Gone ‘Weak’ And ‘Missing’?

Three recent articles have appeared in the media:

Dr. Pratap Bhanu Mehta (‘PBM’): ‘Loud but silent: Modi’s actions are opposite to the mythology surrounding him’

Swaminathan Anklesaria Aiyar (‘Aiyar’): ‘Why Land Acquisition Bill reveals PM Modi as indecisive, happier retreating than an authoritarian’

Has Narendra Modi lost the plot?

After two policy U-Turns in quick succession – one on the amendments to the Land Acquisition Bill and the other on the ban on websites propagating pornography, questions are being asked again on the diminishing effectiveness of the Prime Minister.

Sashi Shekhar has ‘responded‘ to these criticisms. However, we should note that it is possible for the Opposition to paralyse Parliament without the Prime Minister or the Government having attempted anything by way of bold reforms. In other words, his argument that “if nothing the Prime Minister had proposed in the last eighteen months was “bold” or “radical” as the Pundits argue, then it begs the question – what the political fuss in Delhi was all about?” may not stand up to close scrutiny. The Opposition would have behaved the same way as they have done, bold or timid or no economic reforms. That is the only way for them to remain relevant after their decimation in May 2014.

As usual, the truth lies somewhere in between. The Prime Minister has taken risks. It is a fact. As a friend helpfully pointed out, the land boundary agreement with Bangladesh involved overruling the ruling party and going against nationalist sentiment in Border States. Was there no political risk in doing so? Is it not a big foreign policy success even though it benefits over 1 lakh people tangibly? Is direct benefits transfer for cooking gas not a subsidy reform? Was there no political risk in the passing of constitutional amendment on the National Judicial Appointments Commission?

In June this year, after the government announced moderate increases in Minimum Support Prices (MSP), JP Morgan wrote the following in a note to clients:

“…the government deserves enormous credit for today’s move. It signifies that authorities are acutely aware that MSPs are blunt instruments to react to rural stress or a monsoon shortfall. Furthermore, it suggests the government is far more willing to use targeted interventions (NREGA which has a self-selection component, and crop insurance) to counter any drag on agricultural production from a monsoon shortfall. More generally, it underscores the government’s commitment to keeping food inflation in check and persisting with macroeconomic orthodoxy even under populist pressure.” [Emphasis mine].

It should be possible for both Aiyar and for PBM to agree that persisting with macroeconomic orthodoxy even under populist pressure has risk-taking written all over it. Despite two relatively weak monsoons, India has not had to worry about inflation. It is not just due to the monetary policy of the Reserve Bank of India. That had its role and so did subdued animal spirits in the country in general in the real economy caused by the burden of debt still being carried by many businesses. However, the role of sound macro-economic management including the release of foodgrain stocks cannot be suppressed.

Rich source of embarrassments

Bulk of the perception failure with the media and the commentariat comes from the acts of omission and commission on the part of Ministry of Finance. For example, the Ministry was excessively slow on bank recapitalisation. For a while, we thought that they were engaging in stealth privatisation. Very clever, I thought. But, they appear to have been in slumber on that issue!

The haste to levy tax on foreign investors based on one ruling by the ‘Authority for Advanced Ruling’ was rather bad. Ultimately, if one hits those with money and that too on flimsy grounds, then that is the most elementary mistake that one could make.

​Then, came the Income-Tax Return form which was again withdrawn. Now, the Indian Financial Code and the seeming confrontation with RBI. Needless and one too many.​

Hence, commentators should realise that their perceptions could be shaped more by the errors of omission and commission on the part of one Ministry than that of others.

If one promulgated an ordinance three times, as the government did on the Land Bill, then I would expect them to have had a Plan B, instead of meekly reinstating the provisions of the old Bill. The Land Acquisition Bill of 2013 is an albatross round the neck of the country’s economy and its impact (rather bad) has to be assessed a decade later. It might be too late. Commentators should be regretting in the inability of the government to reverse it rather than using it as a stick to beat the PM or the government with. That is an angle no doubt but that is not the national angle but rather a ‘Schadenfreude’ angle.

Missteps of the Superman

For ordinary people – who are not part of Lutyens’ Delhi – the disappointment stems from the fact that he exceeded expectations vastly with his election campaign and the scale of his success. More than his election campaign, the success he achieved with it raised his credibility and expectations. Without him, the Bharatiya Janata Party would not have crossed 160 seats. So, one expected that energy and success to continue in governance.

One expected him to have and articulate a clear vision, a strategy or two to realise it and a road map with milestones to getting there. It is a fact that he has not articulated an over-arching vision.

That there are no numbers in Rajya Sabha was well known. So, why did they not have a strategy to overcome that, on crucial issues?

