Home / Opinion / Views /  A remixed economy of the Narendra Modi era
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In the early 1990s, at a time America was seen at the zenith of its power, an aide of its top leader made a wisecrack. If reborn, he joked, he would like to return as the US bond market—rather than as its president, say. It was a quip about their relative heft which rang true in its context of a financial market glaring down a presidential budget. The Soviet model of a centralized economy had failed and the US formula of market-led success was judged safest if it was not warped out of shape by the White House. After 44 years of a ‘mixed economy’, India back then was a new convert to market economics, open to more robust competition under a Congress regime that let go of central control in most fields of business. Our arena of politics was in upheaval, with an agitation for a saffron state led by the Bharatiya Janata Party (BJP) laying a path to its current position of authority under Prime Minister Narendra Modi, whose policies and popularity have aided one poll victory after another over the past 7-odd years. Today, as we hope to make covid history and expand our economy, the extent to which we empower market forces over dirigiste policies could still determine the pace of India’s rise.

On the eve of his 2014 ascent to Delhi, Modi made a pitch for “Minimum government, maximum governance." This did not translate into a literal crunch of sarkari operations to raise the state’s tooth-to-tail ratio for policy efficacy. Nor did it restrain a fiscal bloat much, as handouts took fine aim for welfare and other kinds of spending, some of it veiled for pull-back targets to be met (on paper) and unveiled after the pandemic demanded a big fisc-led rescue. Since then, a thrust for infrastructure has become the Centre’s focus. As stated, a statist push is expected to rev up private drivers of growth, so that our budget gaps can be shrunk after next fiscal year. Yet, on balance, we find that markets have not gained a significantly greater role in the allocation of resources in India. Among the major reforms under Modi, we can count a rejig of indirect taxation, an orderly exit for bust businesses along with a clean-up of bad loans, and, crucially, a central-bank mandate to keep retail inflation in check. Credit flows and yield curves, however, have stayed mostly state-shaped. Land and labour initiatives got muddled, like the Centre’s approach to data and move to open the farm sector, though business startups were fanned and rivalry barriers dropped in a few sunrise sectors like space. Meanwhile, technocratic ideas were pushed, especially to ease services, and we also attracted loads of foreign capital.

As a leader, Modi’s sway over Indian voters does not trace the economy’s curve, it now seems clear, regardless of whether its recovery from covid’s crevice is V or K-shaped. This grants him a long lease for long-view plans. His recent adoption of ‘self-reliance’ with reduced exposure to global competition, though, bears a visible hand of the state, while some markets have seen rules tighten and lost competitive intensity. State champions are being drafted to uphold Atmanirbhar Bharat and generate value (and jobs). This remix, however, is yet to prove itself. Its results may depend more on sarkari calls than market dictates. Even if this back- shift is low-key, whiffs of state capitalism a la Beijing are in the air; as China’s rise used a mix of its own, maybe we need a remixed economy too. Our risk-return gauge, however, should factor in what errors at the top—or a saffron dirigisme for that matter—might imply.

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