Ahead of the first Union Budget of Narendra Modi-led Government, USINPAC organised a webinar on ‘Key and tough steps that the new Modi Government could take to kick-start Indian economy’ where Dhruva Jaishankar, a commentator on Indian policy affairs, was one of the speakers. Speaking on the occasion, Dhruva Jaishankar says, “There’s need for certain degree of modesty as we approach Modi, since his actions have shown he thinks outside the box and hence, I think one has to give him benefit of doubt as regards to revival of Indian economy” This as an opening statement was truly the essence of what was to follow in the entire discussion.
The policy analyst, before getting into specifics gave a broad outline which he felt would give a better understanding of things to come. He said, “While the mandate gives him a huge burden of huge expectations, which also is an unambiguous message for economic reforms, he has serious challenges ahead of him. In terms of what he intends to, nobody has any clear picture since Narendra Modi as a leader is known to keep his cards close to his chest. However, we can surely look at things which he has said during his election campaign and the short term and long term issues that he has to deal with.”
“During his campaigns, his broad principles were assurance of a decentralised, efficient and transparent Government, special attention towards improved agricultural productivity, creating stable macro-economic environment, ensuring better project management, faster clearances and create a work culture such that the Government achieves better work standards.
Short-term challenges are to curb inflation by using monetary policies, remove supply side constraints in energy, commodities, transportation, storage infrastructure, understand and improve business environment and a tax regime that frightens investors.” These short term challenges, Dhruva Jaishankar feels need to be taken head-on, since they are factors that can bring some relief to people, thus giving a breather for long term issues to be addressed. This is particularly justified since decade-long UPA regime has left the coffers dry with soaring prices and acute policy paralysis which has hurt people so much that they were routed in the last Lok Sabha poll.
“Long-term challenges,” Dhruva felt were: “as far as the human resource sector is concerned, the Indian labour force needs to drastically imbibe skill upgradation”. The education sector is badly wanting, he felt. “Infrastructure requirement is enormous in terms of trillions of dollars. While India as a nation is undergoing massive rate of urbanisation, it is important that things are better planned and what changes in organisation structure in terms of governance should be initiated by the Centre particularly at local level.
Taking a look at the choices that this new Government has, he said, “Clarity in deciding the future of the enterprises (PSUs) which have been performing badly is needed. At their existing status, they wouldn’t get a good price and if they have to be turned more efficient in order to sell them, then the question that arises is why sell them? It is also important to see what is the future of the subsidised programmes under this Government, since they have been burdening the exchequer with huge fiscal burden. Should they be reformed, better administered or be abandoned is the big question?” These have been quite pertinent questions since the first Atal Bihari Vajpayee-led NDA Government had formed a Ministry for Disinvestment to look into possibilities of reducing burden of non-performing PSUs for which former Minister, Arun Shourie had said that over Rs 400,000 crore is needed for recapitalisation. Similarly, high levels of corruption at all Government levels has anyways hurt effective implementation of projects like MGNREGA and FSB which had cost well over one lakh crore of honest taxpayers’ money.
Implementation of Goods and Services Tax could be a hurdle since the ruling party, BJP is not in majority in Rajya Sabha. Jaishankar feels that it will get implemented hopefully, by reaching out to States. Moreover, labour law reforms are absolutely necessary to trigger manufacturing sector but whether it is to be dealt with at State-level or with a Centralised policy framework would be the new Government’s call.
But surely, Land Acquisition Bill and Judicial Reforms Bill seem to be completely beyond reach.
However, looking at the trends of Modi-led Governments earlier, Dhruva Jaishankar felt that for free-market economy in the US and MNCs, there would be numerous opportunities. He said, “India is a two trillion dollar economy, growing at over 5 per cent with hundreds of millions of young consumers and a growing middle-class. This, of course, means big opportunities for American companies”.
On the issue of the Union Budget 2014, he said that radical reforms may be absent but there would be minor adjustments in policies, thus creating better administrative environment which could play a big role in making the graph grow upward.
On questions of how trade agreement would move, Jaishankar felt that FTA is little early since there are stumbling blocks on both sides, however, a key indicator for American businesses would be how EU-India FTA talks go. But even though FDI in Defence going up to 100 per cent may not be happening any time soon, there is surety in increase of share. However, bigger issue is acquisition or multiple platforms for joint production in Defence and faster clearance and higher degree of transparency is a bigger concern for US companies in defence sector, which surely would get addressed soon.
On the Civil Liability Bill, he said that no amendment can be expected soon since India has some issues. However, just as the resolution passed by the US Congress and the negotiation signed by the executive had inherent conflicts; but requires lawyers to workout and negotiate operational functionalities between two such conflicting documents. Similarly, India can workout functional zone within existing parameters and meet industry players as per mutual convenience.
On the issue of investments returning to India, he said that the period between 1998-2004 shows that NRI money flies in first, other investors follow suit. That’s why issues of NRIs will be addressed. Delivering services for NRIs also means new work culture for governance at local level and Narendra Modi surely will work towards it. One thing is for sure that the global investors have kept India on probation. Corruption, uncertain policy environment and tax harassment like retrospective tax in Vodafone case have to be addressed efficiently. Surely, Modi is going to ensure a stable macro-economic environment which could be a strong re-assurance to investors and majority of their concerns will be addressed.
On India’s emergence as a manufacturing hub, the commentator felt that Prime Minister probably wants to create an all-manufacturing hub which is labour intensive in nature, which is the best way to increase employment. While, both Vietnam and China are in the same zone but China is re-balancing its economy. It wants to shift from being an investment-manufacturing driven economy to a consumerist economy. This shift by China is good for India. Gujarat and Tamil Nadu have already proven that they can become such labour intensive hubs, so India can take the leap.
Source: Niti Central