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Monday, May 19, 2014

Clearing the cobweb - Modi' s task

Clearing the cobweb

Narendra Modi-led BJP may have stunned the nation with a resounding show at the general elections. The road ahead for the BJP-piloted NDA (National Democratic Alliance), however, is full of potholes. The task of relaying it is easier said than done. There are a few things within its control to begin the long journey in right earnest. The first task is to address the perception problem. A sense of negativity has engulfed the nation, as a whole, and the economy, in particular. Removal of this spreading perception is indeed the immediate job before the new government. 

Non-functional phase

The second-half especially of the UPA-II (United Progressive Alliance) of Dr. Manmohan Singh, rightly or wrongly, came to be viewed as largely a non-functional phase. It was a government of inaction for some, and of slow action for still others. As a consequence, there was a widespread feeling of let down.
Though the Singh government resorted to some pinch-hitting in the dying moments, they proved insufficient to clear the deeply set misgivings. This perception has seriously hurt the business and commerce.
What the country is looking for in the very near-term from Mr. Modi the prime minister is decisiveness in policy articulation and execution. With BJP getting majority of its own, Mr. Modi is advantageously positioned vis-à-vis his predecessor, who was constantly weighed down by compulsions from within and outside his party. Policy consistency was a casualty in Mr. Singh’s second tenure. This has caused quite a lot of resentment, and scared away foreign direct investment. The government has a legitimate right to demand its due from the business class. Can it do so by tweaking the interpretation of the rules? That is indeed the point of debate here. Retrospective application of rules, newer interpretation of laid-out regulations and the like don’t really speak eloquently of the government’s policy-framing capability. 

Divide of a different kind
The underlying anger among the business community — from within and outside India — has come out in different formats. Mr. Modi is well aware of the repercussions of this angst on the Indian economy, which has gone into a fast deceleration mode.
The liberalisation, in its wake, has also brought about a divide of a different kind. Has this resulted in a bias in favour of multi-national companies? One can discern a feeling of discomfort among the Indian enterprise. A sudden spurt in HR-related disputes and job axes in MNCs gives credence to this argument.
Certainly, the Modi government must have an inclusive approach to society as a whole. It also needs to go beyond, and have inclusive attitude towards local enterprises too.
Given the size of its population, India needs to pursue a holistic path to growth. The growth of the service sector, especially the IT (information technology) and ITeS (information technology-enabled services), has put the country in a position of strength in the global marketplace. Thanks to IT and ITeS, India today is lot more visible in the global map. Nevertheless, a strong manufacturing base is indeed an unavoidable essential option to push the economy back into high growth orbit. If population defines the market, India is astoundingly a large place for any manufacturer.
The priority must surely be to strengthen the production base to satiate the increasing aspiration of young Indians, who have become lot more demanding.
With supply constraints triggering rising inflation, the Modi government has the task really cut out. And, it has to start, and start just now on this score.
Facilitator role

What is important for the new government is to play a quick facilitator role. A combination of factors — aided by simple inertia of the rulers, on the one hand and aggressive activism of assorted institutions, on the other — have literally stopped any forward movement in the crucial infrastructure space. All these have ultimately resulted in the country stagnating in critical areas such as electricity, coal et al. The onus is on the new government to quickly move in to clear the cobweb, and facilitate the turnaround process.
Consumer is the king, it is often said. However, successive governments have ensured that they remain their prisoners through dole out of freebies. How to empower them and help them eke out an honourable living? This can be done by providing them work, ensuring that their jobs are secure, and leaving enough in their pockets.
This is, however, easier said than done. Mr. Modi has clear mandate to provide a stable government at the Centre. With stability secured through a decisive electoral mandate. Mr. Modi, hopefully, will deliver quickly without any loss of time. 

jagannathan.kt@thehindu.co.in