Doing it right is as important as doing the right thing. How does the government measure on this count?
A year-end rush of action is probably Narendra Modi’s way of responding to the growing impatience for the strong decisive policy changes that everyone has been expecting from him.
Among a slew of decisions, the government has promulgated several ordinances covering land acquisition, coal mines, arbitration and insurance. Will achchhe din follow in 2015?
We do hear that Mr Modi, his ministers and bureaucrats have been working round-the-clock. But many of us have been dismayed at the noise over religious conversions dominating public discourse, while there has been less action on the prime minister’s (PM) election promises. And when important Bills needed to be passed by parliament to push reforms, fringe elements in the Bharatiya Janata Party (BJP) gave the disparate opposition frequent opportunities to gang up and prevent the Rajya Sabha from functioning.
Foreign investors are clearly more optimistic about policy reform being on the right track, despite 10 years of watching reforms derailed under the Congress-led alliance. They are even impressed by the ordinances.
Chetan Ahya of Morgan Stanley India, in his year-end note, says that GDP growth shows signs of revival after the ‘sharp deterioration’ in recent years. He flags the key drivers of growth as: land reforms to ease acquisition; labour flexibility for the formal sector; tax reform, especially introduction of the goods & services tax; revival of infrastructure investment and improving the overall ease of doing business.
On ease of doing business, Morgan Stanley lists the government achievements as: online environment and forest clearances with prescribed timelines; project monitoring and plans to set up an integrated approval process (for all ministries) by March 2015 and steps to remove the discretionary power of labour inspectors to simplify compliance of labour laws.
All these are positive developments that will reduce a big source of harassment for industry but have not been discussed in the media much. Indeed, there is much to be optimistic about Modi sarkar’s actions in the last days of 2014. But there are concerns too.
While the ordinance route signals that the government means business, the fact is that important legislative changes are not going through the parliament, nor is there any attempt at public discussion or taking all stakeholders into confidence. The government is coming across as one that only talks to business and chambers of industry.
We need the PM to employ his famous communication skills and use his mann ki baat chats to explain his policy direction. We need to know how these policy changes will improve governance, reduce corruption and make policy-makers accountable to the people. On 1st January, the PM took to twitter to explain why NITI Aayog would replace the Planning Commission; but he has remained silent on why his government ham-handedly blocked dozens of websites on 31st December. This sends contradictory signals from our most skilled communicator and social-media-savvy PM.
The government must realise that people are keenly interested in issues that affect them. It is this interest that brought people out to vote and gave the BJP a sweeping victory in the 2014 general elections. Unfortunately, the government seems in danger of losing that connect. Social media interactions have been largely reduced to greetings, condolences and photos of ministers’ meetings.
Media reports leave ordinary people clueless about the motive behind some attempted bailouts, the long delay in public sector bank appointments, the transfer of honest ministers and bureaucrats. At the same time, even media-friendly Cabinet ministers are repeatedly being forced to clarify twisted media reports. A government that does not clarify its actions also faces the prospect of coming across as a prisoner of business lobbies, especially when the shady businessmen are among the first to praise the changes the government is making.
Many badly drafted laws introduced by the United Progressive Alliance (UPA) need to be amended if India has to attract investment. But these need to be done with proper discussion with all stakeholders.
The hasty amendment to the Companies Act, 2013, after several clarifications, is particularly perplexing. The NDA’s (National Democratic Alliance) majority in the Lok Sabha ensured that the Lok Sabha swiftly cleared the Bill, but it is anybody’s guess what happens when it comes up again in the Rajya Sabha.
What we know for sure is that the Companies Act, 2013, was draconian when it came to corporate compliances and directors’ responsibilities, but had drastically tightened provisions to protect depositors. The ministry of corporate affairs (MCA) has done nothing to act on those provisions, despite the long list of companies refusing to refund company deposits or pay interest. Will someone explain how the amendments to the Act were decided?
The ordinance amending the Land Acquisition Act, 2013, is more worrying. Here, too, an amendment was necessary. But, given the recent history of land acquisition, the PM could have taken people into confidence, instead of allowing the Congress and its supporters to spin it as a pro-industry legislation implemented by stealth.
In fact, history is in BJP’s favour. Soon after it came to power, the UPA government let loose a land grabbing frenzy among Indian industrialists in the garb of special economic zones (SEZs).
Public protests, often violent ones, finally brought the whole SEZ mania to a halt and, as elections neared, the Congress decided to swing the other way in the election year such that it made land acquisition almost impossible. Worse, it did not even make the effort to harmonise the new law with 18 other legislations that had different compensation provisions.
The NDA ordinance attempts to set things right. Importantly, it has left compensation (4x market value in rural areas and 2x in urban areas) and rehabilitation and resettlement provisions untouched, despite pressure from industry. The ordinance has diluted some norms pertaining to environment clearances and exempted five types of acquisitions from the consent clause.
But, by springing an ordinance on people, Mr Modi has created an opportunity for motivated spin on the negative implications of the land acquisition Bill for ordinary people. Property tycoons, like Niranjan Hiranandani, who face allegations of land grab, deepen the suspicion, when they are first off the mark with fulsome praise for the government’s action.
Mr Hiranandani’s talk of ‘affordable housing’ in brand new smart-cities is sure to get peoples’ backs up when most of us want really stringent regulation and penalties for the real-estate sector.
According to Morgan Stanley, over US$300 billion worth of projects, especially the stalled public-private partnerships (PPP), may be expedited by amending the Land Acquisition Act.
We don’t know if that is really good news, because we would like to see more transparency and accountability in PPPs. A former bureaucrat describes PPPs as ‘passing public-property to private hands’. These are not subject to scrutiny under the Right to Information (RTI) Act and, in some cases, the PPP agreements have been found missing.
The PM, undoubtedly, has a tough job. He has to kick-start the economy but also to ensure better governance and regulation. He has to deal with a yawning fiscal deficit and bloated government expenditure, and also avoid burdening people with more taxes and keep public investments going simultaneously.
He needs the support of opposition parties in parliament to push through key legislation, but has also to deal with the frequent controversies created by his own ministers. The Union Budget of 2015 and the ensuing budget session of the Parliament will throw light on whether Mr Modi wants to do the right things the right way.
(Sucheta Dalal is the managing editor of
Moneylife. She was awarded the Padma Shri in 2006 for her outstanding contribution to journalism. She can be reached at [email protected]