As grand obsessions go, there is little in American literature to top that of Herman Melville’s character Captain Ahab in Moby-Dick. The slow burner of an 1851 classic has Ahab living out his all-consuming desire. He wants to personally harpoon Moby-Dick in his eye and through to his brain, the great white whale, as big as his ship. What is Prime Minister Narendra Modi’s Moby Dick? He calmly says it is the progress of India on all fronts. And Prime Minister Narendra Modi works night and day without taking any holidays. But which of those fronts are especially prioritised, because all five fingers cannot be the same size? To the naked eye, it looks like his singular grand obsession is with winning elections. And this is good because there is no opportunity for anything else if one is ousted if there is no government of his in the first place.
Modi is dazzlingly good at it, being an indefatigable campaigner and masterful orator with tremendous connect with the public. It is the electioneering that binds him to his alter ego, party president and Home Minister Amit Shah. And Amit Shah is already working on the Assemblies coming up in Maharashtra, Jharkhand and Haryana.
As an extension, the work on finding a lasting solution in Jammu & Kashmir is probably underway. The anarchy and bloodshed in West Bengal are being carefully monitored for an opportunity. Other narrowly lost States such as Madhya Pradesh and Karnataka may well be clawed back at the first opportunity.
Modi is also tremendous at foreign policy, dwarfing the role of the Foreign Minister. India’s stature in the world community has gone up in leaps and bounds due to his tireless efforts. It promises to climb new heights of success in Modi 2.0. What will we see next? Membership of the NSG? A permanent seat with veto powers at the UNSC? A border settlement with China? Sales of Made in India armaments, missiles, satellites?
Defence and security are also strong points. Modi has dared to transform our security paradigm vis a vis both China and Pakistan. And this achieved with not very good military tools to work with. The country is rapidly upgrading and modernizing its armaments and related scientific capability now, realizing it may not be so fortunate the next time around.
Economy not priority of government
The economy, which is crying out for help, seems to be only fourth in Modi’s set of priorities. He does not seem to have quite the same feel for it, and the whole country is definitely not as mercantile or industrious as the Gujarati.
However, there are hints of major reform in the offing, involving both labour and land. But can the government take the political buffeting to come? Easier actions such as punitive measures against fraudsters and cheats seem to be on the upswing. Bankruptcy code is in motion. But huge bad debts at banks and NBFCs continue due to a criminal nexus between borrowers and lenders. Private sector investment is at a near standstill. Nothing has been done to unleash “animal spirits”.
Leaving aside job and GDP statistics, which are being challenged, perhaps unfairly, and improvements in the ease of doing business rankings, there is not enough feel- good. This despite the fact that FDI has risen to its highest levels ever. Foreign exchange levels too are at their highest at nearly $ 425 billion.
But exports of all kinds are languishing. As is manufacturing, trade, agriculture, services – almost every aspect of the economy, except infrastructure development, funded largely by the government itself.
Where are the urgent moves designed to rescue the economy from a sharp slow-down? This could, of course, be shrouded in secrecy around the budget-making process. All will be revealed in July, but will it overwhelm on the upside or continue with the tinkering of all those Arun Jaitley budgets?
That Nirmala Sitharaman is an Arun Jaitley protégé, does not suggest that there will be any great leap forward. More’s the pity, because the nation deserves to be surprised.
The Modi administration, very statist in its ways, has stayed away from corruption. But it does tend towards the puritanical. An example of this is the utter neglect of the Real Estate sector that rivals agriculture in terms of contribution to GDP. Real Estate is shunned because of its large use of unaccounted-for cash. But this could be mitigated to a substantial extent if the capital gains taxes on profits from sales, mostly dodged, are abolished. There is also an unrealistic desire to reduce property prices by deflating demand, without recognizing that the key reason for high property prices is the underlying, inelastic, land costs.
Elsewhere, the emphasis on efficient taxation via GST is commendable, but it is not balanced by growth incentivisation.
