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Business News/ Opinion / Heat and noise are not policy debates
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Heat and noise are not policy debates

The govt might have disappointed some with its policy actions and inactions. But, it is unfair to say that it has not acted

Photo: Mint Premium
Photo: Mint

As with most situations in India, more heat and noise rather than substance has been generated on the remarks made by Raghuram Rajan, the governor of the Reserve Bank of India (RBI) on Make in India and Make for India.

English language newspapers which, for the most part, are prejudiced against the prime minister and his government, have tried to play up the governor’s remarks as a criticism of the Prime Minister Narendra Modi’s Make in India campaign.

Supporters of the prime minister and of the government have immediately sprung to his defence and have taken exception to the remarks of the governor. Both of them are doing a big disservice to the prime minister, to the governor and, in the process, to the nation itself.

Rajan made a clear statement: “There is a danger when we discuss Make in India of assuming it means a focus on manufacturing, an attempt to follow the export-led growth path that China followed. I don’t think such a specific focus is intended."

He had not assumed that the government had an export-led growth path. Therefore, when he warned against creating subsidies for specific sectors and against Make in India slipping into an import substitution approach, he had not assumed that such was the government’s intention. He merely warned against the risks of the government’s policy thrust being hijacked by vested interests.

We have to remember that he was addressing a gathering of Indian companies. He was sending a message more to the audience than to the government against looking for freebies. Of course, one can question his caution against the government favouring specific sectors and against subsidies such as an undervalued exchange rate. Dani Rodrik, for instance, has said that emerging economies should strive to maintain a slightly undervalued exchange rate given the spillover effects of policies in developed economies that drive emerging currencies to unsustainable valuations. In fact, until recently, India’s inflation rate has been high. The merchandise trade deficit too is high. These are all signs that the currency is quite overvalued.

Professor Ha-Joon Chang had written extensively on how developed economies and many East Asian economies had always picked winners and that such policies had favourable side effects on many other dimensions of the economy including on education, upgrading of labour skills, technology acquisition and indigenous research and development, etc.

In other words, there are reasons to disagree with the governor but not because he was criticizing the government. He was simply not doing that. Modi detractors have ended up using him. There is a lesson in it for all those who wish to offer well-meaning advice to the government. Doing so in public forums runs the risk of their ideas being misinterpreted and abused. There is a case for providing wiser policy counsel in private because detractors may even end up driving a wedge between different organs of policymaking. It is detrimental to the national interest. Of course, Modi-baiters do not care about national interest. Their sinecures have been robbed. That is why some of them even lamented the end of a “Golden Age" (yes, you read that correctly), just days before the results of the Lok Sabha election were announced and it became apparent that the United Progressive Alliance (UPA) would not be returning to power.

The government might have disappointed some with its policy actions and inactions. But, it is unfair to say that the government has not acted. It is not easy to change the work culture in government offices in Delhi. This government has done that. Those who lament that labour reforms have not gone far enough must understand that even modest beginnings are revolutionary in a country that has witnessed seven decades of mollycoddling of recalcitrant and unproductive workers in the organized sector. Auctioning of coal mines has been set in motion and once politicians who are busy calculating the lost rent from the implementation of a nation-wide goods and services tax (GST) are made to fall in line, a nation-wide single market will be a reality.

Yes, many more things could have been done. But, it is hard to argue that the government does not have a mind of its own. Many have forgotten that none of their so-called sophisticated and rigorous analyses predicted a victory of this magnitude for the prime minister and his party. People with a semblance of humility and awareness of their limitations will do well to remind themselves of this from time to time. That is why, beyond a certain point, logical criticisms of the Make in India policies have their limits. What the prime minister is trying to achieve with that policy is to introduce a paradigm shift in the nation’s mood, self-confidence and work ethics and not import substitution. Considering what he has achieved in the course of 2014, he deserves a wider berth on this.

Finally, we will do well to imagine the state of the Indian rupee, Indian stocks and the policy apparatus under a UPA-III or a Third Front government with the participation of the Communist parties and Trinamool Congress. Learning to appreciate the counterfactual will teach us to be grateful and not resentful.

V. Anantha Nageswaran is co-founder of Aavishkaar Venture Fund and Takshashila Institution.

Comments are welcome at baretalk@livemint.com. To read V. Anantha Nageswaran’s previous columns, go to www.livemint.com/baretalk

Follow Mint Opinion on Twitter at https://twitter.com/Mint_Opinion

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Published: 22 Dec 2014, 06:41 PM IST
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