Re­brand­ing In­dia with Modi stamp

100 go­ing on 50: Reach­ing rank 50 is pos­si­ble with a leader like Modi at helm.

The Sunday Guardian - - & Comment Analysis -

The eupho­ria around the World Bank thumbs up jus­ti­fies the Naren­dra Modi gov­ern­ment’s cel­e­bra­tions, as the quan­tum leap to the 100th spot in the World Bank an­nual report card con­sol­i­dates its fu­ture eco­nomic tra­jec­tory. Ir­ra­tional ex­u­ber­ance it is, as the In­dia Story had be­gun its tem­po­rary de­cel­er­a­tion af­ter the twin struc­tural re­forms, and the RBI shocker of 5.7% growth only mir­rored the ex­tent of slow­down. The report card on Ease of Do­ing Busi­ness (EODB) is highly lauda­tory in the po­lit­i­cal will dis­played by Team Modi tar­get­ing “100 go­ing on 50”, a scale-up that can only be achieved un­der Modi 2.0, but only post-2019.

As of now the glass is half­full and its rea­son for par­tial cheer, re­flect­ing as it does only one part of a whole, which is how con­ducive is the po­lit­i­cal-eco­nomic en­vi­ron­ment in fa­cil­i­tat­ing en­ter­prise. Firstly, it is a lim­ited dip-stick of pa­ram­e­ters culled from Delhi and Mum­bai, the po­lit­i­cal and fi­nan­cial cap­i­tals of In­dia. That “mean” could have dipped if it in­cluded “B town­ships” and state cap­i­tals of BIMARU states like Ben­gal and Bi­har. Yet the jump is sig­nif­i­cant in its re­flec­tion of evolv­ing cor­po­rate ethics and in sync with Team Modi’s goal to re-brand Busi­ness In­dia through mul­ti­ple re­forms at eco­nomic purg­ing. How­ever, just as the Sen­sex at life­time highs of 33,000 doesn’t mir­ror ac­cu­rately an econ­omy in pain, or like Moody’s and Fitch rat­ings only re­flect the cred­i­bil­ity pa­ram­e­ters of na­tions, the WB report card is a first-step cri­te­rion for in­vest­ment con­sid­er­a­tions. Be­cause the report re­flects a fu­tur­is­tic uptick that will make In­dia a pre­ferred des­ti­na­tion for in­dus­try, and is a vi­tal in­put for any project man­ager’s spread­sheet while do­ing his due dili­gence and SWOT anal­y­sis (strengths, weak­nesses, op­por­tu­ni­ties and threats) to con­sider.

How­ever, rat­ings can never be in­ter­preted or in­ter­spersed for eco­nomic growth, and tan­gi­ble ben­e­fits on job cre­ation and GDP growth will only man­i­fest later. Our reg­u­la­tors date back to the 1960s, so start­ing a busi­ness, reg­is­ter­ing prop­erty, ac­cess­ing fi­nance etc., each check post has to pass through re­sis­tant babus, who are dis­cre­tionary and de­mand their pound of flesh. And cor­rup­tion costs are built into project costs as a “given” in do­ing busi­ness in In­dia, as lower bu­reau­cracy re­mains graft-rid­den de­spite best in­ten­tions.

There are mul­ti­ple other fac­tors that busi­nesses give weight to, be­fore set­ting up shop any­where in the world, like pre­dictabil­ity of gov­ern­ment poli­cies and a con­ge­nial ver­sus a preda­tory tax regime; ease of liv­ing, like en­vi­ron­men­tal pol­lu­tion, health and ed­u­ca­tion fa­cil­i­ties in prox­im­ity to the lo­ca­tion of in­dus­try or com­merce where ex­ec­u­tives will re­lo­cate; the cor­rup­tion in­dex, which is high even in China or Rus- sia; free­dom of speech in­dex; or even gen­der par­ity in­dex, which slid 21 places in the WEF Global Gen­der Gap; land and labour re­forms, as also ex­pe­di­ency in dis­pute res­o­lu­tion, are cri­te­ria to gauge the am­bi­ent, lo­cal con­di­tions be­fore in­fus­ing fresh cap­i­tal, par­tic­u­larly big-ticket FDI. High EODB rat­ings are at best a “tempter” or fa­cil­i­ta­tor at the pri­mary level of de­ci­sion making for any en­tre­pre­neur. Other con­sid­er­a­tions then get weight based on mar­ket forces, like sup­ply and de­mand, cost of cap­i­tal, macro-global head­winds, and mi­cro or lo­cal eco­nomic con­di­tions. As In­dia com­plies to a rule-based global or­der, it is a huge plus, yet po­lit­i­cal lean­ings of a rul­ing regime be­ing left­ist\cen­trist\right­ist or a coali­tion or pro­tec­tion­ist are also vi­tal de­ter­mi­nants in lur­ing or de­ter­ring cap­i­tal in­flux.

