“...if you are going to take too many short-cuts, you will be tripped up at some point of time," warned Mehta, who is also president of Centre for Policy Research, a New Delhi-based think tank. In an interview, he spoke about the changing Indian polity, the controversy over the post of leader of opposition in the Lok Sabha, which the speaker has denied to the Congress party, and the government’s move to scrap the Planning Commission.
It is going to be 100 days for the Narendra Modi government. Do you think it has been a good start?
It is a reasonable start. It could have been better because the expectations were certainly higher. I think there are couple of areas of big concern. But there is a sense that the government is beginning to function again. Enough has been done to induce a moderate amount of optimism in the economy. But we have not seen any of the transformative changes.
We came out of a context where we even didn’t have the minimal reassurance that the prime minister’s office functions or the cabinet decisions had any sanctity. To the extent that at least there is movement in a lot of government projects and lot of new initiatives, my own sense is the government is showing a lot of energy, what you might call the hardware of economic development.
My big areas of concern are the ministry of environment and ministry of human resource development: these two ministries in particular, which are actually going to be very crucial for future development, are not showing any signs of forward movement. They are actually showing signs of regression. My own sense is that the government is taking far too many short cuts in these ministries. (In) ministries that require fundamental transformation, we have not seen that yet. I think most of the action is in the project level.
There seems to be a rightward shift in the economic thinking of this government. But do you think the shift is bold enough?
I have never been a votary of rightward shift. I am not sure what that means. We have to create an environment that is conducive for investment and business; if that is what people mean by rightward shift, there is some action in that area. I think simplification of business rules and self-certification is a good start. But if by rightward shift if you mean abolish welfare and subsidies, then not only that is not going to happen, that is not desirable.
There also seems to be a stress on generating growth through creating efficiency. Do you think it is a good call to make?
In the short run, you can create growth by unlocking a lot of public investment. So, in so far as there are procedural and legal obstacles in investing in India, unlocking those are very important. If you don’t have inter-ministerial coordination —a lot of the GoMs (groups of ministers) had become forums for ducking the issue—what you need to do is to strengthen all those other regulatory institutions to take both fast and credible decisions. Speed is one component the government is concentrating on, they also need to concentrate on the credibility component.
The government seems to be ruthless in handling issues such as the leader of opposition or governors. Do you think that is the right approach?
Let’s be honest. No political party in the world ever gives up power willingly. That is the core of politics and I don’t know why people get upset. If they can get away with not having a leader of the opposition, they will get away with it. The worry for me is not the ruthlessness part, the core worry is, are you doing your homework when you are taking the decisions? The issue is not whether there is a leader of opposition or not: the issue is you now have several pieces of legislation which require the leader of opposition to have a functional role. It would have been more credible if you would have said we are denying the Congress the leader of opposition position, but for purposes of Lokpal Act, X will be considered the leader of opposition and that is the context in which Supreme Court has raised the question. Are you now going to say that a piece of Parliamentary legislation that requires an active role of the opposition is actually now going to be inert for the next five years? I am coming back to the earlier point, if you are going to take too many short-cuts, you will be tripped up at some point of time. And my worry is that the government is probably a little bit in that short-cut mode.
Within the government, it is mostly one or two people who are taking all the decisions. Do you think this kind of approach will help in the long run?
It’s a big problem. Everybody will exercise power to the maximum they can. I think the biggest worry in this dispensation structurally is that the BJP has become very centralised as a party, government is immensely centralised. Let’s be clear, there is only one person in the government who matters at the end of the day. That degree of centralisation carries immense risks. You are actually cut off from information, if you don’t foster a culture where people feel empowered to tell you the truth, you can be trapped in your own echo chamber, that risk is there.
The second thing which I haven’t seen in this government, which I am little bit surprised about, so let’s for a moment grant that Prime Minister has all the right intention and he is making the right speeches and he intends to follow through, what is the supporting scaffolding that it will actually help realise the mission and support that... At the end of the day, it can be Prime Minister talking to secretaries directly, that is not a sustainable model across the whole range of things that need to be done.
