Modi is the last hope to revitalise the economy
The kind of structural reforms undertaken are thankless. The costs are borne upfront and the rewards come later
Recent weeks have witnessed an enormous amount of hand-wringing in the press about India’s economy. These articles share a common thematic trajectory: a recitation of statistics, their use to settle personal scores, and, in the case of the political opposition, using them to prepare oneself for 2019 with nervous glee. None of this hand-wringing is accompanied with any solutions beyond the obvious.
The fox knows many things. The hedgehog knows one important thing.
In a now famous essay written when he was an Oxford Don in the 1930’s, Isaiah Berlin classified people into foxes and hedgehogs. Foxes, according to Berlin, may know many things, but a coherent worldview is beyond their comprehension. The hedgehog, however, knows one great truth, and steadfast in its pursuit, remains unreconciled until he/she reaches it.
Narendra Modi is the unusual hedgehog who may not only know what India needs to do to become prosperous, but importantly, is also willing to act upon it. Indeed, he may be the only politician in contemporary Indian history who has undertaken structural reforms out of choice rather than, like Narasimha Rao in the 1990’s, being compelled to do so.
Structural reform is thankless: costs are borne upfront, and rewards come later. (The currency for this transaction is political capital, and Arun Jaitley has paid the most for his role as the able knight who is the face of such change.) For years, it was the very absence of these structural reforms that armchair foxes have bemoaned. Now that the reforms are occurring, the foxes are unwilling to pay the price.
Through his decade-long executive leadership of one of India’s richest states, Modi knows what the foxes don’t: First, that there’s never a right time to make a hard choice, and second, the slowdown is the result of a fundamental fragility of the Indian economy baked into India’s economic foundation at its creation: the government’s overwhelming role in the economy.
Modi is seeking to eliminate this fragility by recalibrating the entire engine of India’s economic growth methodically: Jaitley’s increasing of the states’ share in the divisible pool of union taxes in 2015, digitisation// demonetisation of the economy in 2016, the GST in 2017, Piyush Goyal’s work in the power sector over the last three years, Nitin Gadkari’s ongoing work in transportation, all are transformative contributions to the structure of the economy, and designed to create a robust equilibrium from which the economy can propel itself higher.
That these reforms are happening without any taint on any senior politician of the government is in-itself a first in India’s modern history. The republic was lucky to survive through years of pillage under the Congress, and if it were nothing else but just that the BJP is taint-free, we would still have much to be thankful for.
But Modi’s toughest test is yet to come. He must now dismantle the socialist economic superstructure which is India’s lasting curse. To do so involves treating the economic organisation of a society not merely in transactional terms, but as a moral issue inextricably linked to individual rights and dignity, and moving wholeheartedly towards the only economic system that provides for such: a free-market system adapted to help those on India’s economic margins.
This then, is the call to arms. In addition to a dogged focus on anti-corruption (a necessary issue for 2014 but insufficiently ambitious for 2019), Modi needs to speak to the country in civilisational terms about the manner of its economic organisation, and seek the mandate to put the nation on the path to double-digit growth for decades to come.
In practical terms, and as a first step, it requires the sale of the government-owned banks and PSU’s in their entirety. Not re-capitalisation, not mere NPA-resolution, not partial-disinvestment of loss-making PSU’s. A complete sale. These banks and PSU’s are giant black holes that destroy capital (and our soul), or at best, use it sub-optimally. Modi cannot rebuild a nation without removing the termites from its foundation. Only on its conclusion will Modi have lived up to his own revolutionary declaration of 2014: “Government has no role in business”.
Modi may represent the last best hope for the Indian economy to achieve its true potential. If Modi doesn’t do it now, India will be condemned to this snakes-and-ladders growth for another several generations.
If not Modi, then who? If not now, then when?
The hedgehog knows.
MODI’S TOUGHEST TEST IS YET TO COME. HE MUST NOW DISMANTLE THE SOCIALIST ECONOMIC SUPERSTRUCTURE WHICH IS INDIA’S LASTING CURSE