PM Narendra Modi is completing a year in power, and in the last 365 days he has been able to achieve a fair amount.
His global ‘Make in India’ campaign has set the tone for transforming India into a global manufacturing hub; his ‘Jan Dhan Yojana’ has taken financial inclusion to the heart of rural India; his ‘Swachh Bharat Abhiyan’ has put cleanliness on the top of the nation’s agenda; and his ‘Digital India’ initiative has laid the groundwork for a digital empowered society and knowledge economy.
Importantly, PM Modi has arrested the policy paralysis that had hit the nation and brought in a new dynamism in the corridors of power in the past 12 months.
The government has demonstrated its commitment to convert intent into action through various measures aimed at opening up the insurance sector, lifting controls on diesel pricing, bringing transparency into the allocation process for natural resources such as coal, and addressing the menace of black money, successful auction of telecom spectrum and progress on tax, land and labour reforms.
The Government initiatives in the first year have revived the global investors’ confidence in ‘India growth story’. Data from ‘Centre for Strategic & International Studies’ shows that during last one year (Jan 2014 -2015) U.S.-India bilateral trade rose over 4%, FDI jumped over 40% and FII inflows soared 400%.
The positive change in investor sentiment is also an outcome of PM Modi’s efforts to take the resurgent India story to the global stage. From Washington, D.C. to Paris and from Tokyo to Sydney, the Prime Minister has travelled extensively to convince foreign businesses about the immense opportunity of this billion-strong market. Today, Brand India is shining again.
Tax and Land Reforms
In order to improve business sentiment and spur investments by domestic as well as overseas players the government has been trying to bring in key legislation aimed at tax and land reforms.
The introduction of the Goods & Services Tax (GST) can be a game-changer. By replacing a plethora of federal and state taxes, the GST will remove tax distortions and facilitate business, potentially adding at least 1-2% to GDP.
Similarly, the Modi government's land bill aims to make the acquisition of land for infrastructure projects easier by moderating some of the restrictive provisions in the previous land acquisition law of 2013. This will, in turn, boost manufacturing and job creation in the country.
Through the new land bill the government has actually taken an approach that balances the interests of farmers and the ease of land availability for development projects. The proposed law increases the likelihood that landowners will be compensated fairly, not only in terms of their land but also in terms of their jobs and livelihood. It seeks to not only ensure compulsory employment to one member of the family affected by the land acquisition but also proposes a hassle-free grievance redressal mechanism for them.
However, political partisanship has resulted in these two key pieces of legislation – the Land acquisition bill and the GST bill - getting stuck in Parliament.
An Inclusive Agenda
On financial inclusion, especially in rural areas, the Modi government has made rapid strides with over 125 million accounts having been opened under the Prime Minister ‘Jan Dhan Yojana’, aggregating deposits of Rs 106 billion. This initiative is not only helping bring a large swathe of Indians into the financial mainstream but will also allow the government to directly transfer welfare payments to the intended beneficiaries.
Not only that, the Narendra Modi government has in a relatively short period of time launched schemes aimed at providing life insurance, accident insurance and pension to those outside the social security net. Here, the ‘Jan Dhan Yojana’ will facilitate collection of monthly charges and premium for these schemes.
What is unique about these social inclusion schemes of the Modi government is that they have been carefully engineered to introduce a greater sense of stakeholder ownership among beneficiaries while reducing any undue burden on the exchequer.
There are some other small, yet significant steps that the government has taken towards the goal of ensuring stronger, more inclusive growth: ‘Adarsh Gram Yojana’ that tasks parliamentarians with establishing model villages and ‘Skill India’ campaign aimed at providing training & skill development to 500 million youth of our country by 2020, covering every village.
In rolling out these initiatives, the Modi government has shown it understands the aspirations of a New India that wants a hand up, not handouts.
Many Hits, Some Misses
I believe that while the government has walked the talk in most areas, there are some where it could and should have done more.
The biotech industry is worried over the government’s failure to embrace this new technology and bring in transformative change. Despite assurances from the government, the meetings of the Genetic Engineering Appraisal Committee (GEAC) haven’t been happening. These meetings are extremely important to enable field trials of GM crops, which can raise agricultural productivity. In fact, biotechnology presents unprecedented opportunities to ensure food security along with the economic well-being of farmers.
Similarly, the government is yet to provide the necessary policy push for a cohesive pharma R&D ecosystem for innovating new drugs. By lending support to the local pharma industry’s capital investment needs, incentivizing R&D investments and providing significant tax exemptions for innovation, the government can enable a culture of ‘Innovate in India.’
Also, despite an intent within the government for an integrated healthcare system to ensure affordable and accessible healthcare for all, the allocations to healthcare in the last two budgets have been anything but encouraging.
Overall, the Narendra Modi government has covered a fair deal of ground in a year’s time. The pace and intensity of reforms may have disappointed sections of India Inc., but then one must factor structural bureaucratic challenges and the onslaught of fierce political opposition.
One must also keep in mind that a lot of unrealistic expectations were built around PM Modi’s ability to fix the Indian economy overnight. Which is why the NDA’s achievements in the first year are being measured against the same yardstick that is typically reserved for governments that have served a full term. This is unfair. This also means that the government needs to do a better job at managing expectations.
India Inc., on its part, needs to be patient with the Modi government’s long-term roadmap of incremental reform. I am aware of significant behind-the-scenes activity to improve the ease of doing business in the country. A greater engagement between the government and the private sector will ensure that the policies that are unveiled are truly enabling in nature.
I am also glad that PM Modi has announced a crack team to ensure that several big-ticket infrastructure projects can now get off the ground, thus supporting the development agenda for the country.
I believe it is time that the Government, Opposition and Corporate India are aligned in the national interest and pursue the development agenda for India which will help in scripting a new economic growth story for our country.