Reforms By Stealth And Other Things Commentators Must Not Miss

A reminder that a ledger has both debit and credit entries

On May 24, Milan Vaishnav and Suyash Rai wrote a long and somewhat more thoughtful critique of one year of the NDA government. There is a byline that says that their op.-ed was a shorter version of a ‘forthcoming Carnegie Essay’. Perhaps, some of their statements that appear in this op.-ed without back-up evidence are backed up in that long essay. To that extent, my responses might be premature. With that risk fully understood and acknowledged, I write this rejoinder. What they have written are in italics.

Their list of five ‘tensions’ are as follows:

• The first tension is striking the appropriate balance between concentrating power and devolving it.

For all the talk of “competitive federalism”, Modi has been meek about pushing reforms in BJP-ruled states.

Response: It is a valid criticism. In fact, the government is apparently sitting on somewhat radical proposals from Madhya Pradesh on labour reforms. Not only should it have ratified it with alacrity, but must be setting a blueprint of reform agenda for all BJP-ruled States on matters in the State and concurrent list. That is the only way to set the reform cat among the pigeons. This government was elected to be disruptive. Most of the low-hanging reform fruits have been plucked. Now, for the hard part.

UPA ducked them for ten years and even reversed course on many of them. This government has an unenviable task of confronting very thorny issues, in the Indian context. So, it has a very challenging task on its hands.

However, at least, leading and influencing the debate with reform thrust in States will be a good signal that this government can send.

• The second looming tension is between announcing bold initiatives and ensuring their smooth implementation.

Japanese officials are privately complaining that India has not kept up its end of the bargain, such as establishing a one-stop shop in the PMO for Japanese investment.

Response: One example is fine but it does not give the full picture. But, if the article in ‘The Telegraph’ on the bureaucracy stymieing Prime Minister’s foreign policy initiatives is any indication, then, he has a problem on his hands – one that he must fix very soon. So, the implementation issue is not as simple as it sounds. Parts of bureaucracy may be laws unto themselves. How do we tame them? Surely, it is not a unique India problem but it just means that far too much attention to detail is, unfortunately, required in the Indian case, even as the Prime Minister and his office have to attend to thousands of issues in a geographically vast and socially diverse country with several thousand stakeholders in politics and elsewhere. Complex. No easy answers.

So, it is a valid point but one that reflects more on the Indian bureaucracy which outlives governments and its ethos.

• A third tension is between a domineering political strategy and the requirements of thoughtful coalition management.

The persistence of reforms during coalition governments, and the relatively poor reform records of stronger governments, gives pause.

Response: A very weak point. Only one coalition government managed to deliver economic reforms in India. That too only in the period between 2002 and 2004. UPA did not deliver on anything except inflation, rupee collapse, current account and trade deficits, low growth, defence unpreparedness, social divisions and much else.

The so-called third tension is actually linked to the first one. The ‘Upper House’ constraint is ignored here. The answer is that, by now, the government must have figured a way out. That takes us back to the first issue in this list – of reforming through BJP-ruled States. So, this is a rather weak and redundant point on the part of authors.

• Fourth tension is how and when the government should spend its political capital is another source of friction.

A running dispute within the BJP is whether 2014 was a victory for Hindutva or economic reforms. Survey evidence indicates it was an economic mandate, but the Sangh Parivar begs to differ.

Response: H…mm. Not true. The problem for any centre-right pro-Hindu (not anti-Minority) government is how to handle the narrative spun by entrenched interests, in the media and outside, who view any pro-Hindu attitude as unacceptable. Their lines in the sand are thick and have been drawn over decades, if not centuries of fear, persecution and proselytization of all types.

Political capital needs to be spent as much on economic development as on rectifying the systematic insult to the interests of majority community in the country. My cover-story in the May issue of ‘Swarajya’ deals with this issue completely. Hence, I will conserve energy here.

On timing, Modi rejects the assumption that the biggest changes must be tackled in the early years when political capital is at its apex, instead insisting on a two-term vision. But with a fight brewing in Bihar and rising rural distress, nothing can be taken for granted.

Response: Verbally, the government might have rejected the assumption of big changes being tackled in early years although I am not sure where and when it was stated so explicitly. But, the evidence speaks otherwise. The government has taken the fiscal bull by the horns. The UPA government bequeathed a true fiscal deficit of more than 6% of GDP. It has been brought down to around 4% of GDP. It is fiscal consolidation amidst economic stagnation.

The government has refrained from recapitalising public sector banks. That is the easy way out. Credit growth is happening more through non-banking channels. This is hurting economic growth in the short-term but, perhaps, this is a salutary reform for the long-term. Decades-old practices are being dismantled.

