 "Define 'Modinomics', please!")
As lakhs thronged his 'Mahagarjana' rally at Mumbai's Bandra Kurla Complex yesterday, Narendra Modi made a specific pitch to the thousands of diamond traders in attendance - lashing out against the abolition of Octroi and the imposition of the local body tax in Maharashtra. For the Kathiawari community, known to be staunch supporters of Mr Modi, this was probably just what they wanted to hear. And Modi obliged. But many of his critics would say the BJP's prime ministerial candidate hasn't quite been as precise in his analysis of and solutions to the bigger problems affecting India's broader economy and its larger populace.
Drawing parallels between Modinomics and Abenomics (Japanese Prime Minister Shinzo Abe's policies), Reuters Breakingviews columnist Andy Mukherjee wrote in his recent column for the Business Standard that Modi unlike Abe “doesn't have a well-articulated vision for the economy...(he) has attacked the Congress for inhibiting growth and stoking inflation, but hasn't spelt out just what he will fix and how. There is no "Modinomics”.
Is there indeed no Modinomics? There is of course a pro-development, pro-big business figurine called Narendra Modi, lauded for tripling the size of Gujarat’s economy and creating an environment that ensured its GDP grew at twice the pace of rest of India. Modi is also the man India Inc. unabashedly looks up to, for being a decisive leader with a vision for the nation, someone who can lead the change this country needs.
Much as Modi has impressed everyone with the Gujarat miracle, he has also confounded observers with his blurry stand on issues. On 2nd generation economic reforms, his party has opposed several belated measures unleashed under UPA II like an increase in FDI in retail and insurance. On welfare, neither Modi nor his party have explicitly opposed profligate programs like the Food Security Bill or the National Rural Employment Guarantee Scheme(NREGS). On privatization, he said at the India Today Conclave earlier this year that the problems of PSUs must be sorted out, that the government had 'no business to do business' but didn’t exactly bat for complete denationalization. We also do not know what Modi’s thinking is on a broad range of issues like oil decontrol, or agriculture reform or what he proposes to do with deregulating APMC markets for instance.
Are these merely positions Modi has left unarticulated, or does he not have a focused ideology like the leaders he is often compared to – i.e. Thatcher, Abe etc?
“No Indian politician has a well formulated economic philosophy, so terms like Modinomics or Rahulnomics are exaggerations” says economist Lord Meghnad Desai. “But the core elements of Modi’s economic ideals are good governance and growth. His winning card will be his reputation as an implementer, not what he does differently, but what he does about what the UPA is not doing – i.e. clearing the logjam on infrastructure projects, getting babus to sign files etc. Also unlike the UPA regime there won’t be two centers of power and the PM would be the sole decision making authority."
To be fair to the present day government, the Prime Minister has already, if belatedly, kick-started that effort by clearing a whopping Rs 4.3 lakh crore worth of up stuck projects under the Cabinet Committee on Investments (CCI). But many of those haven’t taken off because last mile state level clearances are still pending.
How can Modi do what the PM is doing differently?
A high level official from one of India’s leading conglomerates says on the condition of anonymity that improving centre-state relationships, something the UPA has failed miserably at, should be the foremost agenda on Modi’s plate if he really wants to unclog the huge pipeline of infrastructure projects and revive the investment cycle.
“India’s virtuous growth cycle has turned vicious because of an infrastructure logjam, leading to a buildup of bad assets on the books of most state owned banks. The incremental output ratio has risen to 7% from 3% just a few years ago, indicating that capital is stuck in projects that are not generating returns. The investment cycle won’t restart until both the states act in a coordinated manner and that should be Modi’s first task.”
Economist Surjit Bhalla believes Modi will indeed strive for more decentralization of decision making and empower the states as he is essentially a state leader. But the hallmark of Modinomics according to Bhalla will be “a greater focus on outcomes rather than outlays, a vision of anti-dolenomics and fiscal responsibility.”
We did get a fleeting glimpse into Modi's specific ideas on certain issues when he held a meeting with the top 120 CEOs of India Inc in July this year. He is known to have vocally stressed on federal empowerment and also vouched for labour reforms by calling for a removal of labour law from the centre's ambit. To a question on the long pending Goods and Services Tax legislation which India Inc expects will add 1% to India's GDP, Modi is said to have fully supported it but wanted the economic autonomy of states to be maintained. He has also made his interest in areas such clean technology, water management etc amply known at various forums by talking about the importance of environmental technologies in enabling development.
But perhaps it's time for Modi to be more precise about his solutions to the array of other more pressing economic problems India faces. His supporters insist we must wait for the BJP to unveil its manifesto to fairly assess Modi's vision. Perhaps, but specifics he must talk, not in the least because his adversary, the distracted, nebulous Rahul Gandhi has just begun saying the right things.
