PM warns of tough economic policies

Talks of shunning populist moves; envisages 2 + 3 year plan to repair economy

In the first clear indication that his government will shun quick fixes and focus on a plan for fiscal consolidation, Prime Minister Narendra Modi on Saturday declared that “stringent measures” would be required to bring the country out of the current economic mess.

Modi chose a BJP workers’ meeting in Goa to deliver the message, indicating that the steps his government had in mind over the next two years may not be popular. He also said there was no alternative but to follow a course in “prudent financial discipline.”

Asking the BJP to brace itself for “tough” decisions and prepare the people, Modi said what he was about to undertake, would not be for his own or his party’s interest, “but for the larger interest of the nation.”

The central BJP issued a press release detailing Modi’s remarks, signalling that the prime minister wanted the message to go across before the presentation of the General Budget next month.

Modi’s remarks appear to confirm reports that a proposal before the new government is to streamline spending on various heads and rein-in the deficit in its first budget, and to allay fears of fiscal slippage.  

The prime minister is particularly worried that a poor monsoon could push prices of food items and affect the government’s plans for growth.

“I have taken over the reins of the country in circumstances when there is nothing left behind by the previous government. They left everything empty. The country’s financial health has hit the bottom,” Modi said.

“I am well aware that my steps may dent the immense love that the country has given to me. But when my countrymen would realise that these steps would result in getting the financial health back, then I will regain that love,” said the prime minister.

On the other hand, if these tough measures were not taken, the financial situation would not improve, he said, adding “we need to take action wherever required”.

“We won’t be helping the country by praising Modi and praising BJP. There is no guarantee that just singing praise of Modi would improve the situation. We need to take harsh measures to improve the financial situation,” he said.

The prime minister said, “People vote us for delivering results. Our government will work with clear conscience, clear policy and strong leadership to provide good governance.”

Soon after, Modi tweeted that “time has come to take tough decisions in the interest of the nation. Whatever decisions we take will be solely guided by national interest.”2+3 Plan

Modi’s aides have indicated that the government had a “2+3 Plan”, which envisaged hard steps to repair the struggling economy in two years, followed by a three-year plan for growth.

“The fiscal deficit can surely be brought down to at least 3.8 or 3.9 per cent as there is enough scope to cut down wasteful expenditure,” according to Finance Ministry officials.

They say savings could be made from proper targeting of subsidies and improving employment guarantee schemes for the rural poor, which were seen as not properly managed under the Congress-led UPA government.

Industry and rating agencies hope that Modi will pursue supply-side reforms to unblock bottlenecks in the economy and reduce inflationary pressures.