S. Sethuraman
Will 2015 – the year of hope the aspiring millions cling on to – deliver growth and jobs but without further burdening the masses already facing retail prices beyond affordable levels, no matter the statistical illusion of lowering of inflation indices the Modi Government unduly takes credit for?
The Finance Minister Mr Arun Jaitley, however ebullient he is in advancing reforms via ordinances, may not be bothered by the trivia of prices of basic food items – like rice, pulses, edible oils, milk and other products – as he works on a “path-breaking budget” to promote growth through liberalisation, privatization and globalization (LPG).
The New Year has begun with a flurry of economic policy announcements by the Modi Government after its first seven months, disappointing both sentiment-fuelled investors and corporates as well as the aspiring millions who voted for Mr Narendra Modi and his BJP for the promised “achhe din”. Prime Minister Narendra Modi has since carefully avoided setting any time line for that good day to dawn.
Meanwhile, with the overwhelming majority the BJP-led NDA Government commands in the Lok Sabha, Prime Minister Modi has centralized all decision-making powers to himself and likes to do things his own way, laying down commands for a new model of social and economic development totally disconnected with the post-independence Nehruvian era.
The “Niti Ayog” he has created, after dissolving the Planning Commission of that era, is ostensibly a National Institution for Transforming India, and the Government resolution setting out its objectives makes it clear that it would be bereft of any planning or allocative functions and would only provide “strategic and technical” advice responding to a changing world.
The institutional mechanisms, now set out even more elaborately than before, no doubt lay emphasis on cooperative federalism by involving states, with all their divergent needs of development and resources there-for. But the role of the new body is basically for a “think tank”, This ensures the Centre’s authority with the Prime Minister having the last word on everything.
The pattern of the Modi Government’s exercise of authority has now clearly emerged – the leader sets the agenda at the Cabinet level and outlines his ideas and thoughts in catchy slogans for the nation to pick up and act, whether it is “Make in India”, Jan Dhan Yojana, or Swachch Bharat. However, sound in concept and their long-term potential for a growing and healthier economy, there is a parallel socio-religious campaign mounted with renewed vigour by the Sangh Parivar from which the Prime Minister cannot detach himself.
Rather than assuage concerns of political parties and groups in Parliament over the attacks on India’s secular and pluralistic structure embedded in the Constitution, by the Sangh outfits, the Prime Minister has preferred to remain ambivalent on “ghar vapsi” programmes of re-conversion to Hindu fold. Had he intervened in the Rajya Sabha winter session responding to the opposition demand for clarifications, the Finance Minister Mr Jaitley could have got through with at least a couple of laws including the coal auction and/or the insurance bill providing for a higher FDI cap.
Instead, the Modi Government has ushered in an Ordinance Raj voicing its determination to overcome what it has chosen to call “political obstructionism”. The majoritarian assertions are now in full display. Besides the first ordinances on coal and insurance in late December, Government has taken the same route for some controversial amendments to the UPA’s land acquisition enactment of 2013, which came into force from January 1, 2014.
Mr Jaitley has justified the amendments saying it strikes a balance between farmers’ interests and industrial growth and farmers would get fair compensation. He has sought to ease rules for acquisition of land for five key sectors including defence, rural and social infrastructure, power, and affordable housing for poor. All this should benefit rural growth and generate employment opportunities, according to him. But the ordinance route may not entice foreign investors, though the Government has sought to send signals of its reform intent, and they would rather await Parliamentary approvals.
While land acquisition should help a start for delayed power projects in the country, the Congress, the major opposition though a truncated entity, remains stoutly opposed to the “anti-farmer” approach in the NDA Government’s ordinance. The Modi Government, with all its majority but averse to political accommodation, will have recourse to one or more joint sessions of Parliament to make headway with its reform agenda.
There is now a build-up of great expectations on the Budget for 2015/16, after a year of modest recovery at 5.5 per cent growth in the current year. Broad indications from Mr Jaitley himself in recent weeks have been that he would opt for greater clarity and stability in tax policy, make a historic start with the Goods and Services Act, and set in motion policies to incentivize and facilitate flow of investments, domestic and foreign, given the enhanced caps for FDI in several areas including defence and railways.
The Budget will unfold a series of steps to give a boost of manufacture under the “Make in India” Programme and would cover some tax breaks and other incentives in order to be able to attract investments, with emphasis in areas where import dependence at present is relatively high, as in arms. The Budget instrument may be also used to promote exports, especially to USA the only major economy moving into a degree of buoyancy.
While the plummeting oil prices have proved a boon for India to reduce the value of its imports substantially, cut fuel subsidies and limit the current account deficit, there are uncertainties ahead even though the downtrend continues at present. The fall in prices below 50 dollars a barrel led to fresh volatility in global stock markets, with Dow Industrials tumbling more than 300 points on January 5.
The plunge in prices has continued with ample supplies and tepid demand in importing countries but it may also affect revenues of Governments not only among oil-exporters forced to cut their lavish budgets but also importers like India to experience lower revenues from oil taxes.
Mr Jaitley faces several challenges on the fiscal front – enhancing investments, especially step-up in infrastructural spending, giving a major push to the manufacturing sector and provide for a revised road map on fiscal consolidation. (IPA)
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