Four years is sufficient time to get a measure of the government in power. Narendra Modi, with a significant Lok Sabha majority, was sworn in as prime minister, almost exactly four years ago, in an internationally well-attended spectacle. A confident prime minister gave great hope that an era of corruption and inaction would be replaced by a government of action that was clean, inclusive and development-oriented.
As crude halved in price from the inauguration to the third year, providing a major cushion, the government implemented a series of economic steps, from the Pradhan Mantri Jan Dhan Yojana (PMJDY) and demonetisation, to the goods and services tax (GST).
The decisions were clear and crisp, some might even say courageous, but the implementation was shoddy. The PMJDY was rushed through without a unique relational identifier, resulting in inactive accounts that now make up nearly 50% of the user base (there is no way to clean this, we will have to start over). Similarly, for demonetisation, someone forgot to tell the prime minister’s office (PMO) that the “devil is in the detail". An underprepared Reserve Bank of India added to citizens’ misery because new notes were not printed, and even when they eventually were, the cash machines had not been calibrated. A cost of approximately 2.5% in gross domestic product (GDP) terms for those two quarters, and the untold hardship foisted upon the citizenry, was a very expensive bill to pay for the benefit of “formalization" that has begun as a result.
And the GST regime is still sorting through implementation issues nearly a year after its launch—putting an enormous burden on small and medium enterprises (SME). One element of relief has been a reduction in (direct) corporate taxes for SMEs, with the promise of extension to large companies as well. Therefore, on economic reform, A grade for decision speed and political will, B for decision clarity and C for implementation. Reflecting this, Indian equity markets have outperformed the MSCI emerging markets index in dollar terms for the four years.
On the regulatory front, the record has been better. Early in its tenure, the government passed the Arbitration and Conciliation (Amendment) Act that smoothened out the wrinkles and established a time-bound mechanism for binding arbitration. It followed that up with a Central-level Real Estate (Regulation & Development) Act, or RERA. RERA needs to be notified in each state (since land is a state subject) so this is still a bit of a work in progress. Paving the way for the GST with a constitutional amendment and a complex set of other steps and establishing a new Insolvency and Bankruptcy Code (IBC) must count as the two biggest legislative accomplishments. Overall, grade A.
In 2014, there was little to suggest that the Bharatiya Janata Party (BJP) would use every ounce of its energy and resourcefulness to cement power in each state and obsessively put politics above policy and reform. We have witnessed a centralization of party power in two individuals, a concentration of decision making in South Block, and an overall atmosphere of sycophancy and fear. Sycophancy is not new to Indian politics, but the extent to which “independent" scholars, journalists and other influencers appear to have succumbed does not augur well for Indian democracy. Institutional strength and independence have been systematically eroded by an “appointocracy" that ensures loyalty.
All this is paradoxically reminiscent of the paranoid government led by Indira Gandhi in the 1970s. Institutions with the highest public trust coefficients, such as the Supreme Court, the Election Commission and (most recently) the Union Public Service Commission (UPSC), appear to have been compromised. Those institutions with much lower public trust, like governorship, the Central Bureau of Investigation (CBI), the tax authorities and the police, have, like always, been misused and abused widely for political purposes.
The Karnataka election saga is the latest example of a collapse in institutional standards, with the governor virtually gifting the right to use money power for persuasion to the lead BJP candidate with a dodgy record on corruption.Thankfully, the Supreme Court, itself the target of other recent controversy, scaled back the time to prove the majority on the floor of the house. For systematically undermining the independence and authority of institutions to suit the win-at-all-costs approach, the grade must be a D.
This government has not been caught with its hand in the cookie jar. However, there has been no measurable decline in the money or criminality powering elections. Reforms like election bonds have made no impact. Once again, the Karnataka election demonstrated that money flows like water (it is another matter that the water has stopped flowing). According to the Association for Democratic Reforms (ADR), 24% of the newly-elected MLAs (members of the legislative assembly) have a serious criminal case (murder and hate speech) against them, the highest in recent elections. About 40% of newly-elected BJP MLAs and 30% each of the Congress and Janata Dal (Secular) MLAs have a declared criminal case pending. About 50% of MLAs have a declared net worth greater than Rs10 crore. Déjà vu.
So there you have it, a mixed report card because the politics and win-at-all-costs DNA overpowers a somewhat decent economic record. Of course, you will have a chance to grade on a curve against the opposition in one year from now.
P.S. “The measure of a man is what he does with power," said Plato.
Narayan Ramachandran is chairman, InKlude Labs. Read his earlier columns at www.livemint.com/avisiblehand
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