According to him, the Modi government lacks clear thinking, has promised a lot but delivered too little and it is projecting more than what it has achieved. There is no big picture in the economic policy, only expediency. The Prime Minister's Office is a large, centralised power centre and is now a bottleneck. As a result, India Inc keeps warning about lack of change, and on the ground, investment has not picked up. A government that promised a stable and non-adversarial tax regime suddenly went after foreign companies. Time and energy is spent on managing headlines.
All this has predictably made the Modi government and its ministers angry. When Deepak Parekh of HDFC spoke out last year about the ridiculous rule that required the Cabinet to approve every foreign investment above a certain size, Piyush Goyal hit back with the strange argument that Mr Parekh should be happy that HDFC shares had risen sharply after Mr Modi came to power. This time he portrayed Mr Shourie as a bitter man, angry at not having been included in the Cabinet.
Mr Shourie's frank comments are largely on the mark. However, what he has highlighted are symptoms. The problem is deeper: the absence of an overarching philosophy of this government. The BJP's manifesto of "things to do" could well be targets of Project Manager Modi. But that is not a philosophy. We simply don't know his real and sincere views on three key issues, or, how strongly is he willing to defend them.
Freedom versus govt control: The role of government has grown over the years, by taxing people more. Ministries, departments, divisions, commissions, companies, authorities and other institutions are set up every year that draw down taxpayers' money. The bulk of it is spent on staffing, overheads and on property (renting/ construction). Vast estates across the country owned by various government organisations are a testimony to this "government can do and government knows best" philosophy. I haven't heard of any politician ask whether a substantial part of all this is a waste. There is never any outcome analysis. Maybe the National Institution for Transforming India (NITI) Aayog will do something about it. This money can be better utilised if left in the hands of people and job-creating businessmen, increasing productivity, skills and economic wealth. This can happen if the two other factors described below are also present.
Rule versus discretion: A reputed banker once told me this about banking regulations. Regulations can be rule-based or principle-based. But in India they are discretion-based. Nothing illustrates this better than the recent case of government bullying some foreign companies to pay the minimum alternate tax (MAT). The rule was not clear, the principle is garbled and yet tax babus issued notices to some select foreign institutional investors to pay up MAT. When they protested, the finance minister used his discretion to exempt only long-term capital gains on stocks from the purview of MAT - only in the future - but he insisted on collecting "past dues". When the issue about unfair back taxes blew up, the finance minister used his discretion to announce that certain other kinds of foreign income, too, would be exempt from tax. The confusion as to whether a foreign company should pay MAT based on principle or on rule is still left wide open for the tax department to abuse.
Merit versus loyalty: There has to be a robust system to ensure that the right person is selected for every job. That is the way to increase productivity, innovation and quality of governance. Mistakes can happen in the process of implementing this, but the leader needs to correct them quickly. This is one area where Mr Modi may have to think out of the box. It is well-known that the brightest of young people do not choose to join politics - or the civil services as a career anymore. As Mr Shourie says, this means that the government does not have "expertise and talent quotient" to use. If Mr Modi believes in a merit-based system, he will draft lateral hires - from the pool of talented Indians in India and around the world. While he has no qualms about choosing ministers with no experience or those who have lost elections, he has avoided Subramanian Swamy and Mr Shourie.
It is these three issues that will determine whether we can make the big departure from the past, as the electorate was promised. If Mr Modi puts them in place, we will have better governance, lower taxes, lower inflation, better growth, more jobs and so on. While Mr Modi has often used slogans like "the government has no business to be in business" and "minimum government, maximum governance", these were before the elections. After the elections he has done the opposite in some cases. Mr Modi can avoid implementing these three steps and can still make his government perform better than the previous governments. But then, India's true potential will continue to be wasted.
The writer is the editor of www.moneylife.in
editor@moneylife.in