The Modi Government has completed eight years in office and the commentariat has scrutinised every aspect of its governance. However, there has been little focus on the structural reset that India has witnessed over the last eight years. This reset is not just limited to way things are done in India but also on how the society thinks and its approach to challenging circumstances.

In 2013, India had a big challenge in the form of one-third of its population having no access to electricity. There were doubts whether this challenge could be handled by the end of the decade. Fast forward to 2019, and the problem was largely resolved. Another example is addressing the problem of the lack of access to modern sanitation facilities. There are many other examples of such targeted delivery — LPG cylinders, housing subsidy, and even piped water.

The targeted delivery to the bottom of the pyramid is aimed at establishing a social safety net and ensuring a minimum standard of living for all Indians. This is in itself a big change that the country has witnessed since 2013, as many households for the first time got access to necessities that were believed to be urban luxuries.

This change in targeted delivery is the outcome of concentrated policy effort that leverages technology. The use of Aadhaar and Jan-Dhan accounts are at the cornerstone of this transformation and have helped the government save trillions of rupees over the years.

This approach of individual interventions with the objective of solving complex problems is the mindset change that is propelling India’s economic and development trajectory. The desired objective of many prior governments and Five-Year Plans was to build a manufacturing base in India. ‘Structural reforms’ and improving ‘ease of doing business’ were the commonly suggested approaches to achieving it. There has been work on both these fronts since 2014.

The key hurdle to India’s growth is incomplete markets, which restrict mobility of factors — this include labour, land and capital — from low productive to high productive sectors. The new draft labour codes address the first, and the insolvency and bankruptcy code solves the latter for the private sector.

In addition, there has been an effort to solve the second problem by tapping into land owned by public sector undertakings and monetising them. The new public sector enterprise policy takes this a step further. While disinvestment and privatisation will improve productivity, the policy, more importantly, reimagines the role of the state in the economy.

Restricting govt’s role

Three decades after the 1991 reforms, there has been a realisation that those reforms are incomplete unless the government leaves greater economic space to the private sector and focusses only on the social sector. By restricting government to select strategic sectors, there can be greater administrative focus on resolving issues related to improving governance and social sector outlook.

The Goods and Services Tax is another path-breaking initiative. Thanks to this reform there is an improvement in indirect tax compliance and, therefore, revenues.

Despite the compliance gains, there is a sense of fiscal prudence — an important distinction of the present government. For example, policymakers were wise enough not to fall into the temptation of increasing revenue expenditures during the pandemic when nearly every institution was suggesting an expansion in the government’s balance sheet. This has ensured a stable macroeconomic growth recovery process. While CPI inflation may be relatively higher than 6 per cent now, it is substantially lower than the double-digits that were recorded at the start of the previous decade. Fiscal prudence will ensure that in the medium term it is back to around 4 per cent, as it has been during much of the last eight years.

There is a renewed sense of belief amongst not just policymakers but entrepreneurs as well that India’s problems can be solved by its human capital. The recognition of the need to come together to build a better future is by far the biggest structural reset.

The transition in the way we think will be one of the many enduring legacies of the Prime Minister’s stewardship. Equally importantly, the Modi Government’s eight years will be marked by near elimination of extreme poverty in India, as defined by the World Bank’s $1.9 a day in PPP terms. That this was maintained even during the pandemic is a shining example of the successful transformation of India’s governance and its social security architecture.

The writer is a New York-based economist 

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