The country was riddled with a plethora of scams during the last few years of the UPA; the economy was in decline with inflation, and poor economic and job growth; investments were poor and the rupee was under immense pressure. Narendra Modi was the first Prime Minister who did not seem to accept the Nehru model of state ownership and control, and welfare schemes to directly give essentials free or below cost to the poor. Good luck started his regime right. The collapse in crude oil price, and then in coal and commodity prices, led to a fall in inflation and government deficits, and the condition of the rupee improved. Modi was supposed to be a stimulator of private enterprise. Under him, foreign and domestic investment would grow. His rhetoric—more education, national skill development, 100 smart cities, expanding and modernising roadways and railways, Digital India, bank accounts for all, Swachh Bharat, emphasis on development and good governance, more financial devolution to state governments, were all very attractive. Both voters and businesses appreciated the same.
Some of his promises have happened—bank accounts for most rural households, expanding skill development, reaching out to foreign investors, financial devolution, etc. Most others are announced, or structures and procedures being set up, or people being appointed. But there is little visible difference from the earlier regime. As Arun Shourie puts it, the BJP government is the Congress plus a cow; meaning that policies are still oriented to state ownership and control, with a Hindutva twist to policies.
This government also seems to have given up on consultative processes with other political parties and with state governments. This may be an important cause of its inability to get legislation through. Parliament enables informal discussions between different political parties. Does the BJP have people who have the ability to do this? In our federation, there are mechanisms for Centre-state consultations, with the planning bodies, the National Development Council, conferences of chief ministers, etc.
There is also apparent haste in some of his actions. For example, the Planning Commission was abolished without much clarity on what and how its replacement would function. State government consultations with the central government (as it used to be with the Planning Commission) may be taking place but are not publicised. The National Development Council has not met to take coordinated decisions with the states. For example, there should have been detailed consultations on how the additional devolved central tax revenues would be used by the states, and how the welfare schemes now transferred to states but without any funding would be handled.
It was widely expected that the Modi government under the BJP had an economic philosophy that was more from the Rajaji-Swatantra Party than from the Nehru and Congress Party. This meant an explicit belief in the market economy. Production capacities, technology, numbers employed, tariffs would be determined by market forces and not laid down by the government as it has been for over 60 years. The “commanding heights” of the economy were kept for government and its enterprises. This concept would go. The government would not own, control and manage key parts of the economy as is the case today. They would be sold to private investors. They would be independently regulated to ensure that there was no exploitation of the consumer or of market power. Infrastructure and particularly a high investment service like energy would be under private owners who would maximise efficiency.
Low-priced or free supplies to selected needy consumers would be paid for by government, not the enterprise. This would apply to other infrastructure services as well, like trains, metros, most roads, etc. Subsidised grains, edible oils, sugar, etc, for the needy would not be supplied physically to them but as a cash reimbursement of the difference in price between the market price and what it is desired the consumer would pay. The consumer can choose how to distribute this money between his requirements. This principle would apply to all government enterprises and welfare supplies. Modi has spelt none of this out. One suspects that he has no desire to take government out of business and management.
Modi’s past record in Gujarat and current record in Delhi does not suggest that he has any novel ideas to change India. He is too comfortable to exercise power through a select bureaucracy. Will he move them out of enterprise management and regulation, the major tasks for them today?
If, however, this were done, the inefficiencies of the Indian economy because of state-owned enterprises managed by civil servants and politicians could cease. The private owner would be responsible for the losses or cash shortages if there were not managed well. The size of the government would reduce. The government could focus its attention on education, health, sanitation, water supply, housing for the poor, etc. All these are inadequate and need both financial and human resources to improve.
This way, the BJP government could carve out a separate policy position from all other political parties. It can transform India in a way that no future government can reverse. The BJP will then be a distinct political party, not a clone of the Congress, with a cow!
Do Modi and his party have the vision for making themselves so different? Do they understand what this will do for them and the BJP? Or is the conditioning by education and living under almost 70 years of Nehruvian socialism impossible to overcome? The BJP is today at its nadir. Its performance for the remaining years in Delhi can either be at the mercy of the Opposition permitting legislation, or doing what it can without needing legislation.
The author is former director general, NCAER, and was the first chairman of the CERC