Mr Narendra Modi has a burning desire for greatness, but his government does not have big reform ideas, writes P Chidambaram.
IN a democracy, people vote a party (or parties) into government so that their ‘lives will be better’. That phrase, of course, is more complex than it seems. What makes life in the case of one person ‘better’ may not be true in the case of another person.
Under normal circumstances, an election is fought and won/lost on roti, kapda and makan issues. Other issues may intrude on the consciousness of the voter as she enters the polling station but, in normal circumstances, she will vote for more food, more job opportunities, more wages/income, better water and sanitation, better schools, better health care, better roads, better transport and so on. She will also vote for better security and a life without fear, without violence and without oppression.
In a multi-party democracy, a 31 per cent vote share undoubtedly qualifies as a clear mandate for the winner — the BJP led by Mr Narendra Modi — in the 2014 election. What resonated through the length and breadth of the country was ‘sabka saath, sabka vikas’ and the promise of ‘achhe din’.
Counting the Reforms
At the end of three years, it is natural to make an assessment of the government’s performance. I have already written on internal security and Kashmir (May 7, 2017) and on the rise of intolerance and the damage it is doing to the constitutional fabric of the country (May 14, 2017). While those concerns are important, the more important concern is the state of the economy — and its impact on the promise of a ‘better life’.
Achhe din or a better life is possible only through radical and structural economic reforms, the kind that were first done in 1991-92. Against that benchmark, I am able to identify three measures done or attempted by the Modi government that would qualify as economic reforms:
# The passing of the GST laws (with all their flaws).
# The passing of the Bankruptcy and Insolvency Code.
# The constitution of the Monetary Policy Committee and the setting of an inflation target for the RBI.
All three are works in progress, but I place my hope in the success of these measures. Besides, the government has effected some incremental changes that any government would have done. These include liberalising the FDI limits in various sectors, allowing self-attestation of documents, and auctioning of natural resources consequent upon the judgments of the Supreme Court (although the economic costs of the State extracting a huge rent upfront have yet to be calculated).
More Hype, Less Action
At the end of three years, the economic report card of a party-government that has an absolute majority in the Lok Sabha has a rather modest score. Moreover, the reforms attempted so far have not powered the engines of economic growth.
As I had pointed out in the last column (May 21, 2017), the government has not been able to revive investment (as a percentage of GDP) or boost bank credit or create jobs. Add to this agrarian distress, the structural problems in the delivery of education and health care, and the lamentable state of water supply, sanitation and electricity distribution, the picture is one of a largely unreformed economy.
Unfortunately, the energies of the government are dissipated in useless exercises. After making ‘planning’ a bad word, the government created a toothless NITI Aayog. The result: there is no body to rein in the soaring deficits of state governments and misallocations in state budgets; no body to draw up perspective plans for the medium term; and no one to present an alternative point of view at cabinet meetings. Another disastrous exercise was demonetisation. The post-demonetisation amnesty scheme netted a princely tax revenue of Rs 2,300 crore, bribes are being paid and taken in the new currency notes, and fake Rs 2,000 notes have already appeared. The only detail shrouded in secrecy is how much of the demonetised notes have come back to the RBI (which is still counting them)!
Other initiatives are mere slogans or acronyms. Clean India (Swachh Bharat), Make in India, Start up India, Digital India etc have made little difference to the economic system. Some ideas sit ill alongside the reality. A few Smart Cities (a stillborn idea after JNNURM was junked) cannot co-exist with urban blight and urban decay in almost all cities and towns. A 100,000-crore rupees bullet train cannot co-exist with ageing railway tracks and obsolete rolling stock.
Here is an Agenda
Mr Narendra Modi has a burning desire for greatness, but his government does not have big reform ideas. As a result, the government ends up doing big things in a bad way (e.g. GST) or bad things in a big way (e.g. demonetisation). Mr Modi should embrace new ideas irrespective of who has proposed them. The Direct Taxes Code is a big reform idea. Likewise, the recommendations of the Financial Sector Legislative Reforms Commission contain bold ideas.
Reconstructing the dilapidated delivery systems of education and health care will be a big reform. Deconstructing the bureaucracy is another bold and necessary reform. Throwing open higher education to world class universities will be a revolutionary idea. The Central government has still two full years of its term. Mr Narendra Modi should stay at the wheel until the last day and not give room to hubris (like the Vajpayee government did). The third anniversary celebrations will indicate the direction in which Mr Modi and his government are likely to go.