Waning confidence in economy has been decisively reversed
Beauty, like success, lies in the eyes of the beholder. Predilections and prejudices invariably influence our conclusions. True, a year is too long a time in politics. Nonetheless, it may still be too short a time slice for the five-year Narendra Modi mandate. There are obvious significant improvements. Many challenges remain. It would be difficult to deny that sagging confidence and expectations emanating from earlier policy paralysis have been decisively reversed. The economy, by most yardsticks, looks much better now than a year ago.
Subsisting legacy issues do cast a long shadow. Unfortunately, transparent exits are not amenable to easy solutions. This is true as much of the retrospective taxation mess, stranded assets, bank vulnerability, crippled preparedness on defence and repetitive scams, particularly in the allocation of natural resources.
This brought us to the precipice of a further credit downgrade. We fell off the investment radar. In contrast, improved macroeconomic variables like credible fiscal consolidation, manageable current account deficit and tapering inflation have improved our ratings. Consumers have benefited from lower oil and commodities prices, even subsidies have been rationalised. The administered petroleum price regime has been substantially dismantled. Rating agencies and multilateral institutions like the World Bank and IMF are now increasingly optimistic.
The altered methodology used by the CSO suggests a current year growth rate of 8-8.5%, climbing to double-digit figures over the next few years. Structural reforms, de-freezing stranded assets and enhanced public outlays, particularly in infrastructure, make these targets more realistic. The growth strategy is decisively more inclusive. Special initiatives for financial inclusion and Jan Dhan, when combined with broadband connectivity and deeper Aadhar penetration, have redefined financial empowerment for rural India. Insurance schemes like the Pradhan Mantri Suraksha Bima Yojana, Pradhan Mantri Jeevan Jyoti Bima Yojana and the pension scheme Atal Pension Yojana create the framework for an acceptable social security system. This benefits particularly the underprivileged. It also enhances the efficacy of poverty alleviation programmes.
The Swachh Bharat campaign, never mind the nomenclature and who started it, will improve the environment, hygiene and, not the least, the mind-set. Skill India, coupled with Digital India, will improve the ease of business and competitive manufacturing. These must be combined with other regulatory changes in labour law applications, land acquisition and more reliable infrastructure.
More importantly, creating livelihood patterns outside agriculture, when combined with skill inculcation, will create jobs and employment opportunities. All these, when taken together, are important ingredients in a jigsaw puzzle. They are not a spaghetti bowl of contradictory policies lacking in vision. On the contrary, they are crucial building blocks emanating from what PM Narendra Modi has described in his recent Time magazine interview as poverty being his “life’s first inspiration”.
Mentioning the number of Modi’s foreign visits is naive. Instead, the focus must be on outcome, the Indian re-engagement in an independent world, harnessing the new power of the diaspora, and the re-emergence of the investor radar. Recognising the new synergy between economics and foreign policy would be more appropriate.
Indeed, any governance matrix can seem contradictory. However, fostering growth and allocating scarce resources in combining the gains of growth with distributive justice are never easy. The broad approach in seeking double-digit growth, along with an altered growth composition and utilising growth multipliers for rural India and the underprivileged, lends cohesion to the strategy.
Can we rest content? And what are some short-term challenges?
First, there is need for doggedness to pursue macroeconomic stabilisation programmes with closer adherence to the fiscal consolidation roadmap. This may entail a re-calibration of subsidies if oil prices go up.
Second, innovative project implementation skills for freeing stranded assets, optimising the outcomes from borrowings for infrastructure particularly roads, railways and power are required.
Third, an implementation timeline on multiple new initiatives to make a visible difference on the ground is needed. The synergy between job creation and Skill India will make a tangible difference. Just like the US, additional jobs data must be monitored every month to meet the un-satiated and rising expectation curve.
Fourth, there is a need for implementing budget promises in multiple areas like a national agriculture market, enhancing the reach of irrigation and improving farm productivity as well as redeploying its crowded labour force. This embraces a broader strategy beyond understandable empathy for farmer suicides. Similarly, adopting a bankruptcy code and pursuing financial sector reforms need coordinated efforts among different institutions, which often do not see eye to eye.
Fifth, a new public-private-partnership compact that re-balances risks for harnessing private sector resources and management is essential. The old models stand discredited. The contours of the new path must be redefined.
Sixth, the architecture of financial devolution in Centre-state relations and the increased flexibility of the states to deploy these resources have strong positives. This can foster more meaningful partnership for Team India. However, getting regional parties on board for the government’s broader legislative strategy needs constant recalibration, imagination and flexibility.
Has the Prime Minister’s Office (PMO) been excessively jealous? Have they sought to micro manage? When I had congratulated Manmohan Singh after he became prime minister in UPA I, the first thing he told me was: “You have worked in a very powerful PMO. My PMO is a low-key one.” With some impertinence I told him that in the end all PMOs mirror the style and preference of the prime ministers. It cannot be forgotten that this government’s mandate and electoral campaign was Modi-centric. There are no split power centres. Modi knows that as far as the people are concerned, the buck stops with him.
Former US President John F Kennedy once wisely remarked, “If my approval rating were still 70% after a vigorous congressional session, I’d feel I hadn’t been doing my duty. You can’t measure great transformation in the country by taking the country’s pulse every week.” Fortunately, and unusually, the Modi approval still exceeds 70%.
(NK Singh is a member of the BJP and a former Rajya Sabha MP. The views expressed are personal.)