Tar­get­ing to get to the “Top 50” is en­tirely do-able with a de­ci­sive leader like Modi, if only he low­ers cor­po­rate taxes to glob­ally com­pet­i­tive lev­els, tak­ing a leaf out of the oth­er­wise er­ratic Trump’s poli­cies. Se­condly, rein­ing in the bu­reau­cracy, es­pe­cially lower bu­reau­cracy, and in­stat­ing the long awaited Lok Pal om­buds­man is a pri­or­ity, be­cause “gov­ern­ments make poli­cies, leg­is­la­tors make laws, and bu­reau­cracy sab­o­tage both”, and while gov­ern­ments get voted out, bu­reau­cracy out­lives them all. Time-bound clear­ances must be re­warded and bu­reau­cracy cor­poro­tised by build­ing in in­cen­tives into their salarys­truc­ture, as equally de­lays or ha­rass­ment in award­ing clear­ances must be pe­nalised. For ex­am­ple, bu­reau­cratic bot­tle­necks en­sured no ma­jor Make in In­dia project took off in three years, making a well-in­ten­tioned gov­ern­ment thrust sab­o­taged by a well en­trenched bu­reau­cracy.

Lastly, work­ing on In­dia’s In­ter­nal Report Card is a more im­por­tant cer­ti­fi­ca­tion than the ex­ter­nal in­ter­na­tional rat­ings, be­cause a holis­tic ap- proach to eco­nomic progress must also in­clude EODB pa­ram­e­ters for the marginalised at the bot­tom of the pyra­mid. On this last count, Team Modi de­serves max­i­mum credit in mov­ing the nee­dle, be­cause Modi­nomics recog­nises gov­ern­ment can­not cre­ate all the 16 mil­lion jobs needed an­nu­ally to ab­sorb the work­force. So the so­lu­tion lay in fos­ter­ing an en­tre­pre­neur­ial so­ci­ety, which cre­ated newer busi­nesses and lay­ing the foun­da­tions for fu­ture force­mul­ti­pli­ers for EODB in ru­ral In­dia, as half the pop­u­la­tion still de­pends on agri­cul­ture, which only con­trib­utes to 16% of GDP. This is the seg­ment that as­pires to mi­grate to MSMEs, ser­vices and man­u­fac­tur­ing sec­tor, which can en­hance pro­duc­tiv­ity and GDP to above 7%, through EODB ini­tia­tives taken by gov­ern­ment in: * the thrust to vil­lage elec­tri­fi­ca­tion, af­ford­able hous­ing and toi­let construction, help­ing lift the ease of liv­ing for the ru­ral poor; * ini­ti­at­ing Jan dhan, the most am­bi­tious in­clu­sion project when mil­lions came into the bank­ing net with 30.24 crore zero ac­counts, who now have Rs 66,466 crore as de­posits, and hav­ing un­der­stood the virtue of sav­ings will over time widen the mu­tual fund and in­surance sec­tors; * the Mu­dra scheme, in fund­ing the un­funded with­out col­lat­eral, helped with seed cap­i­tal for self em­ploy­ment in set­ting up ru­ral cot­tage in­dus­tries, where loans were taken by ru­ral wom­en­folk, Sched­uled Castes and OBCs.

At the end of Modi’s term, the voter will gauge him more by what I am call­ing the “In­ter­nal Report Card” and the prism of the above men­tioned ini­tia­tives that bridged the gap be­tween the priv­i­leged and marginalised, than a cer­tifi­cate by IMF, WB or any in­ter­na­tional rat­ings agency. Be­cause im­prov­ing EODB in ru­ral In­dia is as im­por­tant as EODB for ur­ban In­dia. Bindu Dalmia is au­thor and columnist.

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