Modi has ushered in significant changes in administration

  • Hindustan Times
  • Updated: May 28, 2014 12:15 IST

As the NDA government takes mark for a new term, one is reminded of an economic theory: Constrained optimisation. It represents arriving at a set of best solutions to an array of problems.

In a real economy, however, the most favourable way out for one set of problems could harm prospects somewhere else. For instance, if prices are rising steeply, slashing high interest rates may sometimes end up only fanning inflation further. Striking a balance may involve a painfully long process of slow, gingerly taken steps.

The current snapshot of the economy brings into focus the constraints facing the government. Narendra Modi has ushered in significant changes in administration, dismantling existing structures by merging key ministries in an attempt to bring in more synergy in governance, negate contradictory approaches among departments and make decision-making more efficient. For instance, the corporate affairs ministry has been brought under the finance ministry, a move reminiscent of the AB Vajpayee government. This has been done, keeping in view the need to match macro-economic objectives in tune with the Companies Act, which has redefined India’s corporate governance norms. Similarly, the coal and power sectors — inter-linked through fuel supply and generation linkages — will be overseen by a single minister. This will reduce time overruns of projects that are stuck because of delays in inter-departmental approvals. In another first, many ministers of state will have cross-functional responsibilities — a move, if successfully executed, can make administration more seamless and efficient.

The economy is struggling to claw out of a decade-low slowdown. Projects worth more than Rs 2,00,000 crore are in a stalled stage at various stages of regulatory and procedural approval. Reducing regulatory uncertainty and simplifying procedures for obtaining clearances should, therefore, be a priority for the new government. Entrusting a single minister with the responsibility to steer policy decisions in related departments is a good first move to test the hypothesis for a potentially new governance paradigm. The real test, however, will be in proof of delivery of the concept.

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