Go­ing Be­yond the 100-day Govt Agen­das

The Economic Times - - Economy -

here is spec­u­la­tion ga­lore about the new govern­ment’s eco­nomic agenda and no dearth of wish-lists and ad­vice. Ev­ery­one seems to know what the new govern­ment should do. Let’s first dis­pose of the myth about 100-day agen­das. Govern­ment and gov­er­nance are con­tin­u­ous pro­cesses. The new govern­ment hasn’t been elected for 100 days. It has a 5-year term. 100 days that prom­ise to shake the world may earn ini­tial brownie points. But if it isn’t im­ple­mented, head­less chick­ens will come home to roost. Is there any truth in the em­pir­i­cal propo­si­tion that if not done im­me­di­ately with a big-bang in an ini­tial flurry, lethargy and re­sis­tance set in? The propo­si­tion is pri­mar­ily based on the 1991 ex­pe­ri­ence. With this man­date, it isn’t ob­vi­ous that steady state is out. In­deed, the win­dow of cit­i­zen im­pa­tience with non-per­for­mance is prob­a­bly at least 1 year. For vot­ers, the broad-brush agenda is growth, in­fla­tion and cor­rup­tion. How­ever, this is Union govern­ment in Delhi. Many is­sues are State sub­jects. Leg­isla­tive changes take time, not to for­get a num­ber con­straint in Ra­jya Sabha, a Joint Ses­sion is an ex­cep­tion. Be­yond the ob­vi­ous of a non-ex­is­tent govern­ment be­ing re­placed by a vis­i­ble govern­ment and that driv­ing pos­i­tive sen­ti­ments, what can be on of­fer?

That’s a func­tion of the time-line. The agenda will be driven by what the govern­ment per­ceives to be im­por­tant, not by pri­or­i­ties of for­eign in­vestors or cap­i­tal mar­kets (FDI, pri­vati­sa­tion, In­dus­trial Dis­putes Act, sub­si­dies). First, gov­er­nance must be re­ha­bil­i­tated and the ad­min­is­tra­tive deficit elim­i­nated. This means PMO, Cab­i­net (not GOMs) and bu­reau­cratic de­ci­sion-mak­ing. While But any proper GST progress is also con­tin­gent on States. Al­ter­na­tively, MGNREGS, NFSA (food se­cu­rity), LAAR and even changes in Sev­enth Sched­ule. We may have views on amend­ing these. But that’s a long haul. In the in­terim, the best one can hope for is re­lax­ation of tem­plates de­vised in Delhi and grant­ing States flex­i­bil­ity to tweak these.

When agen­das men­tion APMC, what do they mean? Al­most all agri­cul­ture and fac­tor mar­kets are State sub­jects. What does one ex­pect a govern­ment in Delhi to do? Ditto for do­ing busi­ness kind of in­di­ca­tors. At best one can de­cen­tralise, re­verse ex­ces­sive cen­tral­i­sa­tion and in­cen­tivise re­forms in States. Third, there can be sig­nals on fis­cal con­sol­i­da­tion and goals on deficit re­duc­tion. One presses the non-pause but­ton on the FRBM Act. But one needs to re­al­ize that the fis­cal legacy is hor­ren­dous and the deficit num­bers may in­volve sleight of hand. Plan/cap­i­tal and de­fence ex­pen­di­ture need to be in­creased. Most ex­pen­di­ture (in­ter­est pay­ments, sub­si­dies, salaries, pen­sions) is frozen in the short-run, other than a limited amount through ex­pected ra­tio­nal­i­sa­tion/har­mon­i­sa­tion of Min­istries and a leaner Cab­i­net. On rev­enue side, be­yond in­ten­tions to in­tro­duce DTC and GST, nitty-gritty of nei­ther per­mits im­me­di­ate in­tro­duc­tion in July 2014. At best, there can be an­nounce­ments about of­fen­sive ret­ro­spec­tive pro­vi­sions and sim­pli­fi­ca­tion of tax dis­putes. Re­cap­i­tal­i­sa­tion of pub­lic sec­tor banks by di­lut­ing eq­uity is one thing, large-scale pri­vati­sa­tion is an­other. Fourth, in the slightly longer-term, one can rea­son­ably ex­pect an in­fra­struc­ture and in­for­ma­tion tech­nol­ogy (data/ sta­tis­tics) push. For in­stance, for agro in­fla­tion, there are sup­ply­side is­sues and that takes time to lick. But match­ing ex­cess sup­ply in some ge­o­graph­i­cal ar­eas with ex­cess de­mand in oth­ers is more short-term. An­other ex­am­ple of this is in skill for­ma­tion. In the medium-term, the fo­cus is cer­tainly likely to be on trans­port, wa­ter, elec­tric­ity, rail­ways, skills and women.

I think big-bang ex­pec­ta­tions are mis­placed. They ex­pect big­bang in July 2014, but as­sume un­der­ly­ing struc­tures are go­ing to be un­changed. I don’t think any­thing rev­o­lu­tion­ary is go­ing to hap­pen in July, es­pe­cially be­cause the govern­ment hasn’t had much prepara­tory time. But in the medium-term, the big-bang won’t be in in­cre­men­tally chang­ing this and that, but in over­haul­ing the in­sti­tu­tional ed­i­fice. It will be a dif­fer­ent gov­er­nance struc­ture.

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