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Friday, February 28, 2020

A shrinking flock

A confused economic agenda and misjudgement on how to get things done at the Centre may have cost PM Modi his non-Hindutva supporters and the opportunity to be a transformational leader.

Written by Ramesh Venkataraman | Updated: December 15, 2018 12:10:39 am
Modi came to power with a formidable reputation as a “can do” chief minister, who had helped to transform Gujarat. Illustration: CR Sasikumar

Hindutva notwithstanding, Narendra Modi came to power in 2014 largely because many voters believed that he was the most likely leader to deliver “Acche Din”.

As the current Parliament winds down, Modi’s report card on this front is decidedly mixed. But what is inarguable is that there is a palpable sense of disappointment and missed opportunity surrounding the Modi government — likely contributing to the BJP’s reverses in Rajasthan, Madhya Pradesh, and Chhattisgarh.

Modi came to power with a formidable reputation as a “can do” chief minister, who had helped to transform Gujarat. To add to this, was a historic majority mandate for the BJP in the Lok Sabha that freed his hand to get things done without having to compromise with coalition partners. Victories in state after state eventually eroded the Opposition’s ability to stall the government in the Rajya Sabha. Finally, the global environment has been relatively benign, with the global financial crisis behind us and oil prices mostly low.

The prime minister has also demonstrated a critical trait of a path-breaking reformer: He is not beholden to anyone. Whatever be his motive behind demonetisation, it showed that the prime minister was not afraid to turn on core elements of his constituency — shopkeepers, traders, small businessmen, real estate promoters — to achieve his goals, be it to rid the country of black money or Uttar Pradesh of the Samajwadi Party. Equally, the way previously-craven PSU banks are pursuing powerful business houses such as the Ruias, Jaypee Group, and Videocon, to settle their loans or face losing assets or whole companies, suggests that even the well-connected can no longer escape their moment of financial reckoning.

Businessmen, used to decades of “managing” their bankers, are suddenly running scared. Modi’s reputation for personal incorruptibility and lack of interest in amassing wealth are why the charges of special favours and corruption around Vijay Mallya, Nirav Modi, Adani or even the Rafale deal have barely hit home. The fact that no one — oligarch or vote bank — can credibly claim to “own” Modi, combined with his humble origins and visible passion to “make India great again”, gave him an unique platform to be India’s Deng Xiaoping or Lee Kuan Yew — a once-in-an-epoch transformational leader who is not afraid to take on sacred cows
and vested interests to put the country firmly on the path to rapid modernisation
and prosperity.

So why, despite his strong mandate, track record as chief minister, favourable global conditions, and being his own man, has Modi failed to deliver?

I believe there are two fundamental reasons: An incoherent economic agenda that has lurched between open markets and swadeshi, and a flawed governance model that centralises policy “brains” and decision-making in the PMO while expecting ministries and government agencies to merely provide the “brawn” for implementation.

When the BJP came into power, there was a groundswell of optimism that they would, like the Vajpayee government of 1999-2004, propel forward the programme of economic liberalisation that had begun under Narasimha Rao in 1991. Sadly, this PM has proven to be no reformer. He lost his nerve early on over labour and land reforms — two of the main bottlenecks to 8 plus per cent growth. The BJP government’s policies on trade and inbound investment have been schizophrenic — initially actively pursuing free trade agreements with Asean, Japan, Korea and even China, and welcoming FDI, but then lapsing back into swadeshi mumbo-jumbo on import substitution and restricting foreign participation in key sectors such as banking and multi-brand retail. The botched effort to privatise Air India was only the most high-profile casualty of the Modi regime’s baffling tepidity over privatisation. In the absence of a coherent economic programme, the government has resorted to highlighting procedural reform. But even this has run aground as the vagaries of the licence raj have now been replaced by the vagaries of the enforcement and regulation raj.

What is abundantly obvious is that Modi lacks a coherent vision for how to drive India’s development and this has compromised his effectiveness. In the end, Sonia Gandhi’s cabal of unreconstructed socialists who helped derail the UPA government’s initial momentum have simply been replaced under the NDA by the knee-jerk economic nationalism of the Swadeshi Jagran Manch.

The second reason why the Modi government has under-delivered is because the PM, perhaps misled by his Gujarat experience, appears to have grossly misjudged how to make things happen at the Centre. On taking charge, Modi beefed up the Prime Minister’s Office (PMO), in part to compensate for a weak and inexperienced cabinet. Using the PMO to coordinate across ministries can make for faster decision-making and better implementation. But Modi’s PMO has overreached well beyond this to become the “super think tank” within the central government, devising all key policies and making all major decisions, while leaving the unfashionable drudgery of implementation to the various ministries and agencies. But India is not Gujarat. The central government is a sprawling and complex beast with nearly 50 ministries and a host of stand-alone entities spanning a vast breadth of sectors and a national remit, making the path from decision to execution much more complicated than in a single state.

Demonetisation was the most glaring example of how a scheme cooked up in the PMO — whatever its merits — got lost in translation. The RBI and the Ministry of Finance were not only haplessly unprepared for the PM’s announcement but also confused about the rationale for something that they had no role in formulating but simply tasked with implementing.

The Modi government’s effectiveness has been further compromised by a debilitated central government machine. Modi cannot be blamed for this. He inherited a highly politicised bureaucracy with weak capabilities, a corrosive work ethic, and antiquated work practices. But he has done nothing to fix this. The recent initiative to open up 10 joint secretary posts at the Centre to outside talent, while commendable, is too little too late. Fixing the administration is not just a matter of bringing in subject-matter expertise. The entire structure, procedures, work culture, and performance management of our babus needs a root-to-branch overhaul, but Modi failed to see it as a priority.

In short, with his tight grip on the reins of policy-making and penchant for dominating the spotlight, Modi has tried to rule by quasi-presidential edict — but unfortunately without a “bought in” and capable execution engine to follow through. Even his swathe of high profile, personally-sponsored programmes — from Swacch Bharat Abhiyan and Skill India to Smart Cities and Namami Gange — have floundered leaving Modi vulnerable to the charge that he is all PR and marketing flash without any real impact.

The inescapable conclusion is that Modi has blown his opportunity — at least in this term. He came to power with strong tailwinds and the experience and personal traits to be a transformational leader but has under-delivered because of his lack of clear economic convictions and flawed governance. Modi’s idea of India — Hindu majoritarian, exclusionary, and hyper-nationalist — is by no means everyone’s, but he has, time and time again, revealed another vision — that of building a modern, egalitarian, and prosperous country — which energised a broader audience. Sadly, his underwhelming developmental record is highly likely to drive him to set aside the hopeful narrative of vikas and resort to the divisive politics of polarisation as his route back to power in 2019.
The author is a private equity investor and former McKinsey partner.


Views expressed are personal.

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