Implementation is key, but need clarity on policies
Few doubt Narendra Modi’s capability as an administrator, his track record in Gujarat speaks for itself. The BJP’s prime ministerial hopeful taking to BT cotton showed his openness to technology—in the process, he built up his state as the country’s most successful agricultural developer, with an annual growth of 10% for over a decade. His talk today, in the capital, of how IT was now passé, the future belonged to biotech and environment technology reinforced this—since Modi has a penchant for rhyme, he spoke of IT, BT and ET. The example he narrated about how solar technology was harnessed in his state showed a savvy that investors love in a chief executive. Putting the solar panels on irrigation canals reduced water losses due to evaporation, eliminated the cost of land for installing the solar panels, putting them on canals brought solar power close to villages and so lowered transmission losses and, since the canals lowered temperatures, this also raised efficiency levels by as much as 16%—music to the ears of the investors assembled in the audience. Modi also wowed investors with his talk of decentralisation, of abolishing the plethora of laws that govern the country—manifestos, he said, should give the number of laws the party proposes to abolish when it comes to power. And he’s absolutely right when he says that equating investment with just industry gives it a bad name, billions of dollars of investment are needed in agriculture, in education, in infrastructure—and it is a modern politician that wants to talk of optic fibre and gas grids in place of the usual roads and bridges. If Atal Bihari Vajpayee’s Golden Quadrilateral of highways excited investors 15 years ago, Modi speaks of a bullet train corridor that will transform India in the manner it transformed Japan several decades ago.
But important as a grand vision is, investors need to get more granularity in policy as the elections get closer, more so in a country that has seen as many policy flip-flops as India has in the last few years. It is nice to know Modi is in favour of GST, but can he explain how he will get it through when the UPA couldn’t? Professionalising PSUs sounds a dream, more so since it has hardly ever been achieved, but is Modi open to the idea of privatisation? Will labour laws be liberalised, central to the idea of giving states the power to shape their destiny—since labour is a concurrent subject, even states that want to liberalise laws cannot do so till the Centre does this. Is Modi for cutting subsidies, using direct benefit transfers to do so; will the coal sector be opened up to private players; will the government reduce its stake in public sector banks; liberalise the insurance sector? Most of these policies, it is interesting to keep in mind, were those the BJP either implemented under Vajpayee or talked of doing but failed to complete. It is true that election speeches are not the place to get into detail, but at some point in the campaign, Modi’s minders need to get investors to hear specifics from him. Keeping the grand vision for stump speeches, and the granularity for smaller townhall meetings with specific groups of investors is one way to do this.
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“Finance minister P Chidambaram,” Narendra Modi said in a speech laced with digs at the UPA, “thinks my knowledge of economics can be written at the back of a postage stamp. Actually, I need even less. My vision of economic policy is one word — trusteeship”; if people have faith in a government’s ability to deliver, they will invest,” the BJP’s prime ministerial candidate said on Thursday. After the earthquake in Kutch, he said, there was great despondency but because there was faith in the government, the state was back on its feet in three years. “I don’t need knowledge of economics, I will have people who understand that.”
Speaking to a gathering of investors from over 26 countries, the organisers of the event said, Modi repeatedly emphasised the role of good implementation while outlining some new ideas as well. Some of the prominent investment firms represented in the meeting were Fidelity, Goldman Sachs Asset Management, Carlyle Global Market Strategies, Deutsche Asset and Wealth Management and GLG Partners.
Talking of decentralisation and second-generation reforms, Modi said the Prime Minister and his Cabinet could not possibly shoulder the burden of growth, it had to be the PM along with the CMs. “If I come to power I will ensure states get more freedom, I understand their pain. So far, most of the Prime Ministers are from the Delhi environment,” he said. The chief minister of Gujarat said, “Like a doctor prescribes a new test for each new problem, we ordain a new law for each problem — I think party manifestos should talk of how many laws they will abolish if they come to power.”
One of the reasons why soliciting investment has become a bad word, Modi felt, was that people think investment is only about industry, that only a few will benefit. However, the need and scope for investment in agriculture was also huge and had tremendous transformational potential. “Think of the need for investment in education, or in biotechnology or environment technology — IT is no longer the buzzword, it is now BT and ET,” Modi added.
The example of Gujarat’s Solar Mission was cited by him as an example of how much investment was needed, how implementation and not incentives were the key to attracting this, and how careful thought needed to be put in by policy makers — and yes, this was, he said, a good example of decentralisation.
Soon after the Gujarat government announced its policy and offered R13 per unit of power, the Centre came out with its policy offering R19 — “but investors came to Gujarat, not the Centre”.
Because of planning and implementation. We put the solar panels on top of the canals, he said, which reduced evaporation of water; it saved us the cost of finding land for the panels, and because it was on the canals, it was near villages and so, investors saved on transmission losses. And, to the delight of investors in the audience, Modi said that since the area under the solar panels was cool, this alone increased solar output by 16% which “every investor knows is the best return you can get anywhere in the world”. As a result, there is so much solar power, its rates are falling to R7 a unit, while those of thermal power are inching up towards this level.