Perhaps the most rapturous welcome to the new NDA government was extended by India Inc which saw a pro-reform government, led by a man renowned for his ability to deliver efficient administration, as the answer to its prayers. HDFC chairman Deepak Parekh’s assertion last week that the fan club was now beginning to get impatient about the lack of change on the ground, therefore, must have come as something of a shock for the Modi government. So much so that Finance Minister Arun Jaitley had to take time off from Budget preparation to do damage control. Jaitley’s counter was that the government was, on the contrary, facing flak for going “too fast” on reforms. This was an oblique reference to the Opposition’s criticism of the spate of ordinances issued by the government since it assumed office. The nine ordinances issued so far largely relate to issues close to the interests of business, ranging from revamping land acquisition to amending the coal mines Bill to raising the foreign investment cap in insurance. Given the pro-business nature of these measures — the coal ordinance alone has led to record-busting bids for coal blocks by private sector bidders — the charge of “lack of change” does, at first glance, appear surprising.

So why does business think the government’s too slow, while the political class feels it’s the opposite? Parekh’s reasoning — that business optimism has not been translated into revenues — provides a hint. Businesses tend to be driven by quarterly results, or at best annual outcomes; governments tend to look at the world through a quinquennial prism, driven by the election cycle. India’s approach to reforms has been gradualist, given the plurality of our polity. But, as former Planning Commission Deputy Chairman Montek Singh Ahluwalia argued (‘Economic reforms in India since 1991: Has gradualism worked?’, Journal of Economic Perspectives ), “gradualism implies a clear definition of the goal and a deliberate choice of extending the time taken to reach it, in order to ease the pain of transition”. This setting of goals and deadlines is something that both the UPA and the Modi government failed to do. According to Ahluwalia, this was deliberate, in order to allow “room to retreat if necessary”.

India Inc’s impatience perhaps stems from the perception that the Modi government does not need this elbow room. This, as events have demonstrated, is not quite correct. The Opposition may be weakened but it can still stall lawmaking — and our federal system does not allow steamroller tactics. Jaitley has already indicated that this Budget will be “transformational” in direction — but has not assured that it will be a “big bang” one either. While corporates would do well to look at the direction, rather than the presence (or absence) of specific measures before rushing to judgment, the Centre needs to speed up decision-making and back its vision statement with more clarity on outcomes and milestones. The time for gradualism is running out.

comment COMMENT NOW