Prime minister (PM) Narendra Modi has been voted back to power with a resounding mandate, a clear majority and unfettered freedom to shape the destiny of this country. ModiSarkar-1.0 was voted in on the promise of economic, administrative and civic reform as well as elimination of black money and corruption. The 2019 campaign has been bitter, divisive and vastly different; but, once again, the overwhelming mandate is for one man—Narendra Modi, backed by the phenomenal organisational skills, tactics and strategising ability of Amit Shah. It spoke little about the promise of 2014, and yet, a large enough segment of the population seems to believe that Mr Modi deserved another chance to deliver.
The question is: Deliver what? For a chunk of Mr Modi’s supporters, it is probably a misguided notion of Hindutva in peril, the Ram Temple in Ayodhya or cow protection. For others, it may be about unquestioning nationalism and unbridled machismo directed at Pakistan. Some influential pro-BJP (Bharatiya Janata Party) voices are arguing that the voter was unconcerned about economic issues. The angry and abusive rhetoric of ardent party supporters, even in victory, seems to support the belief that people voted for partisan and divisive politics. But believing this to be the manadate could turn out to be a huge mistake.
Those who took the Sensex to new benchmark of 40,000 on Thursday haven’t really forgotten about demonetisation, job losses, economic slowdown, increased red-tape and compliances. They expect Modi Sarkar-2.0 to be about reform and development. In fact, most BJP supporters are still waiting for achche din and believe that the Mr Modi is sincere about his promises and only needs more time to deliver on growth and development.
That the Opposition parties had no credible economic agenda or alternative vision also helped the BJP. In its second term, the government’s priority should be on alleviating farmer distress, especially with a looming drought in many states, job creation and boosting consumption. But here are a few larger issues that also need urgent attention.
Goods and Service Tax (GST):
Mr Modi has beaten a worldwide jinx by becoming the first government that introduced GST—dubbed the Gabbar Singh Tax
—to return to power. But the Indian GST is far from a simple, single tax. The collection system continues to be a work-in-progress; evasion is rampant; while law-abiding businesses pay extra by outsourcing GST filing since they are unable to deal with frequent tinkering, complex systems and draconian penalties. CA (chartered accountant) Nikhil Vadia, a big BJP supporter, has listed down the quick summary of issues on GST
and on GSTR9
that need clarification.
The insolvency and bankruptcy code (IBC) got off to a good start but needs to be brought back on track
urgently. Lenders taking a haircut of 99% (they will recover only Rs150 crore of their Rs20,000 crore lending) in the controversial Aircel has to be the lowest point, along with the dubious move by bankers to allow fugitive promoters of the Sterling Biotech group to get back their companies paying up less than half their dues to public sector banks (PSBs) obtained from unknown sources.
The biggest issue with bankruptcy resolution is the corrupt nexus between lenders, resolution professionals and wilful defaulters. A ‘surgical strike’ on a dozen dirty deals, which are already in the public domain, would send the right signal to hundreds of other cases queuing up before bankruptcy courts.
We also need a better quality of appointments at the NCLTs (National Company Law Tribunals) and a signal from the government to corporate India that gaming the legal system to delay decisions will not be taken kindly to. To my mind, three cases will signal the government’s intent—the sale of Essar Steel, how it deals with the Sterling group, and Jet Airways. The last case is important because banks, with support from the government (politicians and bureaucrats), seem determined to keep the founder Naresh Goyal in the picture even while they seek to bring in the Hinduja group as white knight, while the losses will be dumped on banks and, indirectly, the exchequer.
Public Sector Banks: We need a solution to bleeding PSBs. Business and industry, celebrating the Sensex at 40,000, are already demanding a ‘massive recapitalisation’ of PSBs. Remember, when banks are recapitalised through the exchequer and go on to lose that money again, even the poorest Indian, who has no access to two square meals a day, is helping payback the bad loans our industrialists have siphoned off. Nearly two lakh crore rupees have been written off by PSBs in the past two years alone.
Indians continue to trust PSBs because the implied sovereign guarantee provides a sense of security to our deposits; but these directed bailouts to help big defaulters, cannot keep draining valuable national resources. PSBs have to be made accountable, possibly through privatisation, while bank unions argue for better autonomy and accountability for top management and a protection of unionised jobs. It is unclear how this will work.
The messy solution of merging PSBs, as has been done with State Bank of India’s affiliates or Bank of Baroda and two others, is also not an answer. India needs large banks which people can trust. That requires new licences, faster growth and pragmatic policies on ownership and shareholding.
With five full years ahead of it, Modi Sarkar2.0
will do the country a big favour by making regulators accountable. If bankers can be jailed for bad loans long after retirement, why can’t regulators be held accountable for turning a blind eye to massive systemic blow-ups like the shadow banking crisis triggered by the collapse of Infrastructure Leasing & Financial Services? We have plenty of evidence that star governors of Reserve Bank of India (RBI) had ignored whistleblowers’
warnings. The problem is not limited to RBI. There is a need to restructure the insurance regulator and move its head office to Mumbai or Delhi, where it will stop being a post-retirement sinecure for bureaucrats and insurance officials.
The same applies to the Securities & Exchange Board of India (SEBI) which has turned into a giant bureaucracy with no focus on effective enforcement or investor protection. Senior SEBI officials openly admit that they prefer policy prescriptions to enforcement and investigation. At the same time, we have plenty of evidence of inordinate time and money being spent on litigation in what appears to be vindictive action in cases, involving small sums of money, while large cases of misdemeanour are quietly settled with minimal disclosures.
There is no evaluation of SEBI’s enforcement action or litigation in terms time and money spent versus their outcomes. Naturally, there is no accountability either. In fact, for nearly two decades, the head of the legal department had been on three-year contracts, extended at the will of successive SEBI chairmen, allowing concentration of power at the top.
A similar clean at the electricity and telecom regulatory bodies is imperative for any privatisation or disinvestment initiatives to work. Otherwise, we will continue to transfer ownership from one public sector undertaking to another and call it disinvestment, while crony capitalists take advantage of all privatisation initiatives.
Finally, there is a slew of issues that need to be addressed afresh. The Land Acquisition and Rehabilitation Act (LARA) needs to be revived and the draconian laws that empowered tax officials as a cover-up for the botched up demonetisation process, need to be rolled back. The work on smart cities needs to be stepped up to help job creation and disperse urbanisation. The Real Estate Regulation Act (RERA) needs to be strengthened across states if the promise of ‘Housing for All By 2022’ has to be fulfilled. A powerful regulator is imperative for this sector that remains saddled with unkept promises, large-scale cheating and far too much red-tape and consequent corruption.
Indians have been awed, once again, by the formidable vote-winning machine of Mr Modi. Doesn't he wish that the Indians are even more awed by his transformation of India into a prosperous, economically powerful and peaceful country? If so, there’s no time to waste.