In his Independence Day speech, Modi spoke about many social evils. Do you think a prime minister can also be a social reformer?
The prime minister is right about the fact that India’s biggest challenge is not going to be market failure or state failure, it is social failure. A lot of our state failure is also a reflection of the broader, deeper social failure and in India we have a tendency to displace (sic) everything on politics.
But the fact of the matter is, if you are a country where the government has to teach you sanitation, there is something deeply wrong not just with your society but it also imposes serious limitations on what your state can do. What a politician or a prime minister can do is it can raise the issue to a level of social consciousness, make sure that that issue does not become invisible, it does not get trivialized. But, fundamentally, those are social issues and there are limits to how much the state alone can do. The only way you can micromanage that is by becoming a very draconian police state which our state does not have the power to do. It can’t do it.
Without elaborating on what will replace the Nehruvian institution of Planning Commission, the Prime Minister has announced that the government will dismantle the institution. Do you see it to be a premature move or is there a genuine institutional change happening?
We don’t have a clear picture yet. What is the broad framework? The Planning Commission has three or four principal functions. My own sense is that we have to see what the larger framework of governance is within which this new commission is embedded. The one big architecture they have to decide on and we are getting confused signals from the government is the centralisation versus decentralisation (aspect).
So one of the functions of Planning Commission was, which was a function it has reserved, was that it had become much more of a mediator in centre-state fiscal allocations. If they are going to genuinely decentralise, then that function automatically is not required. But we don’t have a clear signal on that yet. Second function Planning Commission had begun to do was inter-ministerial coordination. My sense is that function should not be done by a technocratic body outside of the government because this is the job of the cabinet. The third function, which is actually the original function of Planning Commission, was capital allocation... Does the government need some kind of framework thinking around it? I think that will remain, I don’t think the new commission will have any allocation powers like the Planning Commission did. But it will probably have to come up with a framework for thinking about those allocations, which is essentially what the five-year plans did. The fundamental decision they have to take is that a commission that has executive functions like the Planning Commission acquired, which is embedded in the system, whether it should be an independent commission. There is a trade-off between embeddedness and independence, if you want genuine intellectual thinking then you can create a commission structure which is free to criticise government.
What about labour reforms and seeking greater private participation?
My own view is (that) the impact of labour reforms is hugely exaggerated. I actually predict to you that you will end up in a paradoxical situation because a lot of how much that is going to impact the economy will actually depend on industry-labour relations... One of the big mistakes of the UPA (United Progressive Alliance) government was lack of clarity regarding where you want private participation and where you don’t. The budget made a lot of noise about public-private partnerships (PPPs). Frankly, in a lot of areas, PPPs are not going to work. So the important thing is not about market participation, but who should be doing what. Slum development should not be done through corporate social responsibility (provision of the Companies Act), that is the state’s job. We should judge the success of the government on whether they actually restore clarity in what is the function of the government and private sector rather than confusing the lines of authority and allocation of responsibility.
In the Lok Sabha elections, the BJP won through the slogan of growth and development, but do you think the next phase of expansion in the BJP in the coming assembly elections will come through greater polarization?
I don’t believe that polarization is going to give long-term pay. That much faith I now have in Indian democracy, at the edges it does but not in a sustained way. I think the one thing that should give sleepless nights to the government is Uttar Pradesh. It is horrendous. It is not just communal violence but you are seeing the extent of rural violence that Uttar Pradesh has not seen (before).
Communalism is the kind of tiger which cannot be dismounted. It is like releasing the poison in a bucket and you can’t really take that out and I am sure the BJP is contributing to that process but it is very much in variation to what the Prime Minister is saying. The Prime Minister has been saying that my definition of secularism is that we no longer remain trapped in our identities. It matters less and less whether you are Hindu or Muslim. Amit Shah’s politics is doing the opposite when he goes to Kashmir and talks about a Hindu chief minister. Why is this even a question, whoever wins, wins. In Uttar Pradesh, this axis is very pronounced but in margins it is creeping in Bihar as well.