A lot more could have been done on ‘Co-operative Federalism’. In the fourteen and half months, they could have got the BJP-ruled States to agree on a ‘Common Programme’ of initiatives where the Union government would sign off immediately. The Union government could have then waited for non-BJP ruled States to react with nervousness. Even now, the Government should be urging the President to sign off immediately on the Labour Law amendments of the Gujarat and Madhya Pradesh governments.

​Then, there is the ban on pornography. We all agree that it is a social menace. We also agree that there are things that we can control and things that we cannot and that some problems are there to be solved by the government and some by the Society if it wished to. Some problems might have to reach their point of maximum revulsion before the Society turns back from the brink. Does the government have a role in all of that? Quite likely not. Hence, the ham-handed intervention by the government only added to the embarrassment.​

Undoing UPA is a long slog

​Commentators seem not to want to think about what they are ‘missing’ (thankfully) by not having UPA in office. However, PBM did write a stinging  ​critique ​ of UPA in 2013 that turned many opinions. In  ​March, after the winter session of Parliament, A.K. Bhattacharya wrote on ‘stand-out governance’ as the Government passed several crucial Bills. However, these are rare exceptions. For the most part, this government is being held responsible for many of the problems created by the previous government. Those cannot be wished away in a short period. Policy takes effect with lags and the UPA has had more than its fair share of bad policies. Indeed, framing bad policies was the hallmark of its governance. The habits it created in bureaucrats are persistent.

Whether it is retrospective taxation or the meddling of the Ministry of Human Resource Development, these are habits cultivated and nurtured in the bureaucracy by six decades of Congress rule. Fifteen months are too short to get rid of habits of over seven hundred months.  A big mistake of the NDA government is that they did not publish a White Paper, as soon as they took office, as to the scorched earth that they had inherited. Yours truly had suggested that in the column I wrote right after the new government took office last year. Indeed, without any trace of immodesty, I can state that the Prime Minister would have done well to heed the suggestions made in that column.

Hence, on balance, I would say that the PM is being judged on the belief that he managed to transmit successfully to the people at large that he, indeed, was a Superman and based on his electoral performance where he pulled off a miracle.

It is but natural that such a successful man evokes strong fears in less secure and capable people – either in the Opposition or in the media or in the so-called intellectual community – of which there is no shortage in India.

That is what we are seeing now.

The horror that we are (thankfully) missing

Let me remind readers and the critics that the counterfactual scenario would have been a lot worse. The India story is built on rather flimsy foundations. It remains a stagflation prone economy. The UPA government did everything to worsen the potential growth rate of the Indian economy. That is why the International Monetary Fund reported in its World Economic Outlook in 2013 that India’s potential growth rate had slipped the most among emerging economies – from around 8% to 6.5%.

India’s factor markets – land, labour and capital – were fragmented. That is why India has been predominantly a low-growth economy. Furthermore, in recent years, with aspirations and domestic demand rising, India’s supply inadequacies are being exposed. India has become a stagflation prone economy due to years of neglect of infrastructure and capital formation. Without capacity and scale, there is no chance of lifting huge population out of poverty. The UPA regime with its Land Acquisition Bill, loan waivers and labour mollycoddling entrenched and intensified these fragmentations. It did nothing to lift India’s potential growth rate. If anything, it helped lower it as the IMF noted. Its (non-) record on job creation (or job losses, to be precise) speaks for itself.

Hence, not only do I urge readers to note the present government’s admirable restraint with respect to MSP that is helping to restrain food inflation, but also remind them of what they are not missing. The inflation measured by the Consumer Price Index went up by 75% in six years between 2008 and 2014, according to World Bank data. The CPI averaged 80.5 in 2008 and 140.3 in 2014. Yes, during the UPA rule from 2004 until 2014, cost of living surged; job creation tanked and the suffering of Indians soared.

Politicians and members of the public can be excused for their short memories and their inability to contemplate the counterfactual but intellectuals should hold themselves to a higher standard of objectivity and rigour in their analyses and evaluation. A friend wondered why more disgust was not shown at the leaders of the Congress Party who were not letting the Parliament function despite being voted out of office decisively and at the unelected members of the Rajya Sabha who think that they have the right not to let the government function.

Whether or not the Indian Prime Minister has gone missing or weak, perspective and objectivity seem to have.

The final word

If the current PM were to fail and UPA III returns in 2019, the Indian story would be effectively over, forever. That is a realistic and reasonable assessment based on their record of ten years in office.

The country indeed needs a superman and it needed one importantly and immediately after ten years of mis-rule by the Congress-led UPA. It thought it found one in May 2014. For now, he seems to be holding it back or he is being held back.

There is one criticism the PM needs to mind or one perception battle the PM has to win. It comes from those who gave their blood, sweat and toil and money to see him get elected in May 2014. Some of them appear to have given up on him totally.  That is not a good sign. Something needs fixing there.