A promise broken: PM Modi's maximum failure on minimum government

On this day last year, the Narendra Modi government was sworn in to office. It was a 45-strong council of ministers and Modi immediately earned kudos for walking the talk on his favourite minimum government maximum governance slogan. This writer had pointed out that Modi’s council of ministers was certainly a lean government, but that does not equal a minimum government, which is rooted in a certain philosophy of the role of the state one in which it confines itself to maintaining law and order, defending the country’s boundaries, providing public goods and not interfering in areas where individuals and enterprises could manage their own affairs . One year later, does the Modi government pass this test? [caption id=“attachment_2262556” align=“alignleft” width=“380”] PTI[/caption] In terms of numbers, Modi seems to have broken the promise of a lean government, with his council of ministers numbering 65. But, yes, it is smaller than that of his predecessor (78 ministers) and far short of the limit of 81 that the ninety-first amendment to the Constitution sets (it limits the size of the council of ministers to 15 per cent of the strength of the lower house of Parliament and state assemblies). The litmus test of minimum government, however, does not lie in numbers. A government can be small-sized and interventionist. What matters, really, is the areas in which the government functions and how. Speaking at the ET Global Business Summit in January, Modi said the state was needed for just five things: public goods, a regulatory system for negative externalities, checking monopolies, plugging information gaps and ensuring people can make informed choices and a well-designed welfare and subsidy mechanism to ensure that the poor are not deprived of basic services, especially education and healthcare. He appeared to have understood the philosophy of a minimum government (though classical liberals will contest some of these). But even on this touchstone, Modi hasn’t measured up. And he is unlikely to, so long as his government continues to see disinvestment merely as a revenue raising tool, selling government stake in public sector companies only to adhere to stock market listing norms and selling only loss-making companies. This is just a continuation of the United Progressive Alliance’s (UPA) policy. In his January address, he said the government should not be in business, especially in areas where the private sector can and is delivering better. That does not square with the government not getting out of sectors where the private sector is doing better and where the public sector is hugely under-performing airlines, hotels, telecom. The tourism minister said last week that the government could sell a few loss-making hotels. But why should the government be running hotels at all, even if they are making profits? The government has been tom-tomming its acceptance of the Fourteenth Finance Commission report on devolution of taxes to states, but why has it not accepted another recommendation of the Commission on a strategy for public sector disinvestment? (Read here ). A major reason for public sector banks being in a mess is the political interference in their functioning. Yet, there is hardly any action towards giving them more autonomy, let alone bringing down government stake in them. A minimum government would have moved away from a heavy-handed interventionist role in the field of education. Here too we got more of the same. From forcing the Delhi University to roll back its five-year undergraduate programme (FYUP) through the University Grants Commission to meddling in the affairs of the Indian Institutes of Technology to placing ideological favourites in research institutes to telling schools how they should observe Teachers Day and Christmas, the human resource development ministry has been no different from previous governments (even they didn’t do the last one). But earlier governments never spoke about minimum government; Modi keeps harping on it. Modi’s minimum government copybook has also been blotted by his government resorting to invoking the Essential Supplies Maintenance Act (ESMA) at the first sign of shortage-driven price spikes. There is ample evidence that this does not work but only increases harassment and corruption. Before he became prime minister, Modi had headed a working group of chief ministers on food inflation and had wanted ESMA to be strengthened, so it is probably unrealistic to expect him to repeal this, but this is another example of the state micro-managing the economy. While on the food economy, one cannot overlook the fact that the government has taken only baby steps on reforming the Food Corporation of India (FCI), despite having the benefit of the Shanta Kumar committee which made several recommendations to reduce the corporation’s overbearing role in managing food supplies which is a major factor in the mess in the food economy . The Modi government certainly needs to be applauded for doing away with the Planning Commission, but how its replacement, the Niti Aayog, will be an improvement is still not clear. Merely making the states a part of it may not mean much if ultimately the Aayog continues to nudge them in a certain direction that is decided by the Centre. But it’s early days yet and one needs to give the government more slack on this. The increased transparency in the government – especially the cronyism-free auctions of coal mines – is another positive. Modi’s critics can jibe away, but as of now there is less evidence of and, more importantly, reduced scope for, the kind of crony capitalism that prevailed not just in the UPA government but earlier ones as well. In fact, the government seems to be going overboard to prove that it is playing fair, cancelling the allotment of a coal block won in a transparent auction out of fear that the extremely low bid would attract charges of corruption against it. The government can also take credit for making doing business easier in areas that are within its ambit (much still remains in the realm of the states). The e-biz portal and easing the labour law compliance process for small businesses hugely reduce scope for harassment and bribes. But while this may be a move towards maximum governance, this is not what minimum government is about. These are just more transparent and efficient ways of government functioning. A minimum government requires not just making government processes faster but questioning the relevance of many of these and doing away with them. It requires a drastic paring down of interface between the government and individuals and enterprises, which is the root of corruption and black money. Without this, there’s little point in legislating draconian measures to curb black money which will only create more avenues for the very scourge the law seeks to end. If Modi is really serious about minimum government, he should address the areas where his promise seems to be falling short. Else, he should stop boasting about minimum government.