While the price of crude oil is being held out as the reason for the low inflation rate at consumer level, one cannot forget the role that food inflation plays in the evolution of inflation at the consumer level. The government released food stocks and announced only moderate increases in Minimum Support Prices. Both these actions played a very big part in taming food inflation and overall inflation.

More recently, the announcement that the government has withdrawn tax and other exemptions given to public sector enterprises in defence production has not received the attention or the appreciation it deserves. Or, reflect on this article written by an editor of ‘India Today’ magazine on how the postings of government officers are done. These are very important systemic changes. These are not done easily, in the Indian context. They deserve wider and proportionate recognition.

Similarly, some of the recent decisions made by the Defence Minister improve organisational efficiency. They may not be exciting for journalists but the plumbing of governance is more important than grand announcements that do not progress beyond that.

Amendments to the Apprenticeship Act now that they are done might appear trivial but, if so, it begs the question of why they were not done for more than two decades?

The government may not be beating the drums on these extremely difficult and challenging reforms as they challenge status quo interests. They are ‘reforms by stealth’ and consciously too. The danger, of course, is that they may be reversed if there is a change of government after the 2019 elections. In India, it is hard to make systemic change endure. To avoid that danger, objective commentators with India’s interests at heart, must play their part too.

Critics are guilty of giving too little thought or credit to these silent, bold and tectonic policy shifts.

To start with, they should recognise and acknowledge the good things that are done while highlighting and underscoring what has not been done.

Second, they should always keep in view and in public, the record of a government that was in office for ten years and remind themselves and others of what they are missing.  We should be grateful for what we are missing even as we constantly badger the government for what it ought to be doing and not doing. It cuts both ways.

• The final tension this government must resolve concerns the scale and scope of reforms.

Recent experience notwithstanding, the opposition typically finds it politically expensive to continually stall popular legislation. Barring a few high-profile battles, the government should be able to build Bill-specific coalitions.

If revolutionaries veer from their core principles or mimic the system they seek to replace, the public will question the revolution. The BJP victory was a revolution via the ballot box. The scale of Modi’s mandate signalled that many voters sought transformative change.

Response: The government did form opportunistic coalitions with select Opposition parties and pass some crucial legislation. Otherwise, insurance, mining and coal auction bills would not have been passed. The Prime Minister had included Ms. Mamata Banerjee in his out-reach to Bangladesh. The accusation that the government has been lax in coalition building flies in the face of this gesture. The previous government had abysmally failed in doing so, with its arrogant and feudal attitude towards State governments.

Considering the amount and intensity of vitriol that Ms. Banerjee poured on the Prime Minister during and after the elections of 2014, this is a Statesman-like gesture on his part even as it was sensible thinking. Credit for good work has to be shared. Otherwise, good work will not happen. One can remain in office for five years or ten years but is that an achievement in itself? Dr. Manmohan Singh should be asked this question. India is still paying a price (and will do so for some more time) for his purposeless and unproductive occupation of the high chair for ten years.

Overall, the authors leave readers with the impression that there is more to be disappointed with and less to be satisfied about the government’s performance in the first year in office. That is, in part, a reflection of the impatience with governance, in general, after ten years of sloth, inefficiency, corruption and regression. In part, it is a reflection of the under-appreciation of the enormity of the task of cleaning up the mess and preparing the ground for re-cultivation and harvest later.

The Prime Minister gave two interviews – one to the Press Trust of India and another to The Tribune in Punjab. You can find them here and here. In his interview to the Tribune, he notes that he was surprised himself by the spontaneous response to his call for ‘Swachh Bharat’. He should not have been. He carries considerable personal credibility. That brings him enormous opportunity and comes with responsibility too.  Now that he has been reminded again of his ability to mobilise people for policy action as successfully as he did for political campaigns, he should use it more for improving the delivery of public goods and conduct of Indian in public space. For example, India’s road accidents are a national shame.

How many commentators have acknowledged and written about the admirable work that Ms. Temsutula Imsong from Nagaland is doing in Varanasi? Many Twitter activists who are quick to criticise the government have not even acknowledged her presence, let alone her work, in their tweets. In fact, the Prime Minister should be doing more to encourage her and her band of co-volunteers. He should highlight their work nationally and inspire many copycats. A clean country is the start to having a self-confident country.

It is as important for us to hold the government’s feet to the fire as it is necessary to appreciate them for good work done. It is not a mistake to hold the NDA government to a higher standard as, after all, the UPA government had lowered the bar and forced India to reconcile to an era of diminished expectations. It is good for Indians to raise the bar on their governments (Union and States) but it is important to raise the bar on the objectivity of their evaluation of governments too. A ledger has debit and credit entries.

As to what the government should be doing in its second year, Yours Truly had set out an agenda and it can be found here. Devolution and more of it, and improving the plumbing of governance are the themes that permeate the recommendations made in that post.