Vajpayee legacy that Modi carries
On the plus side, the NDA, from Vajpayee’s NDA 1.0 and now, into the second Modi term, has always been first class at building and improving infrastructure. Some of this, investment-intensive as it is, is in successful collaboration with the private sector and foreign investors.
The efficacy of the Modi government’s low-cost housing in “Smart City” configurations remains mostly a question mark. The ambition is towards housing for all by 2022, looming close. It is India’s 75th year since independence.
Why does a government keen on infrastructure and low-cost housing refuse to help private residential development and office building?
Modi has asked the bureaucracy in every ministry to come up with ideas and plans to grow the economy to $ 5 trillion. But is the bureaucracy, trained to command and control, capable of thinking in an entrepreneurial manner? Modi relied on the bureaucracy in Gujarat, and does so now, possibly for its biddability. But it may be pliant, but cannot even devise marketable methods to divest PSUs.
The Air India terms of reference were the usual hodgepodge of unrealistic valuations and trying to foist years of losses on the prospective buyer. Indian bureaucrats have to understand that they may be clever but others are not completely stupid either.
The NITI Aayog has not exactly covered itself in glory so far. It too has been tasked to be a catalyst for the economy. Again, are the people manning it practical and imaginative enough to come up with the goods?
A lateral entry programme is inducting experts into the bureaucracy at the senior level. Will the IAS culture allow these entrants from the private sector to function effectively?
All the Modi initiatives for the economy, apart from some aimed at streamlining processes, cutting red tape and speeding things up, lack a grand vision to stimulate domestic investment, demand, and consumption, the foundation and driver of the Indian economy.
Incrementalism won’t do
To do this, Modi must become an Ataturk. He must overcome his incrementalist instincts, and boldly carry out radical reforms. To get rid of a drain on public resources he must enable a surgical strike on loss-making PSUs.
On the other side of the coin, the need of the hour is to make the rupee, half in and half out for years for fear of a run on its value and capital flight, fully convertible. It can’t do much worse than it is now, and Hawala, as before, is alive and well.
And then, on the principle that an economy is valued by the embedded investment it attracts, let in, not millions, but trillions of dollars in foreign investment. This can only happen based on realistic, concomitant and globally competitive terms, and not the ifs and buts that Indian babudom is fond of imposing.
Modi has to break the mould. Foreign investment bankers need to write up the tenders with the PMO approving them directly. Let us remember we have not been able to buy a couple of hundred badly needed fighters for the IAF, Army and Navy for a decade, through our usual routes via the byzantine Ministry of Defence. And when Modi made bold to buy 36 Rafale fighters in a government-to-government deal, he was subjected to undeserved calumny on the grand scale.
However, a nearly two-thirds majority in the Lok Sabha does provide a thick skin if Modi wants one.
Without reviving the collaborative private sector, encouraging floods of foreign investment, and providing land, labour, infrastructure, utilities – in the desired configurations, the Indian economy cannot grow into double digits or thereabouts.
And we have no time to lose. For a long time, the presumption and raison d etre was that pent up demand, left over from the shortages of the socialist years, would sustain. This no longer appears to be true. A period of low growth has set in and could lead to recession, a middle-income trap, or worse.
Demand for private cars in the automobile sector, as a barometer of changing preferences from ownership to using Uber, Ola and the like, has shrunk by a fifth. The number of people flying has reduced, even as airlines go belly-up. Housing is not selling, even at depressed prices. Disposable income in the hands of people has shrunk. Malls are struggling to survive. Inefficient and slow government owned services such as the post offices, MTNL, BSNL – are making massive losses.
Priority number four may be difficult on the face of it. It is not as glamorous as the power buzz of winning elections, the pomp foreign policy, or the adrenaline of national security. But it can, if tackled squarely, make the difference between dashed hopes and mere survival, or glorious success bathed in prosperity.