Hope is a great breakfast, but a bad supper Mr. Prime Minister
The Budget Session of India’s Parliament is around the corner. BJP INC. is making a strong statement with its Make In India Week at Mumbai, tom-tomming the point that they are determined to make India work. While chief ministers cutting across party lines will form a beeline behind Modi for investments into their respective states (8 at last count), their party bosses in New Delhi may not extend such warmth or cooperation to pass bills during the forthcoming session of Parliament.
These celebrations and festivities are a once in a lifetime opportunity – for both CEOs and people’s representatives alike. That being that, it may not pull off the notch in real business though. India’s woes are not a lack of interest from foreign investors, but mostly homegrown bottlenecks – legacies inherited from the previous government and in some part contributed by the sinking global tide.
Back home, the country’s parliament seems more like herding cats. The ruling party has to brush its shoulder with a blithe and cantankerous opposition who have hitherto managed to make more noise for their numbers, and punch the government way above their weight. Modi and his team were banking on state elections to shore up the numbers in the upper house of Parliament to push reforms through. That strategy may not hold much water. The state elections thus far, have not proved to be of much use to him. What happens in Parliament next will determine India’s future.
Interestingly, Modi has not yet unleashed his dogs on the ills of the previous government (except in instances where the court has asked his government to fall in line with the law). Apparently huge amounts of money embezzled by members of the previous government including relatives of the then all powerful Mrs. Gandhi are pending investigation. Modi has kept sniffing out the skeletons for later. Probably in time for the next elections. He would use those prosecutions to persecute his opponents and beat them down. The opposition will have to negotiate and yield. The opposition knows this too.
So they decided to get their acts together to hold this man in his reins. They feinted with shadows; held back serious legislation to embarrass the government. Important bills like the GST roll-out, which will have far-reaching consequences for India’s growth and development, and the realizations of its people’s aspirations have been blocked. They have stopped India from working. Lack of leadership, tact and diplomacy in Modi's camp accelerated the degradation into a stall. The world’s largest democracy is arguably the world's slowest too!
Mrs. Gandhi (the leader of the opposition INC) however ambitious, is playing on a weak wicket. She may have to settle with far fewer seats with regional parties to negotiate an easy access for her son and work out a clean chit for her close relatives and party colleagues. Putting up any fight in 2019 when the next national polls are due is still a big ask. But that is a long time away. She and her colleagues cannot afford to hold India to a standstill till that happens. Her nepotism is drawing flak from a section of the congress itself. But luckily for her, India’s grand old leaders are no more worried than installing their children in their own fiefdoms.
Mr. Modi also has to prove that he is not a one-race horse at the prime minister’s office. The detractors within his own party are more critical of his function than the opposition. After taking over, He has travelled around the world to meet heads of states and ask investors to come to India and invest in the world’s fastest growing economy. So many of them will turn up at the Make in India Week at Mumbai. They may make enquiries and try to start up on their own.
But to realize any gains, Modi must get his bureaucracy to change and kick-start the country. He started with great panache. But the bureaucracy knows how to reign in a fast moving lion king of the jungle. Unfortunately, Modi succumbed to their pressure and signed orders against cleaning up the babudom. Corrupt IAS officers can now stay where they are with all their vice by simply declaring that they did it in national interest. Yielding to this coterie of meanness will slow down the government further.
Modi also has to decide how he is going to start up India’s growth engine. He has been asking the central bank to lower interest rates. That may not be in the offing soon. The central bank is wary of some bad loans that may swell and a few verticals that are imploding (like real estate – India has over 1.05 million unsold houses as of mid-2015). That worry may be true and the nightmare will firm up over time blowing away any gains that Modi may derive from his investment campaigns.
The Reserve Bank of India has already forced India’s banks to stop hiding bad numbers under their tongues. Its banks have been forced to spit out the bad debt it cannot chew or digest. The real picture it paints may force some skeletons out of the cupboard. The central bank needs to be credited far more than is being done. This priority on cleaning up the bank's balance sheet would ensure that the growth that follows will be free of any distortions or bubbles.
On the other hand, his government has decided to keep the windfall from the slump in global commodity prices for itself and clean up the government’s deficit. If his finance minister decides to part with this money in the form for investment in capital goods, infrastructure and a weighty reduction in income tax, that may serve to kick off public spending and consumption; and prove far more fruitful and productive for the economy. As China next door is grappling with its financial market woes and gravitating towards what its President calls ‘The New Normal’ (essentially asking his people to brace up for a slump), Modi’s search for normalcy in the midst of all this chaos may be far from over.
India on the other hand needs all hands rowing in one direction to help weather this storm. Unfortunately, the current political dispensation, despite its overwhelming majority in the Parliament's lower house is slipping into the same terrain as former governments – absence of trust, fear of conflict, lack of commitment, avoidance of accountability and inattention to results. That may prove unproductive to the world as a whole. In the meantime, the party in Mumbai can continue.