Can't blame ministers if Modi pulled back on reforms
In the manner any head of an organisation would, prime minister Narendra Moditoo is evaluating his colleagues prior to what is said to be a Cabinet reshuffle. While he has his set of parameters to judge performance, from the point of view of investors, political will is perhaps more important than ministerial competence. Finance minister Arun Jaitley has delighted fiscal and monetary purists by, respectively, being fiscally prudent and introducing inflation-targetting, and has introduced schemes such as Indradhanush to try and fix the issues faced by public sector banks; along with RBI, he has taken on wilful defaulters, brought in a Bankruptcy Bill and may just be able to pass the GST Bill. Yet, his obvious failures are the inability to remove the retrospective taxation and to privatise PSUs. But whose call was that, Jaitley’s or Modi’s?
Telecom minister Ravi Shankar Prasad has done well to clear decisions on spectrum sharing and trading that were stuck for a decade and has got the post office to think of modernisation, but the decision to focus so much on call-drops—to the extent of making the telecom industry look like a bunch of shysters—and on net-neutrality which will end up hurting the rollout of the internet was surely a political one? Petroleum minister Dharmendra Pradhan came in for a lot of flak for refusing to raise natural gas prices for two years, as a result of which exploration activities all but ground to a halt; while giving more LPG connections in rural areas is a great idea, the refusal to take advantage of low oil prices to start cutting LPG subsidies is a serious shortcoming given how many more such rural connections are planned. But, once again, this was not Pradhan’s decision to make. It is too early to judge whether power minister Piyush Goyal’s UDAY has worked—SEBs are financially less stressed but that it because government-owned banks had little choice but to accept a sharp cut in interest rates—and while there are innovative schemes such as the Rs 36,000 crore of savings to be made by allowing power companies flexibility in allocating coal to more efficient plants, the problem with the plan is there is nothing to ensure utilities try to charge economic tariffs. The State Distribution Utilities Fourth Annual Integrated Rating makes it clear that the number of utilities filing petitions for revising tariffs—by how much is a different matter—is down from 21 in FY15 to 15 in FY16 and just 12 so far in FY17. Once again, not putting too much pressure on states was probably a political call which UDAY had to take on board.
Suresh Prabhu has done well in terms of capex though the big changes in efficiency will be seen in FY19 when the Dedicated Freight Corridor gets operational and, in the same way that Nitin Gadkari seems a clear standout minister, the performance in the agriculture sector has been exceptionally poor. While you can blame food minister Ram Vilas Paswan for not doing enough to reform FCI or Ananth Kumar for not doing enough to cut fertiliser subsidies or Radha Mohan Singh for not freeing up agriculture mandis—or the three for not coordinating closely enough—it is certainly true that the government has been in favour of slower reforms here. Perhaps why, investor perception of ministerial performance will always be different from that of the prime minister.