The Narendra Modi government has completed four years in office. During this period, it has carried out several economic reforms and launched a slew of development programmes—Pradhan Mantri Jan-Dhan Yojana, Digital India, Make-in-India, Skill India, Pradhan Mantri MUDRA Yojana, Swachh Bharat Abhiyan, Ayushman Bharat and so on. What sense does a common man make of the several economic reforms and development programmes of the current government?
Answering this question from an economist’s lens offers a useful perspective. Economists tend to look at reforms/programmes that (1) address market failures, (2) promote equity and reduce poverty, and (3) address government’s own failures. Even the strongest supporters of markets recognise that there are situations when market mechanism breaks down and, therefore, provide a rationale for government intervention. Whether in provision of public goods such as large infrastructure projects or in limiting/promoting activities that have negative/positive spillover effects on the economy, government intervention is required. Similarly, checking against corporations exploiting their dominant market positions or stepping in to fill for “missing” markets, call for government intervention to correct these market failures. Additionally, the government has a role to provide macroeconomic stability.
Addressing market failures
The Modi government’s strong push to building infrastructure projects—not only to new projects but also to kick-start the stalled projects of the previous governments—is well-meaning insofar as it addresses market failure in the provision of public goods.
Similarly, providing a strong push to digital transactions or launching Swachh Bharat is all about capturing the large positive spillovers that each of these interventions has on the development processes. Likewise, advancing the implementation of Bharat stage emission norms from IV to VI to curb vehicular pollution or banning the sale and import of oxytocin to prevent its possible misuse is all about reducing the negative spillovers.
The government is also filling in for the “missing” markets, by rolling out programmes such as Jan-Dhan aimed at financial inclusion, Housing for All aimed at subsidising the cost of home loans to make housing affordable for the poor, Skill India aimed at providing vocational and technical training, and many more.
Economic growth is important for maintaining macroeconomic stability. In order to boost sustainable economic growth, the government has launched various programmes for increasing agricultural production and productivity—these include Pradhan Mantri Krishi Sinchayee Yojana, Soil Health Cards, Fasal Bima Yojana, etc—for encouraging small entrepreneurs and innovators through easy bank finance (MUDRA Yojana, Start-Up India). Looking at the thrust areas of economic growth, it seems that the government is not only seeking to diversify sources of growth, but also to democratise growth by unlocking the potential of people from all sections of the society.
In order to promote equity, the government has pursued initiatives that are specific to certain regions as well as to certain population subgroups. For example, it has placed special emphasis on the development of the Northeast—the region that has long been neglected. Similarly, it has identified over 100 “aspirational” districts that are lagging on certain key development indicators. Under its Transformation of Aspirational Districts programme, the government is providing special emphasis to accelerate the pace of development in these districts.
To promote equity among specific populations, the government has launched several initiatives—free LPG (clean cooking fuel) connections to women from BPL families under Pradhan Mantri Ujjwala Yojana to safeguard their health, National Dialysis Programme aimed at providing free dialysis services to poor patients in over 500 districts and so on.
Addressing government failures
In a market economy, one of the important functions of any government is to set standards and develop regulations, so that markets can function well. Indeed, the government has strengthened the regulatory role as evidenced in the passing of the Real Estate Act to safeguard the interest of home buyers, in the strengthening of the food safety regulations, in the tightening of banking regulations and so on. In the social sector, too, the government is beginning to address the regulatory issues. For example, in the health sector, rife with commissions and kickbacks due to the absence of a health sector regulator, it is beginning to regulate the prices of drugs and medical devices, and check other malpractices.
In order to improve the performance of public sector enterprises, the government has set for itself ambitious disinvestment targets. It is encouraging public sector enterprises/undertakings to reorient themselves so as to remain relevant in the changing economic context. For example, the Department of Posts is all set to leverage its 1.5 lakh post offices in providing services of the India Post Payments Bank.
Under its motto of “minimum government, maximum governance,” the government is increasing the use of digital technology to enable citizens avail of basic public services, as also create a conducive environment for businesses and entrepreneurs to thrive.
Additionally, a newer rationale for government intervention comes from behavioural economics that justifies the role of the government in influencing people’s behaviour and choices. Indeed, the Narendra Modi government is seeking to influence people’s thought processes, behaviours and choices through social campaigns on, for example, promotion of girl child and making villages open-defecation-free.
The Prime Minister has not shied away from lending his own voice to urging people to practise yoga to stay healthy, to use khadi clothes that can help generate incomes for khadi workers, to give up LPG subsidy in favour of those who cannot afford it, to switch over to using LED bulbs for conserving electricity, and so forth.
The examples cited above are only illustrative. The list of reforms/programmes actually runs much longer. In almost all its reforms/programmes, the government has largely stayed away from being populist, i.e. it has not chased populism to the neglect of development. What it has done quite successfully is turned development into good politics. In doing so, it has been able to maximise the overlap between development and politics.
In a country with a huge development deficit relative to the rising aspirations of its people, there are several areas vying for the government’s attention. The government is moving on many fronts—all at the same time. Directionally, it is doing fine, but how about the pace of reforms and performance of different programmes? Well, it is an important topic that merits a separate article.
The author is a development economist, formely with the Bill & Melinda Gates Foundation and World Bank (email@example.com)