Modi's forays into the global investment hot spots will pay dividend only if we reform ourselves, if we decide once and for all that this is the economic agenda which we need to chart out for future proofing India, one that improves our structural inadequacies bogged down by an iron willed bureaucracy.
In yet another Narender Modi masterclass, India's charismatic Prime Minister has shown his people connect skills by flooring tech titans in the Bay area of California. He and India must realise that no country has been given as many opportunities at unfettering its economy as India over the last 15 years. And we must be mindful of the fact that this is essentially a function of the size of India's consumer market, as also the fact that as much as 67 per cent of its two trillion dollar GDP is consumed at home. Now after two trips to the US, where both west and east coast have been covered, it is time to move from rhetoric to performance. Sadly performance pressure seems to be Modi's bugbear at home, where the bureaucracy and his own Cabinet seem to be slowing him down. Investors are unforgiving, it is time India realises this. They have other fish to fry. India and Indians seem to be caught in a mindset that the world cannot ignore us. Yes, this concept of inverse snobbery is wonderful but it does not address the infrastructure, energy and capital deficits at home.
Modi's forays into the global investment hot spots will pay dividend only if we reform ourselves, if we decide once and for all that this is the economic agenda which we need to chart out for future proofing India, one that improves our structural inadequacies bogged down by an iron willed bureaucracy which refuses to improve itself. A Hudson Institute July 2015 report provides a wonderful exposition of our woes and warts. Ones that we refuse to see and overcome. The report says, "Modi was expected to bring a breath of fresh air to the stale, old style of Delhi politics. Economic reform and alliance with the West were important planks of Modi's election platform. Modi was expected to be a catalyst for India's economic growth, removing the shackles of over-regulation quickly. One year later, it seems that caution characterises the Modi government's performance just as enthusiasm had defined Modi's election promises.
India's economy is growing but not because of government policies and actions. The pace of growth has increased because of global economic factors, such as lower oil prices, and the fact that the market still 'hopes' that things will change. Some government actions, such as 'tax terrorism'-imposition of retroactive taxes on multinational corporations-and the lack of implementation of tax and labor reforms, have hurt India's economic outlook."
These words are emblematic of the times. These are questions a that all educated middle class Indians are grappling with. So apt and yet troublesome. What has prevented Modi from unshackling the India that became nearly comatose during the UPA's lost decade? Why has Modi not been able to get a move on? Why has the rhetoric not translated into epoch making reform decisions. I sincerely don't buy the argument that he has been baulked in the upper house of parliament due to the tyranny of numbers. Why can't the man who pledged a new India, one that threw away the cloak of mediocrity and being pedestrian perform? What happened to the development and growth stratagems? Why has he got trapped in the maze of over promise with no delivery?
Posers which confuse and confound all of us. Hudson Institute provides some of the answers: Why is it that an administration that was elected to power to bring about change has not been able to do so? Admittedly, it is difficult to overhaul an economy the size of India's within twelve months. But by now, the Modi government could have laid the foundations upon which it plans to build the edifice of a modern, prosperous, free market oriented India...The Modi government is not hobbled by the sense of policy paralysis that existed under the United Progressive Alliance (UPA) coalition led by the Congress Party's Manmohan Singh. Still, things have not moved forward during Modi's first year in office, creating frustration amongst those who voted for and supported the BJP's election. The flagship program of the Modi government, "Make in India," is only the latest version of India's historic pursuit of economic and military self-sufficiency. The scheme encourages foreign companies to invest money and technology to expand manufacturing within India. Investors, however, would like to see reforms in bureaucratic regulations, tax policy, land ownership rules, and labor laws before committing to major projects.
"During the election campaign, Modi supporters argued that as an outsider in Delhi, the prime minister would cut India's penchant for bureaucratic red tape. In its first year, the Modi government failed to live up to that expectation. Instead it appears to rely heavily on the bureaucracy for policy guidance, rather than demanding that civil servants put the political leaders' ideas into effect. For example, Modi described retroactive taxation on multinational corporations as a 'breach of faith' during his election campaign. Instead of changing the tax laws that make such a 'breach of faith' possible, the government opted for the tax bureaucracy's proposed way out by saying that they will choose not to apply these laws. Such compromises are insufficient to reassure international investors who do not want to deal with retroactive tax demands in future."
The way the Modi government back pedalled on the acquisition and ownership of land by finally allowing the States to dictate policy was the biggest setback. A UPA bill which will de-indistrialise India and is the centrifuge as far as manufacturing, infrastructure and real estate is concerned, vital to industrial corporations and foreign investors could not be amended. Vanquished over the land bill, it seemed the fight had gone out of a majority government bedivilled with internal contradictions and opinionated hyperbole. Over promise and no implementation is costing India. We have traversed the vector from a somnolent government to one that has made a catalogue of promises but failed to deliver on most.
Capturing this mood the Washington DC based Hudson Institute Report written by Husain Haqqani, Aparna Pande and others outlines very rightly: The Modi government should not assume that it has a generational mandate and that it could get through its first five years by implementing minor policy changes while waiting for re-election in 2019 before undertaking major reforms. The previous National Democratic Alliance government led by a BJP prime minister lasted only one term because of its timid approach to policy change; Manmohan Singh's UPA government won two terms but suffered from policy paralysis as soon as it won elections. Given his mandate and his record, Modi must prove himself different.
So true.
(The writer is a Visiting Fellow at Observer Research Foundation, Delhi)
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