Saturday, December 20, 2014

Gauging the pulse and pace of the Modi Govt Oct through mid December 2014

No one can deny that the Modi govt has begun to cause tectonic changes in the speed at which files are being cleared and stalled projects being reinstated. The entire bureaucracy is energized like never before. However, on the ground reality is that economy is not showing signs of stable recovery. To expect that it will happen overtime is futile. While many of his bureaucrats are working overtime to come up with effective legislations or amendments to existing legislations the lack of majority in Rajya Sabha has tied Modi's hands. Major legislations that can bring the economy back on track requires majority from both Lok and Rajya Sabha members. The government is very well aware of the fact that until 2016 Rajya Sabha numbers won't change. Legislations such as amendment to Land Acquisition Bill, Labor Reforms and Goods and Services Tax (GST) - are critical to make "Made in India" a reality. Of these 3 the last one is something the government has been making real headway. If all goes well at least GST will be a reality making the entire country into one tax system cutting across all states. The remaining ones are highly doubtful as mentioned earlier with the government in a minority in Rajya Sabha and Congress will not easily support just like BJP did not during the UPA time.

In spite of being cognizant of all these facts the BJP government has given the fuel for opposition to prevent the normal functioning of Rajya Sabha. The sad pace of legislative bills getting passed in this Winter session is very disappointing. Clearly, the government is at fault for a lot of this. Allowing irresponsible statements from some of his irresponsible ministers is definitely casting shadow on Modi's image and government. The statement by Sadhvi saying people of Delhi will have to choose a government that of the "Raamzaade" or that of "Haraamzaade" and statement by Saakshi Maharaj calling "Godse a patriot" are clearly just unwanted and ridiculous statements. These cast a shadow on thousands of supporters who voted for BJP the first time. It also tarnishes the very governance agenda that he wants to fulfill. This is still early in the game and Modi hopefully will be able to contain these elements just like he did in Gujarat when the fringe elements began to take over his governing agenda. 

6 months in office is too early to conclude about the policies of the government, but the road is very rocky. This article is my own critical evaluation of the govt mainly from Oct to mid Dec 2014. This is because October and November brought about an unusual pace of effective activity.  They were series of decisions that have created optimism in the economy. This by no means is enough although promising.

The PM is working 24*7 even if his government is not. There is over time activity to get legislations drafted so that some basic foundation can be laid on top of which all promises made can be fulfilled. 
Modi remarked in one of his speeches on the evening of "Made in India" event that his aim is to make India reach 50 in the list of countries in the ease of doing business. Currently, India is at 143. To achieve this a slew of legislative changes in labor, tax and land is very much needed. 

Some of the good steps taken so far are as below:

1) Decentralizing diesel prices and removing them from the subsidies. Inflation has been reduced to lowest levels one can think of  and luck is a factor with the government. There was no Modi effect on inflation being low. Global crude prices have been falling since the last 2 months that has drastically decreased inflation. The government basically took advantage of this opportunity and eliminated the subsidies on diesel and made it in line with the market prices just like petrol. This is required and yet good as long as prices are down. The distribution channel of goods need to be structured so that inflation effects are moderated (GST is supposedly going to answer this anomaly). 

2) The random computerized selection of inspectors and units to be inspected to aid 1.3 million companies.
This has been pending since a decade. Prior to this law the 1800 inspectors from EPFO, Employees’ State Insurance Corporation, Central Labour Commissioner and Director General of Mines’ Safety used to randomly select manufacturing units, conduct arbitrary inspections, manipulate reports and harass manufacturing units in the name of non-compliance. With this new rule no manufacturing industry will know ahead of time which inspector is going to inspect its premises for safety and regulatory audits and what the criteria is. The fact that these inspectors have to submit their report within 72 hours makes it even more difficult to bribe or manipulate the inspectors (although very much possible).  However, there are some major doubts - can the inspector himself be trusted? Will 72 hours be a guarantee that a honest report is done? What is the certainty that the inspector is not bribed?

3) Launching of a Universal Account Number for Provident Funds so that employees who switch companies need not cancel existing PF account and open a new one. This was waste of time and energy for both employer and employee. With this announcement sooner or later there will be a universal number for employees.

