Will the new Budget live up to the hype?

Second thoughts: The new Modi government is on a far more stable political ground than the UPA 2 regime led by Manmohan Singh. - R V Moorthy   -  The Hindu

The town criers have built the stage. Now it's the Modi government's turn to deliver the big bang reforms

In medieval times, royal court officials and other public authorities deployed a somewhat rudimentary ‘news broadcast’ channel –— in the form of so-called town criers — expressly to make public announcements, in the village square, about affairs of the state that merited the attention of the populace. Typically dressed in elaborate attire, and carrying a handbell, these criers would stand at street corners and make such proclamations as the court officials or authorities wanted disseminated widely. In an age that predated heightened literacy levels — and the technological advancements that allow for today’s Mann ki Baat and real-time Tweet-storms — these were the ‘push notifications’ of choice for many. The ‘breaking news’ thus dispersed bore the imprimatur of officialdom, and for that reason was treated with the gravitas it deserved.

In the weeks leading up to Budget 2019, a handful of modern-day town criers has been doing the rounds of media outlets, thunderously tom-tomming the promise of “big bang reforms” to come. NITI Aayog vice-chairman Rajiv Kumar, for instance, claimed in an interview that the first 100 days of the Narendra Modi government’s second innings would see a slew of reforms that would sufficiently gratify foreign investors. These reforms, he said, would focus on providing investors access to unutilised government land, and on simplifying India’s rigid labour laws in a way that would combine 44 existing Central laws into four codes.

In addition, Kumar claimed, the government would either “fully privatise” 42 state-controlled companies in the coming months, failing which it would shut them down in order to stop draining public resources.

In their scope, these ‘promises’ are more than a little ambitious, and should, on their own merits, have caused investor moneybags to break out into paroxysms of giddy delight. That they haven’t tells its own story.

The reason such promissory proclamations do not inspire investors’ confidence today is that they have been made too often in the past, without any semblance of forward movement to take them beyond the “jaw-jaw” stage of policy pronouncements. Indicatively, in June 2015, the then Labour Secretary Shankar Aggarwal had articulated the government’s intentions to convert “44 labour laws into four simplified codes” — which is the same proposal that the NITI Aayog today breathlessly passes off as indicative of upcoming ‘big bang’ reforms that will have foreign investors rattling their pearls in excitement.

The sense of déjà vu that such well-meaning, but hollow, promises induce is mirrored in equal measure by the cycle of historic memories from a decade ago, when the UPA government unexpectedly returned to power, ridding itself of the policymaking burden placed on it by the Left parties. In June 2009, when euphoria over the UPA 2’s ascendancy to power was propelling stock markets to dizzying heights, a foreign portfolio fund manager had rapturously told me there were no circumstances in which he would give up on India as an investment story, given that the “opportunity is just too extraordinary”.

Waxing lyrical, he had expanded on that bullish-on-India theme. “I’ve seen border wars, I’ve seen plagues, I don’t know how many Prime Ministers I’ve seen. I’ve seen any number of financial scandals, whether they are cooperative banks in Gujarat or a market operator in Bombay, or a cabal in Calcutta... I like to think I’ve seen almost everything. But, of course, I haven’t! India — God bless it — always generates new surprises, good and bad!”

But over the next five years, as the UPA 2 government was mired in scams, each more enormous in scale than the previous one, the markets went nowhere, and foreign investors were left pondering philosophically over what might have been.

The Modi 2 government is, of course, not nearly in the same political league as UPA 2 was. For one thing, it is on far more stable political ground, with a comfortable majority of its own, and not quite susceptible to coalition blackmail in the way that the Manmohan Singh-led government was. For another, India’s macroeconomic fundamentals today are much more robust than they were back then. Even so, there is one strand of history that bodes ill for the Modi 2.0 government: Its inclination to make lofty promises and not deliver on them.

There is one important lesson that the government can learn from an unlikely quarter: From the spaghetti Western cult classic The Good, The Bad and the Ugly. In an iconic scene from that film, the bandit Tuco ‘The Ugly’’ Ramirez, played by the endearing Eli Wallach, is surprised in his bath by the one-armed bounty-hunter Al Mulock, who has murderous intentions. Bursting into the bathroom, waving a gun in his left hand, Mulock breaks into a rambling and prematurely triumphalist monologue. Perhaps he’d have had lots more to say, but Tuco unloads several rounds from his gun, which he had tucked away beneath the soapsuds. As Mulock staggers away to his death, Tuco offers him a bit of laconic advice: “When you have to shoot, shoot! Don’t talk!”

The same may be said of ‘big bang’ reform promises too. It’s now time to shoot, not talk.

Venky Vembu   -  BUSINESS LINE

 

Venky Vembu is Associate Editor, BusinessLine; email him at [email protected]

Published on June 21, 2019

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