What intrigued me most about the Prime Minister’s raincoat speech in the Rajya Sabha last week was its self-congratulatory tone. He spoke in detail about his dramatic withdrawal of more than 85 per cent of our currency, and patted himself on the back for taking an economic step so spectacular that world-famous economists were now analysing it. Nobody had ever dared do such a thing before, he declared proudly, adding that his dramatic move had immense popular support. In a country where a small incident could cause a big riot, he explained, there had been no public expression of rage. In exactly a month from now, we will know how much popular support there really is. Elections in Uttar Pradesh, Uttarakhand, Punjab, Goa and Manipur have become a virtual referendum on Narendra Modi’s grand gesture.
What I would like to humbly submit is that on my travels lately I have met fewer people who support what happened than I did in the initial stages of the currency withdrawal. Earlier there was general support from our poorest citizens for two reasons. They liked to see rich people queue with them outside banks and they hoped that at least some of the ‘black’ money would end up soon in their own languishing Jan Dhan accounts. The queues have now almost disappeared and accounts remain empty, so support is beginning to wane. While travelling through Lucknow and rural Uttar Pradesh I met parents who suffered terribly from not having money to pay for medical emergencies, farmers who had made distress sales of their produce and small businessmen who had lost everything. But that is not the point of this piece. What is done is done.
It is time for the Prime Minister to show if he has it in him to move on to making some real economic and administrative reforms. If this process had been started in the first hundred days of his government it is possible that Modi would not have needed to resort to magic-trick economics to make our money vanish the way he did. What he did was certainly unique, but it does not count as a real economic reform.
The fact that demonetisation was handled so inefficiently should tell the Prime Minister that administrative reforms are almost more important now than economic reforms. These must begin by cutting red tape and regulations that are uniquely Indian and that have mostly served to create a vast infrastructure for corruption. As someone who wanders about the corridors of Delhi’s mighty bhawans, I can report that the mindset of the people who inhabit these edifices of government has not changed.
With a few rare exceptions, the average Indian official remains stuck in Sahib mode and expects kowtowing and favours to do what he should be doing in the first place. Can Modi change this? Can he persuade these government servants that they are supposed to be servants of the people of India and not the government? Having done this, can he then move on to cutting government spending on itself? To make this point more clearly, I am going to borrow a passage from a speech Aroon Purie gave at the India Ideas Conclave in Goa last November.
“Before he himself joined the government, economist Bibek Debroy did an analysis for India Today in 2013 on useless ministries. He suggested that 31 ministries out of 55 ministries at the time, ranging from Animal Husbandry to Tourism, be scrapped. And the remaining be restructured into 12 ministries of commerce, trade and industry, consumer affairs, infrastructure, defence, law and corporate affairs, external affairs, home, finance, social sectors, energy and natural resources and science and technology. He calculated that this would effect an overall saving of Rs 1,50,000 crore.”
It is this kind of reform that was expected of Modi when he became Prime Minister. It is a shame that it did not happen then, but there is time. If administrative reforms of this kind are accompanied by serious efforts to build the infrastructure that would take us to at least 20th-century standards, if not 21st-century ones, India would soon start to look like a country in which the promise of change and development was finally beginning to happen. If Modi’s opponents have mostly used their campaign rhetoric to taunt him for not having brought ‘achche din’, it is because he has moved much too slowly on real reform.
Magic tricks, like making nearly all our currency vanish at the stroke of midnight on November 8, 2016, have shock value and garner ephemeral moments of public support. But, magic tricks do not fall in the category of real reform. They can also have un-magical consequences like unleashing a new era of tax terrorism. It is time for the Prime Minister to move beyond his obsession with ‘black money’.