4) Transfer of LPG subsidy directly into Bank Accounts: This is a huge initiative. Banks are working overtime to meet the target set by the Government. Earlier when the UPA government wanted to implement this scheme using AADHAR, the Supreme Court passed an order that citizens cannot be forced to get an AADHAR since the bill to make it mandatory has not been passed by the Parliament. Therefore, the government issued a directive to consumers whether they have AADHAR or not, having a bank account and registering or linking that to the LPG is a must. This way they honored Supreme Court order but still allowed money to reach directly into consumer's bank account. Now, there is a huge rush across country to open bank branches in the name of "Jan Dhan Yojana". If played correctly all the subsidies or benefit transfer of fuel and fertilizer can be done through this mechanism. This will eliminate crores of rupees being eaten by the middle men in the system reducing a lot of corruption. Just by pushing LPG subsidy into Bank Accounts the Government aims to save 10,000 crore of rupees in a year which is lost in corruption. An interesting article to read is this.

5) The bill to change the coal block allocations passed in Lok Sabha- Coal is still used to source 60% of India's electricity needs. There is no proper coal transportation mechanism in the country and the expenses in transporting coals to the plants where electricity is produced is very high. All the coal allocations done (whatever mechanism used) from the 1993 till 2014 have been scrapped by the Supreme Court. So, Lok Sabha passed a new bill that allows private companies to aid in the mining of some of the coal mines without any monopoly attached to any one company.(Source). However, this bill needs its clearance in Rajya Sabha which is very challenging. If this bill gets passed then the coal supply and production will get a new life and will aid in meeting electricity demands.

6) The approval of 25 solar parks each with 500MW of solar energy production - This is to aid to generation of solar energy and its contribution to the electricity grid. These parks will not have to go through any environmental clearance or other regulations. These solar parks will have "Made in india" solar panels. Hopefully these projects will see the reality.

7) Filing one form instead of 16 to comply with 44 labor laws of the Center. In a huge relief the Government announced an online way of filing labor related forms so that one form will replace 16 different forms and ease the pace of business.

8) A tangible and result oriented foreign policy is being pursued and Modi is spearheading the policy despite Sushma Swaraj being the External Affairs Minister. He has established strong relationships with countries in East Asia, Australia, Russia, USA, and Middle east. His recent visits to some of these countries has attracted them to invest heavily in India for manufacturing. He has ensured that Pakistan is forced to accept no talks after attacks on Kashmir border and made China go silent for a while at the border. Here is an article in World Politics Review which sums up Modi's foreign policy as "Zero Problems Approach"

9) Aadhar based Digital Life Certificate for pensioners. This would help pensioners get their pension continuously without having to produce certain documents every year. For more on this one can read this article.

While the above are very encouraging there have been several failures or non-starters and some of them are as below:

Ganga Rejuvenation Plan:
No one knows where this plan is headed. There is absolute silence on the implementation of this Rejuvenation Scheme. This personally is something I am keenly waiting for since it is a constituency the PM is elected from and there are great expectations on this. 6 months is too early to judge this but with a person like Modi at the Center there is more to expect.

Failure on the Black Money issue:

The UPA Government had mentioned that there is no clear way of coming up with a figure as to exactly how much money is stashed illegally abroad in Swiss banks and any effort in getting it is not government's alone. The BJP at that time said that Congress was intentionally not interested in bringing back the money and Modi had promised that next Government (BJP) will bring it. He also went to the extent saying each salaried individual will get a share of the money. 6 months into the office the Government has no proper figures and nor a concrete mechanism to get it out. The only good thing is the Special Investigation Team (SIT) has been constituted and it is doing some serious work on it. Despite having information the government mentioned only 4 names to the public and then sent the entire document to the Supreme Court after it gave a harsh statement to the Modi government. Read this article that explains how the numbers stack up

Smart cities:

If the Government cannot get Land Acquisition Act amended Smart cities will only be a dream. There has no headway in the direction so far other than a blueprint which serves no purpose. I see this as a distant dream - something not even visible in the next decade. Do the readers think otherwise?

Swach bharath
With all the nice gestures and sincere attempt by the PM there is no ground breaking move yet in the direction of making Swach Bharath a successful mission. There is still ambiguity over how much Center is willing to spend and how the states and also how the private companies will build toilets or implement solid waste management projects. This needs to resolve at the earliest.(source).

In a nutshell even though Modi is working 24*7 and keeping the requisite grip on bureaucracy he has to still rein in elements meant to spoil his party, government and agenda. He has to make sure through legislation radical changes are done to Land and labor laws. The whole world is waiting for this to make Made in India a reality. 

What do you think about the last 3 months of Modi's policies?

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