Pratim Ranjan Bose
“Fuelling public expectation on India’s growth prospects in 2015 may prove deadly,” I wrote in December. Barely four months down the line, some
of my early apprehensions are proving correct.
Early this month, former BJP minister Arun Shourie accused the Modi government of “managing headlines than putting policies
in place”.
A high profile editor-turned-politician,
Shourie was an important minister in Atal Bihari Vajpayee cabinet (1998-2004).
Many believe, he trained guns at Modi for not getting a plum portfolio.
Reasons apart, the criticism came
at a time when the stock market indices are losing steam in the face of weak corporate earnings outlook and profit taking by foreign
portfolio investors. The flight of capital, coupled with recent rise in crude
prices brought rupee to 20-month low on May 7.
A section of corporates squarely blame
Modi for failing to live up to the expectation. “Impatience creeping in as to
why no changes are happening and why this is taking so long having effect on
the ground”, said Deepak Parekh.
The mood is captured by Financial
Times. “Muttering noises are greeting Narendra Modi as he approaches his
first anniversary as India’s leader later this month — and it is the sound of
brewing corporate discontent,” the newspaper reports (Corporate discord brew in India as Narendra Modi’s sheen dulls) on May 5.
Unrealistic expectations
To know how Modi fared so far,
one must first take a look at the work-to-do list left behind by the Manmohan
Singh government of the Congress-led UPA.
Singh inherited a growth oriented
economy, investing huge sums in infrastructure, from Vajpayee. The setting was
perfect to strengthen the foundations for higher economic growth.
Unfortunately, however, the economy was in a mess when he left office in May
2014.
Coal, gas, power, mining, fertiliser,
steel, road, rail, telecom, banking – almost every key economic activity was either
mired in controversies or paying the price of a series of highly questionable
policy prescriptions.
The complexity of the issue can
be understood from a few examples.
(2) Banking sector has nearly $32 billion (Rs 2,000,00 crore) sticky assets in over 27,000 MW idle electricity generation capacities. These capacities are in distress either due to wrong levelised tariff based
bidding policy or corruption in dishing out coal linkage (assurance for fuel supply by State-owned Coal India).
(5) Years of abuse have left Indian Railways bloodless. It would take time before it is fit enough to fulfill the growth aspirations of the nation.
It is not merely the politics
that should be blamed for the crisis. Industry actively participated in pushing
as bad policies as tariff based bidding in electricity or PPP model in road
construction. If the politics was corrupt for dishing out coal assets for money; industry was an eager collaborator in this crime.
This is an Aegean stable, and no
government, leave alone a government that operates in a democratic environment,
can clear this amount of mess in a year or two.
But India Inc, it now seems,
expected Modi to do a Houdini act. Well in that case they should have put their
money on a magician, not politician.
Policy initiative
Given the task on its hand, how
did the government fare? Did it take policy measures fast, to resolve the
pending issues?
A look at the work list of last
two Parliament sessions (winter and Budget) will tell you that the people’s
representatives were rarely as busy, so much so that all parties complained
when the ongoing Budget session was extended by a few days to place two important
proposals on Land Acquisition and tax reforms (GST).
I am not standing guarantee to
the success of all these policy measures. In fact I have reservations about
some of them, like the coal act and the proposed dilution of restrictions in land
acquisition. There are also areas, like roads and highways, where government is
yet to pay adequate attention.
All I am saying, I don’t not
blame the government for policy inaction. The industry may find it hard to
believe that if Modi is running any political risk today, it is due to hyper
activity on policy front. The opposition started feeling steamrolled and,
probably for valid reasons.
Over the last couple of months,
the government took at least half a dozen major decisions which were hanging
fire for years.
Relaxing the FDI cap in
insurance, creating legal provisions for opening up coal sector,
amendment to Mines and Minerals Development and Regulation to pave way for transparent
allocation of natural resources; Constitutional amendment to ratify the Land
Boundary Agreement (LBA) with Bangladesh
– are some of them.
The achievement lies not in
placing those bills, but getting them cleared on the floors of the Parliament,
as each of these proposals attracted stiff opposition in the past. The
de-nationalisation of coal sector is a perfect example to underscore this point.
Every government that came in
power since 1991, when India
embraced reforms, wanted to end the State monopoly in coal sector. But,
excepting Vajpayee government (which introduced a bill only to be rejected by
the Parliament), no one dared to touch the subject.
Modi got the proposal cleared.
And, I must say he has shown enough prudence in not pushing for its immediate implementation. Coal is lifeline to Indian economy and we should be extra careful in opening it
to the vagaries of market economy.
Contrary to the expectations of
the industry, the Prime Minister will also do well to drop the proposal to amend
Land Acquisition Act, at this juncture. It had already given opposition a reason
to unite and further pressure many not augur well for Modi.
The problem clearly lies with the
industry that fails to recognise an important political reality of the country.
It is a different issue how they expect to do business. But the voters of this
country expect business to stop grabbing fertile farm land – a point that many in the industry also acknowledge.
No mega announcement please
The industry has surely been unrealistic
in its expectations. But Modi is equally guilty of fuelling unrealistic
expectations.
It is one thing to make poll
promises. But it is sure not ‘cool’ enough to continue with his chhappan
inch sina (56 inch chesh) and ache din (good days are round the
corner) rhetoric a year after the polls.
He knew that crude prices or the US job data do
not follow the whims and fancies of the Indian Prime Minister. He is aware that
the maladies of Indian economy are a little more complex to be resolved in a
year or two. He must know that coal doesn't grow on trees and by promising three times growth in domestic production he is making people
believe the unbelievable.
Shourie is right, such
announcements make good headlines. And when measured against such headlines, the
government’s performance would appear below average.
Considering the practical
constrains, the government will do very well in enhancing coal production by
300 million tonne in five years. But, the achievement will turn into a
disappointment if measured against your call to increase the output by one
billion tonne, isn’t it Mr. Prime Minister?
***
Tweet: @pratimbose
(Graphics are collected from the web. Will be removed in case of any objection)
No comments:
Post a Comment