Lessons from four years of Narendra Modi government
From abruptly announcing demonetisation to pursuing an active foreign policy, the Narendra Modi government has been an unorthodox administration
From abruptly announcing demonetisation to pursuing an active foreign policy, the Narendra Modi government has been an unorthodox administration. Now, in its final year in power, its term offers useful lessons for future governments:
1. Replicating Gujarat’s centralized decision-making model at the national level doesn’t yield the best results. Modi chose to centralize power in the prime minister’s office (PMO) following his 2014 election victory—partly in response to the previous United Progressive Alliance government’s weak performance. A strong PMO improves coordination between different ministries and curbs graft by taking away discretionary powers from ministers. However, it places significant responsibility for decision making and policy formulation on one body—leading to the neglect of sectors that haven’t been the government’s main priorities.
Thus, although the government has done well in areas such as infrastructure and energy, its performance has been lacklustre in health, agriculture and education. This is likely a consequence of ministers becoming risk-averse and deferring decisions to a dominant PMO. Empowering competent ministers to take decisions remains essential to ensure good governance at a national level.
2. demonetisation demonstrates the common man’s willingness to undergo inconvenience for the perceived benefit to the nation. Although its long-term impact is still unclear, this public response is an important takeaway for future governments. Despite causing significant inconvenience to citizens, Modi retained popular support in subsequent state elections by directly communicating the benefits of demonetisation and imploring citizens to bear the temporary inconvenience for long-term benefits to the nation.
Policymakers have chosen to undertake reforms by stealth in the past, believing that India’s masses are unlikely to support structural changes to the economy. The strong backing received by Modi following an ambitious policy like demonetisation demonstrates that citizens have shed their statist underpinnings and are open to bold policy ideas.
3. Personalized diplomacy can’t overcome an absence of strategic thinking in foreign policy. Modi embarked on an active diplomatic effort by visiting 49 countries in the first three years of his term. Despite his best efforts, India’s relations with key neighbours, such as China and Pakistan, have deteriorated over the past few years. Modi’s recent conciliatory visit to China is unlikely to address the growing divergence between the two countries. The government’s pursuit of close relations with the US is unlikely to yield dividends: The tightening of H-1B visa restrictions, rising tariffs on imports, and renewed sanctions on Iran undermine India’s economic interests. The lesson for future governments is clear—strategic thinking in foreign policy can’t be substituted by personalized diplomacy.
Building closer relations with South Asian neighbours like Nepal also requires a new approach. In the past, India tried to influence its neighbours by financing infrastructure projects, and, occasionally, through coercive tactics. However, Beijing is now able to outspend Delhi in South Asia, particularly under the Belt and Road Initiative. To facilitate closer ties with its neighbours, India should focus on economic integration by pursuing bilateral trade agreements, and refrain from interfering in their internal politics.
4. Government inaction on air pollution needs to be urgently addressed by appointing a new environment regulator. The latest World Health Organization (WHO) study has revealed that 14 of the 15 most polluted cities in the world are in India. The causes of air pollution are well-known to policymakers, but the solutions are complex, since any shift from fossil fuels is likely to be opposed by vested interests. A combination of judicial intervention, government regulation and civil society activism has failed to curb widespread environmental degradation.
The next government must appoint an independent environmental regulator, and empower it to safeguard air and water quality in the country. Air pollution has become a nationwide problem and tackling it requires an independent institution with technical expertise and strong enforcement capabilities.
5. The Bharatiya Janata Party’s (BJP’s) slowing reform momentum highlights the benefit of front-loading structural reforms at the start of a government’s term. Modi backed up his campaign slogan of “minimum government, maximum governance” by implementing a slew of reforms in his first year, including lifting restrictions on foreign investments in many sectors and streamlining subsidies. However, recurring state elections have made the government increasingly risk-averse.
Although Modi deserves credit for implementing the long-awaited goods and services tax (GST) reform, the BJP shied away from reforming labour laws and privatizing inefficient state-owned enterprises. These are politically contentious reforms and likely to result in protests from trade unions. However, reforming labour laws is essential to boost manufacturing and youth employment.
The GST’s implementation demonstrates that structural reforms are likely to face some opposition initially, but the eventual gains for society are likely to offset the loss of political support from certain groups. Future governments should, therefore, implement difficult structural reforms in their first year, to limit the political damage and capitalize on the medium-term benefits of these reforms.
Siddharth Goel is an independent public policy consultant.
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