A year ago, when the Narendra Modi government completed two years in office, even its diehard supporters were pawing the ground with impatience over the glacial pace of change in economic policymaking. Why, they wondered, was a government that was determined to break away from the past, and which had the strength of numbers in the Lok Sabha, shying away from big-bang reforms?
As the Modi government completes its third year today, these voices of scepticism, and much of the taunts from the Opposition, have effectively been silenced by the spate of high-decibel action in the year gone by. On a number of policy fronts, the NDA government unleashed a barrage of bold actions, which did away with the perceived sense of drift; they also allowed it to seize control of the economic and political narrative, particularly after the BJP expanded its political footprint across India, winning emphatically in many State elections, most significantly in Uttar Pradesh.Winds of change
Not all of these big-bang actions count as reforms, and the jury is still out on the long-term impact of some of these moves – such as the November 8, 2016 demonetisation of high-value currency notes. But even the government’s critics concede that the past year has been transformative, particularly in the manner in which the government is changing the landscape of the financial sector.
Apart from demonetisation, which the government hard-sold as a pillar in its war on corruption and black money, the NDA formalised arguably the most sweeping reforms of indirect taxes by sewing together the Goods and Service Tax (GST) regime in consultation with the States. It also scored on the legislative front with key initiatives such as the Insolvency and Bankruptcy Code and amendments to the SARFAESI and Debt Recovery Acts, and, in recent weeks, put in place an institutional mechanism to tackle the mountain of bad loans that public sector banks are saddled with.
Two other efforts that signalled a decisive break with the past were the advancing of the Budget date (to enable better utilisation of funds for public welfare) and the merger of the Railway Budget with the Union Budget, which promises to do away with the politics of railway budgeting.
A government seemingly on overdrive has in the past year also propelled its financial inclusion initiative, complete with direct benefit transfer and Aadhaar seeding to plug leakages in subsidy payouts.
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Captains of industry have welcomed these efforts. “The highlight of Prime Minister Modi’s leadership has been clarity of purpose, transformational thinking and the ability to take bold decisions,” says Bharti Enterprises Chairman Sunil Bharti Mittal. “From Digital India, Make in India to GST, demonetisation and Swachch Bharat, the government has taken a visionary approach to taking India to the next level.”
Over the past three years, Mittal added, the sentiment around India has become “much more positive” despite a challenging global environment.
Much of the policy action in the third year was made possible by the spirit of “consensus-building and cooperative federalism” that characterises the Modi government, says Union Minister for Law and Justice and Minister for Information Technology Ravi Shankar Prasad.
And not shy of trumpeting its “achievements”, the government is rolling out a campaign, monitored by the Prime Minister’s Office, to project an image of itself: the campaign will portray the government as “decisive and bold”; “ honest and incorruptible”; as one that “empowers Gaav and Garib (villages and poor)”; as one that “cares”; and as a government “For the People, Of the People and By the People.”
A critical element of the campaign will be for the BJP to claim the political mantle of the movement to combat corruption and black money by framing its initiatives on various fronts – for instance, demonetisation, benami property crackdown, tax treaties with foreign jurisdictions to plug loopholes and prevent round-tripping of black money, and the tightening of money laundering provisions – in that context.
‘UPA schemes repackaged’
Opposition leaders, however, question the government’s claims. Senior Congress leader M Veerappa Moily, who heads the Standing Committee on Finance, points out that much of the legislative efforts that the NDA claims credit for, such as GST and mineral development, were initiated by UPA governments. Noting that Modi had opposed GST when he was Gujarat Chief Minister, Moily adds that the GST regime as currently framed has many flaws. In any case, he says, “economic reforms are incomplete without also changing direct tax laws”. If anything, he notes, the measures to empower income-tax officers to search and raid are regressive. And demonetisation has failed to achieve any of its objectives, he claims.
Congress’s Deputy Leader in the Rajya Sabha, Anand Sharma, is critical of the state of law and order across the country and alleges that “criminal and anti-social elements have been let loose” on citizens. “There cannot be growth or development without peace and social stability,” Sharma added.
CPI (M) general secretary Sitaram Yechury draws attention to the rise in unemployment over the past three years and the fact that bank credit growth is at a low. “For all the spin, job losses and a shrinking economy is what Indians experience,” he adds. The Centre, he claims had “let big-fish bank-loan defaulters off” and “ruined” India’s informal economy, which employs more than two-thirds of Indians and accounts for more than half the country’s GDP.
Dismissing such criticism, BJP national spokesperson Narendra Taneja points to FDI inflows and private investments in telecom, infrastructure, energy and power as indicative of a change in business sentiments. “Look at MSMEs: there is a revolution happening in that sector,” he says.
Looking ahead to the next two years, which will lead up to general elections in 2019, even those who acknowledge the frenetic pace of policy actions of the past year wonder if they will be sustained.
In response, Ravi Shankar Prasad points to recent political history as a guide. “Remember we did demonetisation, when crucial State elections were around the corner.” That is the nearest thing to an indication that the government will not shy away from taking strong decisions.
(With inputs from KR Srivats, Surabhi, AM Jigeesh and Amiti Sen)