Many miles covered, lot more to go

By: |
Published: May 28, 2015 12:16:23 AM

While cooperative federalism is welcome, the Centre must implement policies in land acquisition, food distribution, health and agriculture

Having successfully transformed Gujarat into India’s most business-friendly and efficiently-governed state, Narendra Modi “took up the country’s baton” with a mission to resuscitate the sluggish economy. Modi’s immediate task was to break the labyrinth of low growth-high inflation and attract fresh investment by creating an ecosystem of predictability and credibility in law, policy and bureaucracy. Manufacturing sector, which had stagnated under the burden of rigid labour laws, inadequate infrastructure and a complex web of approvals, needed immediate attention.

Fiscal policy, which had wavered excessively towards consumption in the post-Lehman era, needed to be reoriented towards investment without compromising on quality consolidation. These changes had to be affected within the institutional framework of federalism while achieving the larger goal of poverty eradication and inclusion. The task required a strong political and administrative acumen.

As the Modi government completes one year, it can be commended for astutely addressing most impending economic concerns and enhancing India’s economic stature globally. Following the mantra of Minimum Government, Maximum Governance, policy agenda of the government has drawn extensively from Modi’s experience as Gujarat’s CM. Goal setting, planning and working on issues ex ante rather than ex post have been the hallmark of this government.

We saw an amalgamation of short-term and long-term policy setting. The challenging economic environment warranted restoration of key deteriorating macros. The government not only undertook high-impact micro measures but also laid the foundation for long-term growth by giving shape to initiatives such as Make-in-India, Skill India and Digital India while reinforcing the federal spirit of the Indian polity.

The most significant success of the government has been its ability to rein in price pressures. While RBI’s tight monetary policy and a cyclical turnaround in global commodity prices, especially crude oil, were critical enabling factors, the government’s rationalisation of MSP adjustments, changes in the APMC Act and open market sales of foodgrains facilitated a slowdown in structural component of inflation. Incremental measures to ease business regulations such as e-Biz portal, transparent allocation of natural resources, especially coal, simplification of the tax regime and initiation of labour reforms have created the right facilitators for reviving investor sentiment.

The government’s short-term priority of economic revival has been led within the broader agenda traversing governance, administration, foreign policy and diplomacy—all at early stage of a new design and unprecedented style of implementation. The e-Kranti National Governance Plan and PRAGATI are two platforms that aim to deliver timely government services electronically. The government has pursued a proactive international engagement based on enlightened national interest, combining India’s economic strength with pragmatism, to foster a doctrine of mutually-beneficial relationships. The pledged investment inflows from Japan, China and Germany to actualise Make-in-India is a validation of India’s ability to transform itself into a globally-competitive manufacturing hub powered by skill, scale and speed.

In its long-term vision, the government envisages a Shreshtha Bharat that encompasses aspirational strides in economic and political hegemony with full involvement of the 1.2 billion citizens. A huge amount of focus has been accorded towards enhancing India’s growth potential by harnessing all factors of production—land, labour, capital and entrepreneurship. The road towards actualisation of long-term vision will involve strengthening India’s institutional architecture. Towards this:

* A beginning has been made with the NITI Aayog, the policy think tank which, unlike its previous avatar the Planning Commission, will involve participatory role from states.
* With the FY16 Budget incorporating most recommendations of the Fourteenth Finance Commission, cooperative fiscal federalism can shape states’ economic contours.
* Regulatory approvals getting e-portalised, shrinking the space for discretionary activism and making progress on the policy goal of digitising India.
* Overhaul in tax architecture is under way with the introduction of the GST Bill from April 2016.
* With the formation of the Monetary Policy Committee, the government will formalise monetary policy decision-making under flexible inflation targeting, improving the credibility and accountability of the central bank.

The vision journey of the Modi government epitomises social and financial inclusion. The Swachh Bharat Abhiyan, a mass cleanliness campaign, is a unique initiative that cuts across the regional and cultural diversity of India. After facing initial scepticism, the Jan-Dhan Yojana, an avenue for furthering financial inclusion, has managed to feature in the Guinness Book of World Records for making India fully banked in a short span of time. This is likely to be a socio-economic game-changer as it also provides the platform for DBT, which will help plug subsidy leakages.

Structural changes to a country’s socio-economic fabric do not materialise overnight. As such, stakeholders need to be patient so long as direction of change remains positive. Continuing on the path of structural reforms would require the government to engage in a stronger consultative process. It may have to deploy all the political levers at its command to get critical Bills passed, given its minority status in the Rajya Sabha. While the government’s devolution of fiscal powers to states is encouraging, its ability to implement crucial policies in the areas of land, food distribution, health and agriculture will depend on the execution capability of states. It’s time to complement Minimum Government, Maximum Governance with the new mantra of Accelerate Execution to Multiply Growth.

The author is MD & CEO of Yes Bank

For Updates Check Editorials and Columns; follow us on Facebook and Twitter

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.