As it nears the completion of two years in office, the Narendra Modi-led central government's record on economic issues looks mixed. In spite of a welcome recent spurt of energy, much initial promise has been belied. The government's unprecedented majority in the Lok Sabha was neutralised by its lack of control over the upper House; and the priorities of the government itself have at times seemed to be not as pro-market as some of its early supporters imagined. Given its self-imposed and external limitations, therefore, Finance Minister Arun Jaitley's reflections in an interview to this newspaper published on Monday should perhaps be seen as a welcome dose of rationality and realism. Mr Jaitley admitted that "reaching nine to 10 per cent growth is extremely difficult" when the global economy is not expanding at a reasonable rate. His agenda for his ministry was also practical and unambitious: he mentioned a series of pending legislative changes - four, including the goods and services tax - which do not add up to a disruptive programme but will no doubt make a difference.
Mr Jaitley defended the absence of "big-bang" reforms under his watch, saying the government decided to go after "low-hanging fruit" like the liberalisation of foreign direct investment ceilings and the cleaning up of the natural resource economy. The finance minister in fact described some of the government's changes as "slight tweaking", a further indicator that major disruptive structural reform is no longer considered desirable. He believed that the long-term impact of the "slight tweaking" on the relevant sectors - such as coal mining - would be significantly positive. He did hint that the privatisation agenda had not been totally abandoned, and also said that changes would be brought to the nationalised banking sector. Mr Jaitley however was crystal clear that the Centre could only do so much - it could deregulate and ease permissions at its level, but "suddenly issues like land sanctions... and completion certificates arise. Then the whole thing comes to naught." He correctly identified the true open question of the coming years in economic policy terms: Would the Centre's thrust on marginal, non-disruptive easing of regulation and increasing the ease of doing business meet with equal efforts from the states? He also stressed the macro-economic achievements of the government and the fact that it has successfully changed the conversation about India globally. Part of this is due to India being one of the few places to unequivocally benefit from the crude oil and commodity price fall, though credit is also due to Mr Jaitley's successful efforts at staying on the path of fiscal consolidation and his re-commitment to continuing subsidy rationalisation.
Certainly, India would have benefited from a firm, sustained and cohesive course of structural reform. But that should have been initiated early on in the government's term, when it had its full store of political capital and a fresh mandate. Two years on, it is better perhaps to embrace a realistic conception of what has been and can be achieved, rather than to hype past achievements or to promise too much in the few years that remain before the general election cycle begins again. Mr Jaitley is right to lead this re-evaluation.
