JOIN USModi, if elected, must accelerate direct benefits transfer to bank accounts and thus control leakages of social expenditures.
Both Rahul Gandhi and Narendra Modi have now spoken about their programmes. Modi has done so in numerous elections speeches, with oratorical skills, sarcasm, crowd appeal, but few specifics on how he would go about it. Rahul Gandhi after ten years of shy backroom work in the party exposed himself to the most opinionated interviewer in television.
Both have huge ambitions for India. Both would like to see it as a global manufacturing hub. But Modi is focused on growth while Rahul is focused on uplift of the poor. He does not realise that these may not be contradictory objectives. Modi is a one-man show. Reclusive Rahul pretends that he is where he is despite himself. He does not want power and he did not ask to be born in India’s First Family and is against dynastic democracy.
Under Vajpayee as prime minister heading the NDA government India had seen good but uneven growth. Vajpayee wanted to move out of state ownership. Privatisation and disinvestment of public enterprises were key policies. He was for the market under tight regulation to determine prices and so moved from administered prices for petroleum products.
The Congress slipped back into administered prices with its huge subsidies for petroleum products in an era of rising crude prices. Vajpayee was heavily focused on building infrastructure especially national highways and rural roads and power. While he realised the need to support the poor with social programmes, he contained their expenditures within the nation’s budgets. Though he has not said so, Modi will almost certainly follow these policies.
It is inaccurate to accuse the UPA of mismanaging the economy over ten years. Economies function in a continuum. NDA benefited from the liberalisation (delicensing, tax rate and regulation reforms, public and private investment, etc). The UPA 1 benefited from the NDA's policies and continued some of them. The UPA 2 suffered from the uncontrolled expenditures by UPA 1 especially on subsidising the ‘poor’ and on social programmes. These did benefit the poor, as shown by the improvements in India’s human development indicators.
However the UPA 2 forgot the housewife’s adage that you cannot spend much more than you earn. UPA 2 also suffered from the heavy expenditures (massive farmer debt write-offs by UPA 1, rural employment guarantees which did not build permanent assets, a mismanaged rural health mission, and poor targeting of beneficiaries).
Fiscal deficit as percentage to GDP rose to 8.09 per cent in 2012-13. Average inflation was 9.0 per cent, with food prices in double digit inflation for almost two years.
Savings and domestic and foreign investment have also declined. FII were erratic and a cause of extreme volatility in stock market and the rupee's foreign exchange value.
UPA2 forgot macroeconomic balancing for vote catching, and poorly managed and implemented social schemes. In the event, almost half the targeted poor did not benefit, but suffered from inflation and poor job growth.
Reform administration
Modi must learn from this and plan the management and implementation better for all programmes, both in infrastructure and for social welfare. He must bring inflation down to the 6 per cent targeted by the RBI and considerably improve savings, investment and growth.
Incompetence and delays in government approvals as well as corruption have now stranded almost Rs 5 lakh crore of investment. A good part of the money belongs to banks since the debt equity allowed for infrastructure projects is 8-20. Modi must bring his vaunted administrative skills to speed up approvals, severely punish corruption and get investments moving so that they add value to the society, creates jobs and purchasing power.
Nothing that Modi or the BJP have said till now convinces one that they understand the need for a coordinated and speedy plan of action on these lines. Modi has to rationalize subsidies, expenditures on them, better target them, cut waste and theft from social programmes.
Most urgent of all he must do what Manmohan Singh promised when he began ten years ago but did not do. He must drastically reform the administrative services to improve individual accountability and punish malfeasance.
Modi improved Gujarat agriculture mainly because of Narmada waters to arid lands. Nationally he must encourage private investment in agricultural infrastructure like warehouses, cold stores, refrigerated transport, rain water harvesting, water storage, canals, etc. He must get government out of agricultural marketing. Price policies must not stimulate more grains production. To bring large increases in agricultural production BJP must accelerate clearances for genetic modification. Farm labou shortages in many states have been attributed to the MNREGA. It must not be allowed to affect farm production adversely.
Modi, if elected, must accelerate direct benefits transfer to bank accounts and thus control leakages of social expenditures. He must improve public private partnerships, and ensure time bound clearances.
The Lok Pal and other anti-corruption legislation, minimum tenure for central services officers, closing the routes for money laundering like investments from Mauritius free of capital gains tax, or participatory notes). A Direct tax code which simplifies and expands tax reach, as well as getting the goods and services tax (GST) in practice (now opposed in BJP ruled states), are urgent actions.
If Rahul talked generalities and was unable to be specific, Modi who has been a chief minister for over ten years was also quite vague on what his national government would do on most things. Objectives are important; even more are the means to achieve them. Neither Modi nor the BJP have a structured approach to economic or social policies.
India is not a relatively homogenous geography and society like Gujarat. It is perhaps the most diverse and complex country in the world. It calls for understanding this complexity. Solving our problems is not by simplistic massive social expenditures or high growth and vast inequalities of income and wealth. Modi must show that he understands and can deal with this diversity and complexity.