Sunday 23 January 2022
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Rajan’s Warning Meant For States

He is Raghuram Rajan. He does what he does. If past experience is any guide, he also speaks what he speaks. As in 2005, at Jackson Hole when he criticised retiring Federal Reserve Chairman Allan Greenspan for leaving the world economy vulnerable with his policies, Rajan said how Prime Minister of India Narendra Modi was actually ahead of the rest of the country. Like in 2005, Rajan will not find many takers for his idea. Unfortunately, divided as we are in two camps — pro- and anti-Modi — the statement is certain to be used with delight by the detractors of India’s rockstar-like prime minister.

RBI Governor Raghuram Rajan
RBI Governor Raghuram Rajan

Rajan acknowledged the prime minister’s initiative to position India abroad as an ideal destination for investment, but unless the same is backed by “action on the ground”, the effort may prove counterproductive. He has a point. When an investor comes attracted by the sales pitch and finds that it takes 3 months for the first entry point, the Foreign Investment Promotion Board (FIPB), to convey if the proposal has been cleared or not, he may not be amused. Even after getting the permission, the investor needs to scout for land, which will require clearance from all landowners through public hearing. Such hearings are a hotbed of political extortions with little or no benefit to those who give their land. However, the rule was framed, which cannot be changed due to stiff opposition. Will an investor bring in his money to sink into such an uncertain atmosphere?

If the investor is lucky enough to locate a patch of land provided by some pro-active State, his waiting period just begins. Land provided by State Industrial Development Corporations requires several approvals before a can start. In the hinterland of the national capital Delhi — NOIDA and Gurgaon — there are 50 odd permissions necessary for a construction to commence! Unless the investor is desperately in love with India as a destination by now, his patience would vanish.
Once the factory is set and activity commences, business should be smooth. Not in India. Of course, the bumps for business vary from State to State. In States like Uttar Pradesh, it is said, so frequent is the demand of several rent seekers, big or small, that many opt not to touch NOIDA despite the infrastructure there being better than that of Gurgaon.

The eastern State of West Bengal is said to be another such case study. With rampant unemployment, political parties allow such extortions to keep their cadres happy. This is what the situation on the ground is.

Aila victims reach out for food and water as a relief boat reaches Bijoynagar in Gosaba, West Bengal (Rediff file photo)
Aila victims reach out for food and water as a relief boat reaches Bijoynagar in Gosaba, West Bengal (Rediff file photo)

What can the prime minister do? If the national investigation agency probes factories of terrorists in West Bengal, the Chief Minister thinks this is an act against federalism! But when she fails to turn up in a meeting of State chief ministers called by the office of the nation’s Prime Minister, does she not forfeit the right to complain, too?

There are two issues mentioned by the chief minister. First, she thinks that a suspected -making hub of terrorists is exclusively in the domain of the State’s and order situation. The point she loves to wink at is that it thrived under the careful watch of the State government. Either the state police was inept or was forced to close its eyes. In either case, the National Investigation Agency deserved to take over the probe. The chief minister’s complaint gives the impression of hiding something and seems to be an afterthought and a desperate measure.

West Bengal Chief Minister Mamata Banerjee
West Bengal Chief Minister Mamata Banerjee

Second, federalism is not a one-way traffic. A State must also gear up and contribute to the national cause. Mamata Banerjee has always acted against the national interest like her newfound friend Arvind Kejriwal is doing. When the earlier central government wanted to exchange the enclaves and sign the Teesta water treaty, she played spoilsport. This not only hurt then Prime Minister Manmohan Singh’s plan on regional cooperation but also acted against the political need of Sheikh Hasina in the Bangladesh election. The very fact that Mamata was present in Dhaka when Prime Minister Modi sealed the enclave exchange proves the point.

Coming back to Rajan’s comment on situation on the ground, it may be noted that the ground is controlled by the likes of Mamata et al. These leaders now find themselves out of tune with the current socio-economic aspirations of people. Yet, in their desperation to remain in power, these leaders use all the failed tricks — muscle power coupled with the rhetoric of socialism. To thwart Narendra Modi, the “very articulate spokesman of India” as Rajan called him, these leaders use abusive words, incorrect logic and white lies to hide their incompetence. The situation on the ground needs a change.

Prime Minister Narendra Modi
Prime Minister Narendra Modi in the US

How this can happen is illustrated by the recently released State rankings on “ease of doing business”. Gujarat and have emerged as the first and second most competitive States. Both have Distance-to-Frontier scores to figure among the top 50 nations in the world. Clearly, Modi’s vision of taking India to top 50 is not unsynchronised with reality. All we need is proper leadership at the ground level.

In 2005, Rajan had, at Jackson Hill, analysed the past and warned of the mistakes that the retiring Allan Greenspan had made. This time, he has looked to the future and warned India of the possibility of failing on the ground. This will be yet another missed opportunity. Warning from Rajan is timely for the leaders in the States. If they refuse to read the writing on the wall, it is for the electorates who choose them to give them a befitting response. Now is the time for the regional powers to follow the path of nation-building or get consigned to the dustbin of history. Hope they will read Rajan’s message correctly.

Sugato Hazra
Public policy analyst based in Delhi

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