Journalist TCA Srinivasa Raghavan has written a column[1] on the relative timidity of Modi, the Prime Minister in comparison to Modi, the campaigner. He also offers three possible explanations for the timidity that he sees. Such articles must be welcomed. Reality checks are necessary for those in power. It is unlikely that they will get candid feedback from their subordinates. There are no peers within the country for those in such high positions for them to get a 360-degree feedback. 

One thing is clear. The Indian government – or, for that matter, any government- can always do better, faster and more. But, we all know that governments move slowly. India has a reputation for being slow. The more the government tries to reform; the greater is the resistance to change. It is not just about bureaucracy but even vested interests outside the government. All these are well known, however.

The article mentions three areas that, according to the author, has contributed to the image of a reluctant, indecisive, slow-moving government. One is that the Prime Minister wants to run the government in Chinese style with Indian features. The second and related to that is the purported fascination with the American Presidential form of government with pork-barrel politics. The third is the risk aversion that comes with wanting to win a third term. To the extent that there is a grain of truth in all of these, there is room for improvement and change in the style of functioning.

The only chance – and it is small, by the way – that a pro-Hindu Prime Minister wins a second term in India is to act in the first term as though he/she has only one term and makes decisions faster. The system is set up to deny him or her another chance. So, the third explanation may be more useful and the PM can take that seriously.

All that being said, there is a fourth factor and that is that the scale of the economic mess left behind by the previous government is so big that it cannot be fixed overnight, not to mention dealing with new problems that keep cropping up. Talking of crops, India had a deficient monsoon in 2014 and to compound matters, it had unseasonal rains in March this year. Well-known agricultural expert Ashok Gulati is sounding the alarm bell[2] and rightly so.

With the unceasing onslaught of information and news, old news and memories fade fast. India had run up a huge current account deficit because, thanks to the previous government’s ill-considered and corrupt decision-making, coal mining was banned and export of iron ore had stopped. The Modi government has passed the Coal bill and the mining bill for transparent transfer of public resources into private hands. This should show up in growth in infrastructure industries soon. A.K. Bhattacharya of the Business Standard called it ‘stand-out governance’.[3]

The previous government had left a huge fiscal deficit. One estimate puts the true fiscal deficit in 2013-14 at 6.6%. The mid-year economic analysis of the government published in December 2014 put it at about 6.2%. This government had to undertake a severe fiscal squeeze in 2014-15 to avoid getting downgraded and seeing cost of capital go up for Indian borrowers in world markets. Plus, India’s image would have taken a big knock had there been a downgrade to junk bond status. Consequently, the government had to stick with the fiscal deficit target with the crucial difference that it had to do genuine fiscal tightening whereas the previous government projected a lower fiscal deficit by postponing payment of bills in the cash accounting system that the Government of India follows. The result is a growth squeeze as well and that does lead to a sense of drift and complaints of non-performance. It is time to take stock of what this government has done in the last ten months.

The Prime Minister has done a few things that no other Prime Minister in living memory has done. He has taken the case for one of his government’s policy proposal to the public. Again, this is about undoing one of the toxic and destructive policy legacies of the previous government – the Land Acquisition, Relief and Rehabilitation Bill of 2013. First, he is addressing the nation once in a month in a radio talk. No other Prime Minister has done that in the recent past. Second, he used the radio talk to address farmers directly. He has re-promulgated the Ordinance to push through important changes to the dysfunctional Land Acquisition Bill of 2013. It is not easy and, if passed, its import is likely far more significant than the mere undoing of a lousy and toxic policy of the previous government which was not only anti-industry but not pro-farmer either. It would have simply killed all land acquisition transactions or reduced them to a crawl.

He has been directly appealing to the rich of India to give up their subsidized cooking gas. The Tata group is urging its employees to give up subsidised cooking gas.[4] In his speech at the function to mark the 80^th anniversary of the Reserve Bank of India, he remembered to mention that, urging bank employees to give up their subsidised cooking gas. That is a good sign. A good leader misses no opportunity, no matter how trivial, to push his agenda. Small things add up. Few more examples follow.

A report in Times of India noted that the government had put up a list of thirty-six companies “committing to supply 95 lakh tonnes of the construction material during this year at price up to Rs 180 per bag. These companies will supply cement from 103 factories spread over the country and the material can be bought for building roads, affordable housing, irrigation projects, drain and other civil works by Centre, state and local governments.”[5]

Manish Sabharwal of Teamlease never tires of mentioning that some of the labour reforms (they are quite modest actually, considering what remains to be done) have not been attempted in the last two decades. For example, “the Government has implemented a single window labour compliance process for industries; companies will now be required to file just one compliance report for 16 labour laws. Each factory has been issued a labour identification number (LIN) to enable it to register online and file the unified labour law return. The new rule will be applicable to central government affiliated PSUs and entities. Each state will have to pass similar rules individually for application to private entities in their states.”[6]

Based on the proposal announced in the budget, workers will have options for their pension savings than the Employees’ Provident Fund Organisation and for their health insurance needs than the Employees’ State Insurance. The benefits of freedom and choice both these afford workers are enormous. This is empowering.

Subsidy for diesel used to be a big issue for the government. To be sure, the previous government did this one thing well. They quietly raised the price of diesel every month by 50 paise per litre. In fact, the success of that approach holds important policy lessons for successive governments and governments around the world. This government carried it through to its logical conclusion and decontrolled the price of diesel. Now, prices of petrol and diesel go up and down regularly. Our media outlets continue to accord it some significance and mention every price change diligently. It should be and is a non-event. It was not so, just two years ago.The government also decided to follow the same model for gas pricing by announcing a modest increase now followed by a review every six months. Reforms are as much about packaging and giving time for change as it is about intent to sweep away the old, the unnecessary and the harmful.

