Prime Minister Narendra Modi addresses the International Conference on Consumer Protection for East, South and South-East countries with the theme of Empowering Consumers in New Markets in New Delhi. (Sonu Mehta/Hindustan Times via GettyImages) 
Snapshot
  • ... and why the only ‘ism’ Prime Minister Modi seems to follow, is pragmatism.

Narendra Modi government completes four years in office on 26 May 2018. The policy-making may now become more politics-aligned with the impending Lok Sabha elections. This is a good time to understand the underlying first principles and building blocks this government used for policy-making since 2014.

A key aspect of how Prime Minister Narendra Modi has approached policy-making is to not get tied to any conventional -isms of economics or planning. This non-reliance on the deeply institutionalised Delhi consensus has been used by his detractors to regularly lambast him. Funnily, this same missing cookie-cutter template has also worried his ardent supporters, especially those who use economics as the pivot to label themselves right wing.

Due to this perceived lack of accepted and acceptable wisdom in Modi’s approach, many commentators have labeled the government as unhinged, multi-threaded, un-cohesive and arbitrary.

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In fact, five distinct themes characterise the Modi government's policy-making.

Ambition At Scale

First, the government has approached change – procedural, behavioural and political – at big scale. The flagship programmes of the government have all been high on ambition.

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In some ministries, this means targeting ‘first ever-s’ and ‘for all-s’ with a deadline. Housing is for everyone by 2022. Waterways will be used for the first time for goods and passenger movement. Highway construction rate has to be best ever. Solar power capacity should multiply 50x in eight years. Bank accounts should be for everyone. Power has already reached every village in a time-bound fashion and is expected to reach 40 million households by end of this year.

Such ambition sometimes comes at a heavy political cost, for the downside risk emanating from sloppy government machinery driven implementation is huge. The launch of goods and services tax (GST) and demonetisation are two examples, which had the potential to disrupt the economy and disrupt they did within eight months of each other. The government probably lost sympathies of some of its own supporters.

Even then, the ambitions aren’t watered down. Criticism has often manifested in political negativity – but Modi has adopted a self-branded change management approach. He is at once a visionary and a dreamer selling ideas and a school headmaster nudging people to change for their own and country’s collective good.

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There have been occasional areas where the scale has not yet translated to commensurate results – e.g. the National Agriculture Market or the Skills Development Programme seamlessly dovetailing into job creation. But new ideas and appetite for large change continue to find favour undeterred. Ayushman Bharat, the healthcare access programme is the fresh kid on the block.

New And Parallel, Not Old But Improved

When governments change, there is always the urge to go back and ‘correct’ all the wrongdoings from the past. This approach can result in governance becoming rear view mirror driven. The Modi government has instead kept future solutions at the centre of its key decisions.

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Indian Railways needs improvement, but India also needs bullet trains and high speed rail – we are talking about it now rather than launching new passenger trains on a gridlocked network. We need new trains and better roads, but wouldn’t a country with fast increasing per capita income rather be flying? The government is ready with the UDAN programme, which has at once brought 75 un-served airports and helipads on the national aviation map.

Importing oil is costly and fiscally draining; hence the focus is on solar power, electric vehicles and natural gas. Increasing kerosene prices is politically fraught with danger, so while the government continues to rationalise subsidies, it is also focusing on creating large natural gas grids across the relatively poorer eastern parts of the country. Using firewood and kerosene led to health problems and poor quality of life, so the government distributed millions of LPG connections, simply revamping the underlying fuel.

Smuggling and diversion of urea for non-agricultural purposes caused farmer resentment, so there is now neem-coat urea rather than anti-smuggling policing structure. A holistic financial inclusion approach involving savings, deposits, credits and payments has been crafted via Jan Dhan accounts and MUDRA loans. The government subsidies were stolen by middlemen, so rather than trying to prosecute millions of middlemen, the government simply bypassed them, thanks to Aadhaar-linked direct benefit transfers.

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The parallel structures, again envisaged at scale, trigger and shape a new and entirely different glide path for the economy over time. The Modi government has concentrated on a more productive flow in the economy, rather than improving or removing defects of the stocks.

This approach also has limitation in social sectors. It is difficult to either bypass old networks or create afresh new alternatives in areas like education and healthcare. Removing conventionally accepted thinking is also the hardest from these areas. Hence it is not surprising that the government hasn’t found its feet completely on these subjects.

