Is Modi picking up the right battles to fight?

Rampant corruption allegations & paralysis of governance of the UPA II, propelled Prime Minister, Modi, to power in 2014; of course his fluent oratory & “development” mantra did win many hearts. Divine providence, perhaps, was at play too. None expected the BJP to breach the magic fig. of 272 in the Lok Sabha nor imagined a drop in the oil prices to under $50 dollars per barrel. Both did happen giving the ruling dispension enormous heft which unfortunately is getting squandered. Is it because Modi is not picking up the right battles to fight?

Along with his allies, Modi enjoyed a brute majority in the Lok Sabha but lacked a majority in the Rajya Sabha. Instead of belittling the opposition’s intelligence & wildly hoping that a bill pushed through the Lok Sabha but stalled in the Rajya Sabha could be rummaged through a joint session he should have kept the back room channel diplomacy open with the opposition – a successful strategy adopted by both Narsimha Rao & Vajpayee. Instead he pushed through his agenda through ordinances which further hardened the opposition onslaught leading to a parliamentary logjam.

The slogan of “Congress Mukt Bharat” during the elections & subterranean attempts later on were fine but the BJP spokespersons’ repeated disparaging comments on the 44 seats won by the Congress as reason for them to shut up & mildly accept the ruling party’s diktat was sheer arrogance which turned off even the liberal supporters of the BJP. Had the PM created an opening with the opposition – especially the Congress – he would have been in a better position to rush through his economic legislations creating a genuine feeling of “ache din”. Unfortunately he did not.

Instead of remaining non- committal for long on the Congress’s demand for the constitutional position of the Leader of the Opposition in the Lok Sabha, Modi should have emerged as a statesman either by agreeing to their demand or by announcing on the floor of the house that the post was being denied citing precedence but expressing his willingness to make changes in rules to include the leader of the largest party in the panel which decides on appointments of CVC, CIC etc. The 2^nd alternative eventually happened but post a long hiatus during which time the relations between the parties was soiled due to jingoistic sloganeering & chest thumping in TV studios & beyond.  By not doing so, he has widened the chasm which continues till today much to the detriment of the legislative process because of which the economy suffers. The economy had bottomed out in 2013 & is on an upward trajectory but the growth rates as per the new revised index have flummoxed many economists including the Chief Economic Adviser to the govt.

It is to Modi’s credit that the Lutyens’ bureaucracy has been disciplined. The arrest of agents accused of stealing govt. documents was a signal to crony capitalists not to meddle with governance through industrial espionage. Current account deficit (CAD) being under control was as much due to financial jugglery – preponing receipts & postponing expenditure - as well as “heavy lifting” done by the UPA; oil price drop was an unexpected bonanza for the NDA which could have been used for public spending to revive the investment climate. His “rock star” like foreign visits helped International investors refocus on India. He only needed a competent 2^nd line to deliver the goods, off-course with greater decentralization of power & responsibility. He, unfortunately, chucked predisposed as he is to a centralized Prime Minister’s Office (PMO) & a command & control structure.

While Modi’s stratagem of mandatory retirement of politicians after 75 years is welcome he could have implemented the policy in phases. Had he included tried & tested hands of the Vajpayee era like Yeshwant Sinha, Murli Manohar Joshi, Jeshwant Singh (he could have been re-inducted into the party) et al with a strong MOS being tagged to them with the message that the younger lot who deliver would be promoted to Cabinet Rank in 2 years’ time, he would have had a team that would have been on the ball from day 1; after all it is unfair to expect the current lot - despite the best pedigree & competence - to deliver immediately, denying them a “learning curve”. That policy ails the govt. to this day.

Lack of experience in ministerial experience should be made up through association with “think tanks”; after all most of the bureaucrats in specialized functions like Finance, Defence et al are generalists & while being good with knowledge of govt. processes, might not be able to come out with innovative solutions always. By announcing the demise of the planning commission from the ramparts of the Red fort on Aug. 15^th last year before working out the contours of the proposed NITI Ayog, Modi lost the plot. Vivekananda Foundation or the India Foundation has tried to step into the vacuum but much still needs to be done. It is precisely due to this reason that the BJP was forced to either rebrand the old UPA programs or execute them remarkably better than their predecessors but is yet to come out with any original scheme till date. That is the sad story.

Modi has picked up certain fights which are unnecessary. Nomination of Gajendra Chauhan as the head of the FTII has elicited wide protests from even traditional BJP supporters. Rather than viewing withdrawal on this issue as a defeat he should have appointed a more respectable face like Anupam Kher or Amitabh Bachan. Appointing Shatrughan Sinha - peeved at not being offered a cabinet berth- could have mollified him partially & ensured his continued loyalty to the party; perhaps this would have kept him away from Bihar where his proximity to the opposition is creating flutters. Simultaneously, Modi should persist in disciplining the institute which has seen multiple strikes in the last few years & the first step would be to ensure that students overstaying in hostels be asked to vacate the premises. He appears more keen on the latter.

Coming back to the economy, any economist would have indicated that utilization levels across industries like Steel, Cement, Auto etc. are low & hence despite the rapidity of environment & other clearances, Industry was unlikely to accelerate investments unless demand picks up. The surest way to do so would have been been by increasing rural demand by modifying the MNREGA to create assets & growing urban demand by accelerating the payouts of 7^th pay commission recommendations. Combine these vectors with the increased tax benefits on housing & New Pension Scheme to the salaried class - already announced in the previous 2 budgets – & demand  revival is waiting to happen. However, in sectors like coal, iron ore etc. where demand exceeds supply, supply side initiatives as well as legal solutions were more desirable. While there is some forward movement on coal through the auction mechanism - although open bidding without sectoral restictions would have been more prudent strategy at price discovery - a legal solution to the stalled iron ore mining issue is yet to be initiated. Reviving the mining sector could have helped revive the animal spirits in ancillary sectors like tyres, commercial vehicles etc. thereby leading to a higher trajectory to the Primary Manufacturing index. Consequently, we would have saved on foreign exchange too with a drop in imports. Services linked to those industries would have seen an uplift too.

With infrastructure companies reeling under heavy debt and asking for a haircut & Public sector Banks bearing the blunt, it was clear that expecting investments from the private sector was a pipe dream. Govt. spending or public sector spending was the solution. Strangely, while this should have been announced in the first budget, it was delayed to the 2^nd & even today we see no acceleration in the govt.’s resolve to get the same implemented. The govt. should identify Roads & Railways as 2 areas for spending & work on completing these projects in 2 years by which time the economic cycle would have taken a steep upturn forcing the private sector to consider investments. Bank capitalization & dis-investments should have been the concurrent strategy which unfortunately is being attempted now when the stock market is dipping effecting valuations.

It is a known fact that when the private sector sees returns they would do so with or without the “land bill” or the “Labour law” reforms. While both are, indeed, important, non- implementation of those would not stall economic recovery. The govt. now seems resigned to the fact that the land bill cannot be passed in Parliament & is hence wants states to make their own laws. Surely, shifting the labour laws from the concurrent list to the state list would also help in creating competitive federalism. Modi should therefore choose which battles to fight.