What is Modi's plan for reviving the economy?
That India needs to fix its aging plumbing is a given. A meeting with a top bureaucrat involved in the complex task of "untying the knots" last week convinced me that the process of recovery is slow and protracted. UPA gave up the simple outlook of linear thinking and never bothered to man up. A widening chasm between a lady driven by European sensibilities, and a pro-free market but indecision-gripped prime minister, cost the nation and resulted in what is now called the Lost Decade. This binary system saw a rapidly careening economy which needed to be restored to its white hot incandescent avatar. That’s, of course, easier said than done.
The PM has directly interfaced, with all top bureaucrats twice in the space of five months, he has repeatedly transferred the comatose bureaucracy to instill some spirit of endeavour to ensure that the pace of decision making picks up. As finance minister Arun Jaitley says, reforms are a continuous process, they cannot be limited by time or individuals. The primacy of this idea should not be ignored by anyone in government. Hopefully today, one will see the induction of several new names which rises above narrow regional and party considerations. What one can hope for are doers who get their feet and hands dirty.
Momentum
Governments have to look beyond the budget whirligig, they need to realise the power of the executive and the instrumentality of the Cabinet, something that Vajpayee’s NDA government did so successfully years ago and now the Modi dispensation is replicating. Bring back decision-making and unleash the power of the executive. The man who saw tomorrow Nouriel Roubini still believes that India has the necessary momentum to make the cut and lift itself from the bootstraps. The New York University professor, who was speaking at a conference in Hong Kong the other day, summed up the difference between the two Asian locomotives. India, weary from the needle moving back to its 1960 and 1970 experiments with socialism, was vanquished at the gate by a peculiar leadership diarchy on one side trying its utmost to take on a credit-fuelled fixed investment Chinese model.
Roubini reckons hitting at that famous Chinese economic "bubble" that credit fueled investment, will result in more bad assets for the banks and shadow banks, more bad investments in real estate, infrastructure and excess manufacturing capacity and more non-performing assets in the public sector. To quote Roubini from that conference, "The Chinese understand their growth model is unsustainable - too much fixed investment, not enough consumption". India meanwhile can be a beneficiary of a low base effect - over eight quarters of five and sub five per cent GDP growth - the trajectory from here on with the right leadership can only be upwards.
This now brings me back to the bureaucracy and the executive at home. India comes with inherent risks now - poor capital generation, don't go celebrating because of portfolio dollars, they don't really add up being transient in nature; a challenged investment cycle, deficiency of capital, power, infrastructure, falling savings rate - all of them are accentuating the laundry list of woes. Sitting in a frontline minister's ante room, I was pleasantly surprised to see his staff tracking files calling up other ministries, wanting to know the status and making notes on where it was in the government food chain.
Another bureaucrat who had kept an hour for me got cracking the moment I walked out, as a huge pile of files awaited his attention. Still another minister in a sensitive position told me categorically that the PM and his government were not in the business of informing media on everything that they were doing, work was a continuum. This pretty much echoed Jaitley's words. The PM obviously believes that the velocity needs a kick in the backside. That is why he told the bureaucrats that they should work fearlessly. A troika of key finance ministry bureaucrats – Rajiv Takru, Arvind Mayaram and GS Sandhu – were being packed off was a clear message to the rest that performance criterion are paramount. Though, in at least two of these cases, it may well have been for different reasons. New ministers and changes in portfolios will provide pointers to the direction that he wants to take the economy to.
India now needs to understand that economics is to be divorced completely from politics. Modi has to bump up the economy, there is no alternative to that - none whatsoever. Consumption parameters haven't shown any resilience and that remains a worry. Automobile or consumer durable sales are still struggling, though the new whetstone of etailing seems to be outperforming traditional markets for other goods and products. But that could merely be signifying a discernible shift in consumption patterns and not necessarily adding to the overall volume.
Decisions
Expectations weigh heavy. Knots like the draconian anti-industry Land Acquisition Bill, announcements like Smart Cities, Make in India, Digital India need actualising, fixing labour laws and passing GST, insurance and pension legislation will need resolution sooner than later. These may be part of a string of pearls stratagem, but the big killer app or grand vision is still awaited. The BJP, which won 282 seats on its own, needs to reveal the economic big picture for India over the next five or 10 years instead of this piecemeal patchwork quilt.
More than that India needs to know what the BJP's economic mission is. And one can’t wait for the next budget in February. Rhetoric has to translate into action. Modi's greatest virtue is that he is at one level extremely individualistic and his own man. A man who has succeeded by pursuing his own charter of change.
Incremental steps will no longer do, India needs a new overarching economic policy that lacks any hesitation and revisits. The policy also needs to be forward looking and bereft of clutter and mindless populism. The reforms must percolate right down to the last man standing, so that India's lot improves and as Roubini said in Hong Kong, the tortoise can move to the next level in its combat with the hare - China. India expects, India waits, India wants, India aspires for only one thing - change.
It has voted with its feet for it. Change is now the only guarantor, welfare economics have been thrown into the rubbish heap, with a brand new economic vision that is vital to reboot India. Broad policy strokes must be defined and enshrined. One that people can breathe and execute.