Similarly, cash transfer of subsidies was such a big challenge. Most of the objections to it was patronising. Now, it is being rolled out on a nation-wide basis. The Prime Minister overrode objections from members of his own party and decided to deploy Aadhaar for doing so. Again, it is easy to forget or dismiss its significance. However, the payoffs are likely to accrue to India for a long time. This is what Sajjid Chinoy of JP Morgan wrote at that time (in October 2014):

                “In a move that is likely to get buried under the more dramatic diesel and gas price announcements – but one that, we believe, is equally important in reducing subsidy leakages in the medium term –the government announced it will be linking cash transfers (“Direct Benefits Transfer”) with recent efforts to increase financial inclusion (“Jan Dhan Yojna”).

The Finance Minister indicated that, as a start, in 54 districts of the country those with bank accounts would receive the LPG subsidy in the bank account. While the details are still to be announced, tying financial inclusion with cash transfers is unambiguously positive. A move to cash transfers will eventually ensure that distortions caused by dual-pricing of products will disappear, better targeting (to the extent that the UID is involved and results in de-duplication) will result in fiscal savings, and that households have a reason to use and service bank accounts and build up a financial history that can eventually be used to avail of credit.”

More recently in February 2015, A.K. Bhattacharya of Business Standard praised[7] the new government for the fillip given to the spread and use of Aadhaar, for the success of the Jan Dhan Yojana (by the middle of January, the number of accounts opened under the scheme had crossed 115 million) and for the crediting of cooking gas subsidy directly into bank accounts.

While subsidies to the poor get more attention from the media and elites, subsidies to corporations do not. That is myopic. The NDA government has promised to rationalise corporate taxes but do away with many ad-hoc tax exemptions that have now become permanent fixtures in the tax statutes. They have to follow through and deliver on this. That would be a huge windfall for the government and reduce clutter.

Foreign direct investment in hitherto closed sectors like Railways, Defence and Construction have been either allowed or prior limits hiked. “Some of the key government measures for the construction sector include: [8]

·         cutting of minimum foreign investment from $10m to $5m and minimum floor area from 50,000 sq. metres to 20,000 sq. metres;

·         reduction in minimum 10-acre land area for serviced housing plots;

·         removal of the three-year lock-in period for repatriation of capital and

·         enabling of developer’s exit on completion, if earlier.

Also, according to the research note by IIFL cited earlier, “the Ministry of Roads and Highways has sharply raised the pace of award of road projects. The Ministry of Roads had awarded projects of 5,000km in 9MFY15, which include 4,300km on EPC basis. For reviving stalled projects, the Government has cancelled 34 projects totalling 4,084km, which would be restructured in terms of their model (PPP/EPC) and project cost to enhance their viability. The Ministry of Roads has also addressed various issues that have affected execution of ~4,200km of road projects.”

Citing CRISIL, IIFL notes that “work had already begun by end-Nov’14 on 75% of the 16 road projects awarded in FY14. This number was 18% in FY13 and 10% in FY12. Time taken between the award of a project and its commencement has reduced from 10-12 months earlier to 7 months. To spur execution, the Government has been taking proactive steps such as completing 80-90% of land acquisition, fast-tracking environmental nods, delinking forest and environment clearances, increasing limits on sand mining, and enabling online filing for clearances to construct rail over-bridges and under-bridges.”

In December, the government introduced amendments to the Electricity Act 2003 that, among other things, would allow consumers to choose to buy electricity from multiple sources of supply. They can also switch suppliers by giving notice.[9] The amendments are expected to be passed by both houses of Parliament and become law by the middle of this year.

Finally, Prime Minister Modi’s campaign to clean India has ignited several minds. The most electrifying and inspirational example is that of Ms. Temsutula Imsong of Nagaland who has been camping in Kasi, cleaning up Prabhughat. Her campaign has attracted several other youngsters. Mr. Srinivasa Raghavan must check that out. Merely visiting her Twitter handle[10] and seeing the pictures, one is infected by the enthusiasm and energy of her and her other collaborators who have come voluntarily without any push or prod. Which other Prime Minister has managed to attract young Indians in the service of a public cause? This gives us Indians a lot of hope in the future.

For a Prime Minister who came to office promising sweeping changes, it is a challenge to confront the scale and criticality of problems in every area of government that demand urgent attention. Hence, in line with devolution to States, the Prime Minister would do well to devolve authority and responsibility to his Ministers, hold them accountable and drop them if they are found deficient. The process can be transparently done too with public seeing the goals set, the achievements and failures and the appraisal. Before that, he needs to revisit his promise to re-organise several Ministries into Ministerial clusters, reduce overlaps and streamline decision-making. That is an idea well worth pursuing.

India’s skills and learnings outcomes are nowhere what is required for an economy wanting to achieve the status of an economic superpower. Human Resource Development initiatives of this government are not in the wrong direction and lack clarity and purpose. That brooks no delay.

Last year, the government promised to do away with many outdated laws. Not much seems to have happened since then.[11] Implementing such sound ideas will mark the difference between this government and other governments of the past.

In the final analysis, given the neglect and wrong policies of the previous UPA government and given India’s aspirations, it will always be the case that the government is found wanting, no matter how impressive and comprehensive are its actions and achievements. For India with nearly 600 million people in poverty or in low-income status, no pace is fast enough.