Government As Catalyst, Aggregator And Utilities Provider

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What role should a government play in the life, times and business of citizens is a contentious topic across the world. The Modi government has chosen to be a catalyst, aggregator and a utilities provider. The chosen areas are the ones where either the individual demand was too fragmented or it was too costly to for the supply side entities to service the demand.

Until 2015, hardly anyone in India used energy efficient LED bulbs. Today their price is almost 80 per cent lesser than the prices three years ago. Households, government offices and municipal bodies managing street lights are rapidly switching to LEDs. They are benefiting from government-led procurement at scale, creating sticky demand as well as viable supply businesses.

Digital payments were not moving fast enough to free the country from the clutches of cash. So the government got the National Payments Corporation of India (NPCI) to create a common layer, which can be used by any payment service provider including banks for designing easy money transfer experience.

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As smartphone usage explodes in India, the government fast-tracked laying of a national fibre optics network, with more than 100,000 gram panchayats getting high-speed internet connectivity. This will catalyse the deployment of digital governance tools as well as create new business opportunities for private players.

When the government operates the payments or the bulb procurement or the optic fibre networks, it chooses to be a free utilities provider, not a business stakeholder. This approach will help create rapid, repeatable and predictable demand, which will likely create supply side efficiencies and stable market making in time.

Behavioural And Sustainable Change

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The Modi government has attempted to drive behavioural and sustainable social and administrative change through its key programmes. The sustainability has been baked in through both carrot and stick approaches.

India’s taxation system is a prime example. GST implementation and demonetisation have resulted in a big tax base jump. India now has more than 60 million income tax payers. The GST is designed to catch revenue leakages through the supply chains and will likely integrate several small establishments for the first time in the indirect tax system. This inclusion will then drive direct tax base improvement as individuals linked to the establishment start reporting incomes more transparently. Tax related changes are often stick-driven and admittedly government machinery regularly goes overboard in driving compliance, an area of improvement.

Swachh Bharat is another behavioural change. The sanitation coverage in the country is up 2x at 76 per cent, from the time the programme was launched. Citizens are being encouraged and educated about sanitation and the collateral health benefits. Large sections of the society are for the first time adopting sanitation and personal hygiene measures unheard of just a few years ago.

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Another big change has been the betterment of the corporate bankruptcy process. The quasi-judicial National Company Law Tribunal is working on resolving bank nonperforming assets at an unprecedented scale and speed. When the tribunal was formed, quick obituaries were written by experts as to why the dispute resolution mechanism will not work. Au contraire, it may prove to be the biggest behavioural reform for the Indian businesses, where the promoters will be careful not to make irresponsible investment decisions using easy bank capital. We already see promoters or bidders for stressed businesses coughing up money to take control of prized assets.

Competitive Federalism

A healthy competition is being promoted between different levels of governments across the country. States are competing for improving ease of doing business. Cities are competing to be cleaner and smarter than others. Collectors are competing for the most efficient implementation of government programmes. Colleges are competing for operational autonomy.

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This healthy competition is forcing a relook at the way traditional bureaucratic delivery structures work. Doing things as prescribed is no longer sufficient. The needle moves towards demonstrating how delivery structures bring meaningful changes through the use of innovation, technology and public participation.

All these competitions have another key feature – an aware citizenry, which is being engaged using technology tools like MyGov. This puts constant pressure on the governments – local, state and central – to improve and stay ahead of other peers. The competitive process, a positive feedback loop, is creating an efficient two-sided market for governance delivery – an empowered and engaged citizenry and an accountable government set up, which is rewarded or penalised as per performance.

Today states are advertising ease of doing business and government departments are falling over each other to open information via apps. Some will win rankings and competitions and others will lose, but the importance of competitive federalism lies in minimising the distance to the frontier for everyone.

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The best part about these five themes is that none of them were rocket science ideas. These just needed the traditional subaltern knowledge of how the country thinks and runs. What the conventional wisdom in the corridors of power could not fathom, the Modi government inserted in the DNA of the government swiftly based on experiential and empirical ideas.

PM Modi once said that he does not need to read books to understand what poverty is. This clearly reflects in his policy-making. The only -ism involved is pragmatism. And this will continue to bother professionals and experts – both who like this government and those who don’t.

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