Drawing parallels between Modinomics and Abenomics (Japanese Prime Minister Shinzo Abe's policies), Reuters Breakingviews columnist Andy Mukherjee wrote in his recent column for the Business Standard that Modi unlike Abe “doesn't have a well-articulated vision for the economy...(he) has attacked the Congress for inhibiting growth and stoking inflation, but hasn't spelt out just what he will fix and how. There is no "Modinomics”.
Is there indeed no Modinomics? There is of course a pro-development, pro-big business figurine called Narendra Modi, lauded for tripling the size of Gujarat’s economy and creating an environment that ensured its GDP grew at twice the pace of rest of India. Modi is also the man India Inc. unabashedly looks up to, for being a decisive leader with a vision for the nation, someone who can lead the change this country needs.
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But what is his economic philosophy? Like Abe who made tackling deflation his sole mission, how does Modi plan to get India out of the current vicious cycle that’s eating away at growth? What are his views on curbing the fiscal deficit? How does he plan to raise resources – is he pro privatization? Does he have an ideology completely incongruent to the UPA on social handouts and welfare programs? Not much of this has been revealed, as in rally after rally Modi has only reaffirmed his dogged vision of a Congress Mukta Bharat, but not a great deal more. Save obscure ideas about bringing back black money once BJP comes to power.
Much as Modi has impressed everyone with the Gujarat miracle, he has also confounded observers with his blurry stand on issues. On 2nd generation economic reforms, his party has opposed several belated measures unleashed under UPA II like an increase in FDI in retail and insurance. On welfare, neither Modi nor his party have explicitly opposed profligate programs like the Food Security Bill or the National Rural Employment Guarantee Scheme(NREGS). On privatization, he said at the India Today Conclave earlier this year that the problems of PSUs must be sorted out, that the government had 'no business to do business' but didn’t exactly bat for complete denationalization. We also do not know what Modi’s thinking is on a broad range of issues like oil decontrol, or agriculture reform or what he proposes to do with deregulating APMC markets for instance.
Are these merely positions Modi has left unarticulated, or does he not have a focused ideology like the leaders he is often compared to – i.e. Thatcher, Abe etc?
“No Indian politician has a well formulated economic philosophy, so terms like Modinomics or Rahulnomics are exaggerations” says economist Lord Meghnad Desai. “But the core elements of Modi’s economic ideals are good governance and growth. His winning card will be his reputation as an implementer, not what he does differently, but what he does about what the UPA is not doing – i.e. clearing the logjam on infrastructure projects, getting babus to sign files etc. Also unlike the UPA regime there won’t be two centers of power and the PM would be the sole decision making authority."
To be fair to the present day government, the Prime Minister has already, if belatedly, kick-started that effort by clearing a whopping Rs 4.3 lakh crore worth of up stuck projects under the Cabinet Committee on Investments (CCI). But many of those haven’t taken off because last mile state level clearances are still pending.
How can Modi do what the PM is doing differently?
A high level official from one of India’s leading conglomerates says on the condition of anonymity that improving centre-state relationships, something the UPA has failed miserably at, should be the foremost agenda on Modi’s plate if he really wants to unclog the huge pipeline of infrastructure projects and revive the investment cycle.
“India’s virtuous growth cycle has turned vicious because of an infrastructure logjam, leading to a buildup of bad assets on the books of most state owned banks. The incremental output ratio has risen to 7% from 3% just a few years ago, indicating that capital is stuck in projects that are not generating returns. The investment cycle won’t restart until both the states act in a coordinated manner and that should be Modi’s first task.”
Economist Surjit Bhalla believes Modi will indeed strive for more decentralization of decision making and empower the states as he is essentially a state leader. But the hallmark of Modinomics according to Bhalla will be “a greater focus on outcomes rather than outlays, a vision of anti-dolenomics and fiscal responsibility.”
We did get a fleeting glimpse into Modi's specific ideas on certain issues when he held a meeting with the top 120 CEOs of India Inc in July this year. He is known to have vocally stressed on federal empowerment and also vouched for labour reforms by calling for a removal of labour law from the centre's ambit. To a question on the long pending Goods and Services Tax legislation which India Inc expects will add 1% to India's GDP, Modi is said to have fully supported it but wanted the economic autonomy of states to be maintained. He has also made his interest in areas such clean technology, water management etc amply known at various forums by talking about the importance of environmental technologies in enabling development.
But perhaps it's time for Modi to be more precise about his solutions to the array of other more pressing economic problems India faces. His supporters insist we must wait for the BJP to unveil its manifesto to fairly assess Modi's vision. Perhaps, but specifics he must talk, not in the least because his adversary, the distracted, nebulous Rahul Gandhi has just begun saying the right things.