Karan M wrote:I am actually concerned about one. What's actually being done, the media bias is so obvious to us on BR. I scanned the eco thread but lot of, but not much on what's actually needed vs what's being done. Perhaps you can lead the discussion on what needs to be done. That would be helpful.
I'll try to give a take on it from a political economy perspective, since it is suitable for this thread (but not in the economics thread - which WILL get derailed):
Five years of this administration have shown a few dominant socio-economic tendencies:
* An unprecendented focus on fixing the socio-economic circumstances of the bottom of the economic pyramid. Now well documented here, and essentially IMHO the main factor that drove the GE 2019 landslide win. India has never seen such a dramatic improvement in the lifestyle of the poor and almost poor. Many of the pithy attacks against India that were once deserved. e.g. "why don't you build toilets for your poor ?" no longer make much sense - sanitation coverage is now around 90-95%. It used to be
1% back in 1981. No, that is not a typo. Literally ONE percent. Decades of Banditji and his beti saw infinite improvement on this front, from 0% to 1%...
* A focus on efficiency of delivery of goods and services. No grand new plans, just fix or appropriate existing capabilities to work properly. Aadhar, instead of being junked due to political baggage, was instead made central to the
JAM yojana. The government is generally ideologically neutral and pragmatic when it comes to keeping what could work, and just fixing what could be fixed instead of throwing it away because of its genesis. This is markedly different from the previous UPA administrations, which were
far more ideological in this regard.
* Repeated efforts to formalize economic activity and apply rule of law, as opposed to generations informal business-making driven by patronage and influence. This system works up to a point, but cannot scale to $5-10 trillion. While every country establishes some level of formal/informal business culture, clear legal and statutory structures are necessary in order to scale up new business and deploy capital effectively. Both the Indian banking system (primary and secondary) as well as the business class have found anecdotally difficult to live with. Actions that directly relate to this thrust include demonetisation, the GST finally coming into force, the IBC act, the 2014-15 coal auction process, UDAY and more.
There's a case to be made that two successive RBI governors were policy hawks who did not work well with the Finance Ministry and were behind the curve when it came to lowering real interest rates enough, despite several years of benign inflation. The current RBI governor has done well so far, though there's an argument to be made that he was too conservative in his latest 35bps rate cut, and that he should have gone for 50bps and signaled more. But that is also a case getting an unexpectedly large bowl of ice cream and being upset the scoop wasn't even bigger.
GE 2019 was the first ever election where neither corruption nor price rise were viable political topics. These two issues have ALWAYS been standard opposition planks regardless of who was the opposition. This is a reflection of the change in how socio-economic policy is conducted by this administration, that the top two electoral issues for 6 decades of Indian political process became non-issues. The darling Dilliwala anti-corruption party founded during the go-go early 2010 days hasn't ever been able to take off since.
The resumption of growth is tied to how effectively GoI can ensure that business and financial interests are able to function effectively under its rule of law structure. Already it has shown urgency in finetuning the IBC Act with the
2019 amendments. It continues to try and fix the secondary banking system that's been in trouble since the IL&FS issues came to light.
However, the government has been proactive about trying to understand what the issues are and trying to fix them. It has the political capital right now to force these changes upon the business and financial world because it's good for them in the long run. What seems like doldrums now, if properly managed, are the seeds of a couple of decades of rapid growth. Like a single business, a large economy needs structure to grow. What worked as a small dukaan doesn't work as the business grows larger. Order and formalization is required, even though there will be enormous resistance to it.
An example is the Mallya episode. Here's a former lawmaker himself accusing the state of persecuting him. Leaving the handwaving aside, one issue that stands out is that he doesn't quite realize how the world has changed. He claims he made multiple undertakings to pay the banks back, 'but was rejected', thereby proving a witchhunt. However, that's not the case - his case is going through formal bankruptcy proceedings, and the IBC eliminates decades of
debtor in possession in favor of creditor in control. Thus, Mallya the debtor has no standing to make offers - regardless of how honest he may be. Rule of law means that there's no longer any ad hoc offers or subjective questions of Mallya's venality. There is a process to be followed, and it's to be done by all.
There's also some disappointment that Modi isn't the free marketer he was expected to be. However, in my opinion, he is not and was never an unfettered free marketer. He's a social democrat, who will probably have a legacy like that of
Tage Erlander, who led Sweden through the
record years of rapid economic growth. Like Erlander, Modi focuses on the bottom of the pyramid, insurance, healthcare, infrastructure building and socio-economic enablement, which progressively drives rapid economic activity.
