PM has luck on his side

Modi has a historic opportunity to change India. His government must discard the mindset of 60 years of pseudo socialism and build  opportunity towards social welfare.

In looking at the reforms agenda and achievements of governments, we must consider, policies in regard to foreign relations, security, social welfare and the economy. This government and Narendra Modi since he became the prime minister, have had an unprecedented success overseas.  He has left a mark with every leader he has met and on every country that he has visited.

Modi seems to have built close relations with the PMs of Japan, Australia and President of the US. To his good fortune, the Sri Lankan government under the new president is more inclined towards India. The drinking water crisis in Maldives enabled warmth by rushing water. Nepal was wooed at the SAARC meetings-when he invited SAARC leaders to his swearing in (a first ever).

Bangladesh was waiting and he had the intransigent Chief Minister Mamata Banerjee agreeing to the treaty with Bangladesh on exchanging enclaves, power trading and other matters. 

A good leader is also a lucky one. Modi has had abundant luck. His taking charge has coincided with India being the one country that has not declined like other merging economies and Europe.  

His rapturous receptions in the US and Australia by people of Indian origin made an impression on politicians in those democracies. Beleagured Russia’s Putin rushed to befriend Modi and reiterate Russia’s support for India. Modi already had developed an equation with Abe, Prime Minister of Japan. China was among the early countries to have its president come for a personal assessment.

Modi, however, has also demonstrated that India wil be friendly and aim to deepen economic ties, but not at the cost of the country’s security. He has persisted with the close ties with Vietnam, a bête noire for China. There is talk of a Taiwan representation. The Dalai Lama and Tibet’s government in exile, remains India’s card. The proposed naval exercises with USA and possible other military ties with the USA, will not please China which will see that there is an attempt to surround it as China did India when it poured money into Pakistan, Nepal and Sri Lanka.

It is with Pakistan that Modi has demonstrated a dramatic change from the past. The Indian Army now multiplies retaliations against incursions and shelling from across the border. All talks were cancelled till Pakistan reins in its terrorists being sent to India.   On internal security, this government appears to be evolving a policy of total intolerance for “Maoist” and other local insurgencies. The Army was called in to deal with the insurgents in Assam. Retaliation against Maoist violence was swift.

The good luck has helped Modi in the domestic economic scene. Crude prices have dropped from $110 a barrel to $ 45 in the last few months. Food prices have dropped. Inflation is at the lowest in years. The RBI now senses a change in inflationary expectations and has begun reducing interest rates.

The NDA government’s first budget was a bureaucratic delight and could well have been crafted by a finance minister in the previous UPA government. It contained no vision for the economy nor any measures to change course from a state controlled economy to a market economy. 

It showed no sign of a government keen to make it easy to do business in India. It had no signal for improving efficiency especially in the public sector whose inefficiency is estimated to lose India 1.5 per cent of GDP every year.

Promise on black money

Modi’s failure to deliver his promise to bring back black money from overseas was a blemish on his ability to translate slogans into actions. There is no signal that he will close loopholes that help generate domestic and overseas black money. The government could close the exemption from capital gains of investments from Mauritius; regulate participatory notes, the anonymous investments in stock markets; stop leakages from social schemes (PDS, MNREGA etc); poor monitoring and regulation of outcomes from infrastructure expenditures; commissions on defence imports; land and property laws that enable illegal funds to be created etc.

Strangely, this government like the last one talks of divesting public enterprise equity for raising funds, but not privatisation to improve economic efficiencies. Like its predecessor, it prefers to cap power tariffs, not improve efficiencies but enable adequate return on investment. Electricity enterprises especially in distribution lose over Rs 1,00,000 corers in a year. It is reluctant to allow up to 100 per cent foreign investment in defence insurance, railways, roads, and other infrastructure. The UPA was constrained by “socialism”; the NDA by the RSS’s hostility to “videshi”.

The NDA government seems to have little conception of the need for reforming administration and regulation. Administrators need to be made individually accountable for outcomes. Their promotions, transfers, tenures should be decided by a body like the UPSC, not politicians. Regulators should be drawn from academia, business, media, etc, not as now from among retired bureaucrats.

This government also has to spend on health, education and skills development, with many more institutions, teachers and their quality. Modi has a historic opportunity to change India. He must not fluff it by hesitant steps, restrictive ideology, nor confuse intention and inspiring rhetoric with actions.

His government must discard the mindset of 60 years of pseudo socialism leading to state ownership, control and regulation of resources and charity, instead of building opportunity as social welfare for people.