There was a flip flop in foreign-secretary level talks between India and Pakistan. The opposition too is now saying that the government doesn’t have a policy regarding Pakistan. Do you agree with that?
Pakistan has been tough for every government…you can have objectives in foreign policy and you can think about tactics but a lot of what you do will depend on what your interlocutors are doing. I do think that the emphasis on greater regional cooperation is right and I think India is a great power, is a bigger power in the region and bears asymmetric responsibility for it. The yardstick by which we measure ourselves is not just reciprocity but take greater responsibility. We do have to recognize that at the moment it is not clear what we would achieve by talks with Pakistan. I am willing to cut the government some slack in so far as it wants to draw some very clear red lines that look we are ready to talk, we are ready to open up trade.
My worry right now is our own Kashmir policy and not what we are doing with Pakistan. Fact of the matter is polarization is increasing in Kashmir as elections are approaching. Why should we alleviate Hurriyat to the representative status? Who does the Hurriyat represent? I am willing to buy this because there is something to that argument but you need serious constructive mechanisms of dialogue with people in Kashmir, a political process.
There is a rightward shift where the government is important to private players and business players but at the same time the government is talking about the poor, it is talking about access to basic services. If we see both things together, is it more smart political management or is it a genuine approach towards development.
I often get mystified with this right-left division the way it is construed in India. One every simple way thinking about the problem is that a government has two challenges, one it has the challenge to unlock productivity a lot of productivity will come from business and private sector and its job is to ensure that it unlocks the productivity to the maximum extent possible. Its second job is to then use the resources it has generated from productivity to make sure that more and more people participate in this growth process. It’s not so much welfare, welfare is just an instrument. What is welfare about? Welfare is about giving people who have been left (out) in the growth process the means to participate in that growth process. The real issue (is) not going to be the spending, you will have to spend on the poor and you should. It’s whether the form that spending will take will allow them to participate in this growth process. We also have a third complication...I do think that environment is becoming a binding constraint on India’s growth. It is one thing we realised, unlike 5-10 years ago (when) you believed somehow if you grow the environment (it) will take care of itself, that is simply not true. The environment is at the end of the irretrievable. As China is finding out, it is very hard to clean poisoned rivers, it’s very hard to clean polluted air. So, no responsible government can get away from performing these three functions. Where did UPA get it wrong? UPA got it wrong because it didn’t understand what it would take to unleash that productive dynamics of growth. And it partially got it wrong in the sense that its commitment to welfare was correct but the object of that welfare was not to empower people to participate in this economy. So what the government needs to do is that unlocking of growth potential part, both in the public investment side and the private investment side and then designing a welfare architecture that produces a greater participation in the long run. And we haven’t seen too much of that. Financial inclusion is one aspect of that participation, if they deliver on it then it will be a huge success... but we will have to see in a couple years time how far down the road (it would go); many governments have announced financial inclusion, they certainly have the platform, and they are committed to it, let’s see how far they go.
How has the polity changed over the last three months?
Obviously, BJP has become the dominant national party now, and it is sitting on a huge advantage, in the sense that it has leadership, it has organisational structure, and if it delivers moderate to good governance, it is going to be very hard to challenge.
It (BJP) has shown immense organisational energy, the organisational machine of this party is truly impressive at the moment. So it’s going to be very hard to be displaced. The only thing that can displace it—and this very election has demonstrated that—you cannot take the Indian voters for granted. Even these byelections are demonstrating that. The opposition will get an opening only if inflation remains high, growth does not pick up—then you will the see the opposition itself, there will be a space for the opposition. Just like space for BJP was created at the first instance by UPA’s dysfunction.
So what the opposition needs to do -- right now the Congress is in such a bad shape, it doesn’t have leadership, it doesn’t have organisation at the moment, it has to be ready for when that space opens. Unfortunately, it is not doing what it takes to be ready. Here we are talking about government denying space for the opposition, and as the leader of the opposition is himself not ready to take the mantle. It would have given Rahul Gandhi such a platform. He refused to take it, so god knows what they are thinking. But fundamentally, that politics will turn on how well this government performs and they have to just do moderately well and its theirs to keep.