Modi's WSJ interview reassuring, in parts worrying
The late PV Narasimha Rao once famously said that India’s politics was so fractious, and seeped in socialist rhetoric, that even when you had to turn right, you had to signal a left turn in order to survive. It is not certain if that’s what prime minister Narendra Modi is doing, but his interview to The Wall Street Journal (WSJ) suggests he is being a lot more pragmatic about so-called big reforms. So, he has made it clear that, after the experience of failing to get the land Act amended in Parliament—though most state governments, cutting across party lines, declared their discomfiture with the UPA’s law during consultations with the central government—he was going to leave it to states to change their own land Acts. “It is over now … state governments can go ahead and we will give them permission”, he said, clearly referring to Article 254(2) of the Constitution that allows state governments to come up with a different formulation from that of the central government on concurrent subjects as long as the Centre agrees to it—before Modi was sworn in, former NDA minister Arun Shourie had suggested this as the way out for most contentious areas such as labour reform and well as the land acquisition Act. Some states have already amended their land Acts in order to make land acquisition easier and this includes, ironically, the Congress-ruled Karnataka which has done this for projects that require less than 100 acres of land.
On labour reforms, too, Modi seems to be in favour of a similar approach though he added a curious “labour reform should not just mean ‘in the interest of industry’…it should also be in the interest of labour” and that hire-and-fire was a Western concept. Given that his government was, till recently, trying to push a legislation that allowed firms with less than 300 workers to shut down without government permission, this seems the quintessential Rao-esque left signal while turning right. Indeed, whether hire-and-fire is a Western or an Eastern concept, it is abundantly clear that states which have more relaxed labour laws are the ones that have faster employment growth, and it is lack of such flexibility that has kept Indian enterprises small, for instance, the ready-made garments sector and this is the reason for India’s lack of global competitiveness. Indeed, the presence of too many employees in PSUs like MTNL, BSNL and Air India are one of the reasons for their decline. Which is why, is it curious that Modi didn’t shed much light on what his policy would be towards privatisation or shutting down of PSUs which, the few exceptions apart, seem to be doing little else other than draining precious national resources. Of course, Modi is right in saying both the public and the private sectors have their own roles to play—and public sector organisations like Isro and NPCIL have done India proud—but this can hardly apply to PSUs such as MTNL which have little market-share or hope of ever turning around. The prime minister, similarly, is right in not wanting to scrap subsidies outright—he talked of unemployment benefits and food stamps in even countries like the US—but surely out and out populism such as the Food Security Act that seeks to subsidise food to two-thirds of the country needs to be tackled? A newspaper interview though, is perhaps not the appropriate forum to spell this out, if indeed it even needs to be spelled out so explicitly.