Prime Minister Narendra Modi has enormous reservoirs of political capital, refreshingly grand ambitions for India, and still strikes enchantingly nice notes. But the government is floundering. The gap between what he proposes and what the government disposes is growing wider. There is new energy in some parts of government. Some reforms, like more power to the states and the GST, look promising. The extent of regulatory rot created by the previous government is so deep that change will take time. The largest shake up of India’s power structure in decades will take time to congeal into a pattern. The mistakes of past governments are being rewired into this government faster than the innovations. But the cumulative effect is, increasingly, that the government is like a Bollywood film: a big lead, some sets, some good lines, a few meaningless fight scenes, but fundamentally, no script. We cannot break into a song just yet.
The lack of script is evident in the absence of a framework for growth. The government has taken modest steps to help private investment. But there is a fundamental contradiction in its strategy. At India’s stage, you cannot get growth up without increased public investment. The finance minister wants to practise American-style fiscal conservatism with low taxes and a low deficit, while the prime minister’s dreams are premised on Chinese-style infrastructure growth. This contradiction will come out soon. But not one government scheme, from so-called smart cities to inordinately expensive bullet trains, has a credible financing plan behind it.
The second missing ingredient of a script is administrative disarray to the point where you cannot tell the difference between the current and the previous finance ministers in all the irrationalities they share. The government will probably commit to sticking to the 4.1 per cent fiscal deficit target. Revenue shortfalls are immense. So what will happen? First, expenditure cuts. Not officially but by irrational stealth, do some dodgy juggling, don’t release money till March 31, do random compression on expenditure without assessing their rationality. Second, the government will give Vodafone the relief it wants. But the revenue shortfall will imply pressure on the income tax department to increase collection. Guess what that will do for increasing confidence in tax administration. These are standard administrative pathologies of the Indian state. All the signs are: no reversal.
The third missing ingredient is an understanding of legal risk. The current coal bill in Parliament, for example, is full of potential legal howlers, whose net effect will be to create more litigation down the line. But neither the government nor the opposition understands the importance of legal and regulatory homework that a 21st century state requires. Legal hubris did the previous government in, and the institutionalisation (or lack thereof) of legal care in this government has too many shadows of the past. When faced with a court query about changing language instruction in the middle of the year, the response is: we won’t hold exams this year. This small reply is symptomatic of what’s wrong with government: we are casual about law and so long as we have a lawyer’s trick, we don’t even care about education effects.
The fourth missing ingredient is creative thinking about the state. This government’s single most important mission is to build a credible state, across a range of domains. Make no mistake, building a credible state with the right number and kind of personnel will require more financial allocation. A cheap state will be a cheap state. And since this takes time, it needs to be done early in the administration. Modi is reputed to work through efficient teams of civil servants. This is not a judgement on the individual, but giving the cabinet secretary two six-month extensions sends an enormously bad administrative signal. It suggests the government’s inability to find or trust talent. It sends mixed signals about empowering and securing tenures of civil servants. But fundamentally, it sends a signal that the government does not have enough talent for us to be able to trust it.
There is no better example of a script working at cross purposes than education, the single most important ministry. The government causes the disease in the first place, and then it calls distributing some medicine success. The ministry of human resource development has been jinxed for decades. But almost every single proposal under discussion, from mad ideas like common acts for all universities to centralised recruitment, will destroy whatever little remains of public higher education. Admittedly, the RTE mess was not created by this government and the states can do a lot at their level. The government seems not to understand that you cannot think in India or make in India or even preserve Sanskrit if you repeatedly assault the institutional foundations of education, smother it with over-regulation and mediocrity, and then offer a few skilling programmes as palliative.
Another example is the government’s eroding credibility on black money and crony capitalism. Its sole strategy has largely been to obfuscate on the now irrelevant issue of Swiss bank accounts. But all the early intent of real estate sector reform, requiring Aadhaar for real estate transactions, seems to have gone for a toss. We are in exactly the same place that we were a year ago.
The bad fight scenes are piling up. Modi’s ambiguous admonition notwithstanding, his party is feeling incredibly empowered to spread communal poison. Other parties in West Bengal and Uttar Pradesh may be fishing as well. The excuse that these storm troopers are fringe elements, marginal to the party, simply does not wash. The number of inflammatory statements by a range of MPs is increasing. Again, our appalling legal regime on conversion is a combined gift of the Congress and the Supreme Court. But instead of moving to a regime where we can effectively privatise religion and respect people’s autonomy, the BJP is using it to instigate more conflict.
Second, the noise erodes trust in the prime minister’s ability to lead. The only Machiavellian silver lining for the government is that the opposition will be too busy arguing conversion to apply its mind to coal or any other complex issue that requires attention. But the development narrative script can get derailed very quickly.
The prime minister’s political stock is still high. The underlying dynamics of change in India are complicated. On many things, they give us reason to be far more optimistic than we recognise. But power has a strange alchemy: it slips into wishful economic thinking, lawyerly cleverness, administrative stupor and casualness about communalism too easily. It is not difficult to stem the tide. But for that, Modi has to learn from the mistakes the last government made. Rather than be defensive, he needs to take warning signs seriously.