Where NDA doesn’t differ from UPA NEW DELHI DIARY
Similarities between the Narendra Modi-led National Democratic Alliance (NDA) and the Manmohan Singh-led United Progressive Alliance (UPA) on some key economic policy issues are now becoming too stark to be ignored. At the launch of the Modi government in May 2014, there was an expectation that the new regime would follow a more aggressive path towards reform and reorganisation of the governance structure. This was also expected to be different from the UPA approach. The business and market expectations were that soon the role of the state and its size would be reduced, easier factor market policies would be framed and the inefficient public sector enterprises would be closed or privatised.
As the Modi-led NDA completes three years in office next month, it is increasingly becoming clear that there may be many differences between the UPA and the NDA over their social sector policies, but there is virtually none as far as the broad approach to those three economic policy issues are concerned. This is not to suggest that the NDA government has been slow on reforms in general. Indeed, there are many sectors where reforms under the current government have been quite significant and rapid.
Some of these steps are worth recounting and they include the roll-out of the goods and services tax from July, the launch of the bankruptcy code, easing of foreign investment norms for a host of sectors including defence, insurance and railways, a new institutionalised monetary policy framework including the framing of an inflation targeting system, a new policy framework for auctioning coal assets, a new incentive package for stressed power utilities, introduction of market-linked prices for more petroleum products, a framework to expedite award of road construction contracts, cleaning up the government’s financing allocation system by abolishing the distinction between Plan and non-Plan, giving a push to regional air connectivity and setting up a regulator for the Indian Railways. While the Modi-led NDA deserves to be complimented for initiating these steps and many more in other areas, questions, however, will continue to be asked as to why it remains as equivocal and tentative as the Singh-led UPA was with regard to its approach to questions on the size of the government, reforms of factor markets and the future of public sector enterprises. It is not that the NDA government has given up all its efforts to bring about changes in those three areas. If it had done so, lack of action on the ground in these three areas could have been explained. But in the absence of such a pause or an explanation, no progress in these areas does become a political puzzle.
For instance, the NDA government continues to hint at how its promise of maximum governance with minimum government needs to be understood in a particular context. The government’s explanation is that it is on way to achieving that goal by reducing the number of layers in decision-making or in the number of days taken in arriving at a Cabinet decision. But surely this is not what the expectations were when the NDA had made the promise of providing maximum governance with minimum government. There was hope then that the number of central ministries would be slashed and the number of government employees would be reduced. But in the past three years of the Modi government, there has been no downsizing of the government. Instead, new ministries have been created with additional headcount demand.
On reforms of land and labour laws, the Modi government has made slow progress in the last several months. In the first year, of course, the government had shown tremendous energy in getting the land acquisition and rehabilitation law suitably amended. But once it met with stiff political resistance and recognised that the Opposition parties would join hands to thwart its move in the Rajya Sabha, where it was not going to have a majority for some time at least, the whole idea of land reforms was quickly put into cold storage. Nobody in the Modi government now talks about the need for amending the land acquisition and rehabilitation law as passed by the UPA. Instead, there was an attempt to get this law amended by the states that are willing to do so. The Bharatiya Janata Party rules in almost half the states in the country and yet not one state has made any movement in that direction. Similarly, the pace of labour reforms has slowed down considerably even though one does often hear that the Centre would soon come out with a new comprehensive labour code. A couple of states had taken a few bold decisions to reform their labour laws, but no other big state has followed suit. Prospects of factor market reforms look bleak and the Modi government is not keen on pushing them either.
And on privatisation, the Modi government is still preparing a blue print for selling some of the poorly run public sector enterprises. But no concrete result has been seen so far although this is not one of those decisions that has to pass any legislative hurdle. The Union Budget this year had proposed privatisation of the IDBI Bank, but it seems the proposal has not made much headway. Air India, which continues to be in a financially poor state, has been brought under a turnaround plan at a huge cost to the exchequer. In each of the last two years, the Union Budget had indicated that the government would be able to complete strategic sales (another name for privatisation) of some state enterprises, but not one such sale could be completed.
The similarities between the UPA and the NDA on the three issues of reduced size of the government, factor market reforms and privatisation are notable for another reason. They are a telling commentary on the state of India’s politics and the failure of the country’s national political parties in creating the necessary political consensus for such reforms.