EDIT: RHETORIC AND REALITY
PM’S emphasis on less govt interference is the way to go
Prime Minister Narendra Modi’s speech from the ramparts of Red Fort on the occasion of India’s 75th Independence Day contained several statements with regard to reform and sustainable economic growth that were welcome in their clarity. The prime minister explicitly drew a distinction between the policies of the “past”, in which he said the government was in the driver’s seat of the economy. Those were, Mr Modi argued, perhaps the needs or desires of the time. But the times have changed, and his government intended to minimise the intrusion of government into people’s lives. He specifically referred to efforts to repeal “the web of unnecessary laws and regulations”, and said that “15,000 compliances have been ended by us”. The example he gave of the government’s forward-looking actions was instructive: The opening up of mapping and surveying to firms, which thereby were empowered to collect geospatial data.
The prime minister’s emphasis on deregulation and freedom from state and bureaucratic interference will hopefully fall on fertile soil in the rest of the government. It must be said, however, that the actions of the government at various levels in the recent past have not exactly met the standards set out by the prime minister. The policy on geospatial data that Mr Modi mentioned is unfortunately more the exception than the rule. By and large, the last years have seen the strengthening of the government’s role in the economy, rather than the reverse — the institution of new tariffs as a mechanism for economic control, and the creation of a haphazard importsubstituting industrial policy in the guise of “Make in India”. Mr Modi’s desire to reduce interference and the grip of extractive regulations — not to mention his intention to bridge the trust deficit between state and industry — contradicts also a recent statement by a senior Union minister that the business practices of Indian industries were “against the national interest”. It is clear from this speech that the gap between Mr Modi’s vision and rhetoric, and his government’s policies and actions needs to be closed.
In terms of new schemes and promises, the speech had one that might dominate attention: A new “Gati Shakti” master plan, which the prime minister said would spend ~100 trillion to develop “holistic infrastructure”. It is unclear what this means, and how it is different from the ~100-trillion investment in infrastructure that the prime minister has talked about in two previous Independence Day speeches. It is anyway far from certain that the government has any way to pay for such mammoth investment from a Union Budget that was strained even before the pandemic put further pressure on the fisc. Other important policy priorities laid out in the speech may be more realistic and cost-effective. These include not just his hope that regulatory support could be provided to entrepreneurs and start-ups in Tier-ii and TIERIII towns, but also that energy security, environmental security, and national security are all closely interconnected.
The prime minister spoke specifically of renewable energy production, making India energy-independent, and of new technological advances that might be suitable for India such as green hydrogen. It is to be hoped that the government will spend less time on coming up with enormous targets that are unlikely to be achieved, and more on doable and forward-looking policies such as these.