Is Modi big on the vision thing? PDF Print E-mail
Wednesday, 06 August 2014 00:00
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There are obvious gaps, but the gas grids, the skilling and the financial inclusion programmes suggest a bigger plan

There are two ways you can build a house. Hire a good contractor and, based on what you have seen of other houses, draw up a rough sketch of what you want and give it to the contractor. The other is to simply hire a good architect, accept some of his drawings, reject some; the biggest advantage, of course, is that you have a professional giving you ideas that could be quite different from the ones you already have.

Put that way it looks as if prime minister Narendra Modi is of the hire-the-contractor school of thought since he hasn’t filled up the advisory slots in the Planning Commission or the Prime Minister’s Economic Advisory Council, nor has he got any well-known technocrat, like a Nandan Nilekani, working with him. To be sure, Modi recognises the need for the architects—recall his speech about how India’s think tanks were failing it at Bibek Debroy’s book launch function in June—but for now at least, Modi seems to be trusting his own counsel.

And of bureaucrats who, in the past, have shown themselves to be so anti-reform, you shudder—witness the moves to keep away foreign investment in pharmaceuticals and retail though the stated policy of the government of the day was in favour of this. We are already seeing how the taxman is killing Modi’s SEZ dream, but the subject is interesting enough to warrant a separate column of its own.

So you get the kind of mistakes that, at least in this newspaper’s opinion, are getting committed. Prices of natural gas are not raised though India continues to import this at a much higher price, plans are made to put onions on the Essential Commodities Act, the WTO process is unnecessarily jeopardised (goo.gl/uW8i7R and goo.gl/oXNQIm), no move is made to open up the coal sector to private players, trial of GM crops are delayed and may be put off completely due to RSS pressure, the list goes on.

It would, of course, be nice if Modi had his own Raja Chelliahs, Vijay Kelkars, Ashok Gulatis and Parthasarathi Shomes, and in time, he probably will. But you would have to be naive to not see the government’s larger game plan, although it is true, it would be better if the government itself chose to spell out what it was doing—one reason for not doing that, and possibly a wise one, is that this would unnecessarily rally the opposition.

Take the labour reforms that everyone says India needs desperately. Since labour is a concurrent subject, as this paper has pointed out earlier, it would be nice, but makes no difference at all, if the Centre changes its laws. So, if the Centre amends its laws to say firms with under 1,000 workers do not require permission to shut—the limit is 100 right now—no state is compelled to amend its law; yet, with trade unions and Opposition parties all charged up, as a result of the change in law, the government will not be able to do any work. Much better then, to allow states like Rajasthan to change their laws and to simply ask the President to approve them. Silent, yet effective.

For years, industries like readymade garments have been asking for some flexibility since they have seasonal employment—largely related to export demand—and cannot afford to take on full-time employees. The textile industry also asked for permission to do a double MGNREGA—allow it to pay R200 per day to workers for a minimum of 200 days a year, and not have to hire the workers full-time—but the government didn’t allow this even though the payments were being made by the industry, unlike in the MGNREGA case. Now, as part of its skilling programme, as yesterday’s FE reported, firms can retain workers for just 6 months as long as they train them during this period.

The financial inclusion piece, SBI chairman Arundhati Bhattacharya pointed out, was also being misread by newspapers, FE included sadly. While we were talking of 15 crore extra accounts, each with an overdraft facility of R5,000 and what it could cost banks, the SBI chairman had a different take. If the government was able to move subsidies using direct cash transfers into these bank accounts—the government spends R3 lakh crore each year on subsidies—banks would earn a transaction fee on this, and get a float till such time this money was withdrawn for use. And with regular funds flow into banks, the account holders would have enough funds to pay the EMIs on their overdrafts. This is not to say direct benefit transfers will definitely happen as per plan and that there will be no glitches, it is just that there seems to be a plan that is in the making now that the government has finally come around to backing the cash transfer programme.

The gas grid one is even more interesting. Modi has been talking of such grids for a long time, but only those getting piped natural gas (PNG) in their homes in place of the conventional LPG cylinders can understand its import. Depending upon local tax levels, an ICRA report points out PNG is as cheap, if not cheaper than subsidised LPG in cities like Delhi. In other words, if you give consumers PNG instead of LPG, their costs won’t go up but the entire LPG subsidy, or a large part of it, will go. Another report, by CII-ICF International examines what happens if, as per the Rangarajan formula, the price of natural gas is doubled. While the price of PNG can be reduced by lowering taxes levied on it, or marketing margins of suppliers, the larger point is (see graphic) that PNG still remains largely cheaper than unsubsidised LPG. If consumer prices remain largely untouched while subsidies are cut by pushing gas grids, it’s fair to say that’s a grand plan. (Note: the reason why LPG costs more than natural gas, even after the latter’s prices are doubled, is that it is made from costlier crude oil.)

It is early days yet, and perhaps this column is getting ahead of itself, but if you link the dots in various Modi schemes, there is a larger thread, including fixing some of the serious damage—the Land Acquisition Rehabilitation and Resettlement Act being a good example—the UPA inflicted. That this gets lost in the din of demands to stop GM trials, to derail the WTO process, or to dumb down the civil services entrance exams is unfortunate.

Last Updated ( Thursday, 07 August 2014 00:26 )

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