Modi could become the first prime minister to make a compelling public case for economic reform.
Prime Minister Narendra Modi spoke of “tough decisions” on the economic front, claiming that the UPA had left nothing behind for the new government to work with. The next couple of years would require him to impose financial discipline first, and take steps that may lose him some popular goodwill, said Modi, but he was confident that it would pay off in the longer term. While the speech made no mention of specifics, as is becoming typical of a Modi address, it set the tone for a presumably hard-nosed budget next month. By now, he has hinted often enough about a forward-thinking economic agenda for his government, and also made an attempt to level with the public on the need to manage inflation, curb subsidies and take investment-friendly actions.
With the numbers he has in the Lok Sabha and his clear supremacy in his party, this could be the first time a government has the freedom to work to its economic beliefs. He has little political competition if he tries to tap the power of markets, aspiration and buoyancy, at a time when the Congress is leaning heavily on its own left axis, and other parties are building their brands on those purportedly excluded from that process. Modi must position himself in line with his own reformist beliefs, and what is more, make a public argument for them.
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Previous governments have failed to deepen reform mainly because they lacked the capacity to make a political case for them. Apart from a professional consensus, it requires the political leadership to be invested in these ideas, and willing to take the risks to see them through. Apart from a few occasions like the FDI in retail debate, the previous government seemed content to leave this task to the PM and his “neoliberal” team, whose alleged excesses were then projected to be tempered by a socially responsible Congress president. Modi must trust his own instincts. He must stand up to allies like Chandrababu Naidu, who has announced the biggest loan waiver a state has ever given, to the tune of Rs 54,000 crore, that will either have to be gifted from the Centre or raised in bonds, and which runs entirely counter to Modi’s rhetoric of fiscal responsibility. If he means what he says, Modi’s lasting achievement would be the creation of new political frames for economic good sense.