PM does well to warn lynchers and cow vigilantes, govt has done well on IBC, NCLT and GST, but not enough for industry.
The prime minister has done well to repeat his condemnation of cow vigilantism and mob lynching. In an email interview to The Times of India, the PM has said his government is committed to upholding the rule of law, and that clear advisories have been issued to the states on this. However, given the incidents continue, it is not clear how reassuring his comments are. Maintaining law and order is the job of the state governments, but when there are reports of the police being slow to act—in one case, newspapers reported the victim died since it took the police several hours to take him to a hospital barely a few kilometers away—this suggests the states are not doing enough to contain the violence; that so many of these states are ruled by the BJP only makes things worse.
The PM’s defence of his government’s record in ensuring industry grows, and investments return, is less than convincing. Though he talks of the taxman becoming less adversarial, the jump in tax arrears over the past four years is testimony to the continuing high-handed behaviour of the taxman, as is the fact that Cairn Energy’s shares are being sold—and its dividends attached—even as the case is being adjudicated. Challenging an arbitration award in favour of Reliance Industries, unwarranted price controls on pharmaceuticals, anti-profiteering action, the driving out of Monsanto, not enough pricing freedom for those extracting natural gas and continued crippling levies in telecom, among others, show the going hasn’t got easier for industry. The PM may believe it is easier to do business today, but labour laws remain restrictive. While there has been an attempt to simplify and rationalise rules, what employers want are laws that help them handle their workforces more effectively. That has not happened, and even the flexibility allowed to companies to hire temporary workers hasn’t really worked.
The PM talked of how, based on EPFO data, 7 million jobs were created in the formal sector last year. Given 80% of jobs are created in the informal sector, this means several times as many informal sector jobs were also created. Apart from the fact that new entrants to the EPFO don’t necessarily mean new jobs, the fact is the economy—helped by the use of a revised base—doesn’t reflect the buoyancy that should have accompanied such a massive jump in the number of jobs. Had so many jobs been created, it should have been reflected in demand. However, private final consumption expenditure (PFCE) has clocked in a sub-7% growth for the last seven quarters. Had demand been more buoyant, one would have seen larger investments by the private sector, but the fact is the bulk of the capex since 2014 has been seen in the government sector, primarily roads and railways.
Where the government has scored, and scored big, is in the rollout of the GST. Moreover, while some large industrialists may be unhappy, the political backing given to the insolvency cases of large defaulters is unprecedented; the PM and his team deserve more than full marks for their commitment to cleaning up and capitalising the banking system. However, contrary to his assertion that disinvestment has been a big success, there has been no privatisation; indeed, the Air India stake sale may just have gone through if the government was willing to write off more of its debt and completely let go off the airline. And the purchase of HPCL by ONGC was aimed at fetching the government more revenue even though privatisation was a clear option. The government can, and should, claim credit for various social sector schemes—and reducing losses in others by the use of DBT—but it continues to score poorly on both boosting industry and employment.