Opinion

Value for money: The wait for a plan to revive the economy

Subir Roy | Updated on August 22, 2019 Published on August 22, 2019

Union Budget: This year missed the mark   -  Getty Images/iStockphoto

PM Modi in his second term has failed to devise a concrete economic vision. But there is still time for some creative thinking

NR Narayana Murthy, the iconic founder of Infosys, has said PV Narasimha Rao, Manmohan Singh, Montek Singh Ahluwalia and P Chidambaram were “the four architects of economic reform. They did in one week what we didn’t manage in 45 years,” painting them in somewhat heroic colours. This is a known story which Murthy has narrated many times, but still, rehearing it at this juncture has its own impact.

The present regime has sought to deny the earlier Congress-UPA dispensations much credit for taking India forward economically, basing its narrative on two propositions. One, the NDA-II in its first dispensation has taken the growth rate forward, beating the Congress-UPA record, and two, in its second dispensation it has set the goal of making India a $5-trillion economy by 2024.

But then, barely a couple of months into the NDA-II’s second term, storm clouds have gathered. A serious economic slowdown is on, there is a crisis on the jobs front, the likes of which has not been known in decades, rural India is in acute distress, exports have been stagnating for years and, what should be embarrassing for a government that has gone to town on the improvement it has brought about in the ease of doing business, business is gasping for breath under a new tax terrorism.

Who said this? Not an NDA critic but a known well-wisher, TV Mohandas Pai, former chief finance officer of Infosys. He finds India’s tax regime the most onerous among those in the 30 countries he has known; and worse, 50 per cent of the outstanding tax disputes have come up in the last two years! All of this happened right under the nose of NDA-II, and is not a negative legacy of the Congress-UPA.

Economic reforms

The political blame game can go on, but the issue before business and the economy is, how to get out of the economic mess that the NDA-II appears to have landed us in. To be fair, the NDA-II has not been sitting idle. It has taken a number of initiatives for which it can take well-deserved credit. It has initiated an insolvency and bankruptcy code which has the chance to break the back of bank NPAs. It has taken big strides in bringing sense and clarity to the laws governing the labour market, and raised the threshold for initiating and pursuing tax litigation at various levels.

But still, the NDA-I’s phase-II is not widely credited with an ability to get the economy out of the current doldrums. This is most importantly because it does not have a game plan which can deliver on the task ahead. Finding out why can lead the way to devising a plan which will deliver.

You need a comprehensive vision to be able to formulate a game plan, particularly when there is no formula for one. It can only come from people, mainly economists, who can think out of the box. Murthy’s four heroes of economic reform between themselves had a vision which, at the time, required out-of-the-box, not incremental, economic thinking.

The reality is that the NDA-II phase-II cannot call upon the services of outstanding economists who will come up with a game plan born of such thinking. It has done away with the services of Raghuram Rajan and Arvind Subramanian and left the latest Budget to be devised by a civil servant economic administrator. And when the Budget bombed, he got transferred and effectively demoted, leaving him no choice but to seek premature retirement.

Modi’s vision

The Budget could have marked a turning point, like Manmohan Singh’s early Budget which, critically for pioneers of India’s IT revolution like Murthy, exempted software export earnings from income tax. Conversely, the latest Budget seems to be bent on scaring away foreign portfolio investors.

Just economists with a mind of their own are not enough. They need to work in the right political space, which has to be created for them. Narasimha Rao and Atal Bihari Vajpayee could be termed instinctive economists. The former helped create the ground floor on which the latter could add a first floor, thus making it possible for Chidambaram to build a second floor under the UPA-I.

The critical question is whether Narendra Modi is an instinctive economist in the manner of Rao and Vajpayee? He has, until now, displayed a political vision and game plan to take forward the creation of a Hindu rashtra. Its milestones have been identified in successive election manifestos and the electorate has given him the mandate to traverse them. But, he is yet to come up with any kind of economic vision.

When Modi ruled Gujarat, he delivered on the overall growth by following conventional free-market policies, but the State was second class in delivering improvements in human development indicators. The crisis facing the Indian economy, particularly rural distress and joblessness, cannot be addressed simply by the notion that high growth will be pursued and the resultant rising tide will lift all boats. These are early days, and Modi has enough time to reveal his economic vision and game plan. We must wait for that. His handicap is that the Hindutva ideology does not have much economic content. It is centred on creating a Hindu rashtra by targeting the minorities.

The writer is a senior journalist

Published on August 22, 2019
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