After insurance bill fiasco, Modi govt shifts gear, modifies strategy on reforms

After what seemed like a slow start, the Narendra Modi government suddenly seems to be revving up the pace of change. While it has faced a Congress roadblock on the insurance bill, it seems to be moving full-speed ahead in two areas: one, changing regulations and easing rules for business in areas that don’t need new legislation, and, two, fast-tracking legislation related to labour laws, foreign direct investment (FDI) proposals, etc. Earlier it had seemed as if the government was waiting to get the assembly elections over with before making major reformist moves.

Put together, this suggests a subtle shift in the government’s reforms strategy that was not visible earlier. Or it could mean this strategy was always in place, but the media hadn’t noted it.

In just the last few days, it has cleared policy changes to allow 100 percent FDI in railways , and up to 49 percent in defence. After the insurance bill fiasco, the government is moving ahead with bills to amend the Factories Act and the Apprentices Act so that it becomes easier to employ more labour. This is radical. A Judicial Appointments Bill is also in the works. The big change left is a bill to rework the Land Acquisition Act of UPA-2, which is the biggest hurdle to infrastructure and manufacturing development.

Even more importantly, the government is moving at breakneck speed on removing rules that can be changed with executive action. As this Business Standard report notes, the Modi government has changed the rules for environmental clearances for the expansion of existing coal mines, opened up some no-go forest areas for mineral prospecting, eased up clearances from the wildlife angle, reduced the powers of the green tribunal, ended the ban on new factories in so-called critically polluted areas, and allowed states to clear thermal, coal, paper pulp and mining faster. Earlier, to speed up decision-making in government, the Modi government had abolished all empowered groups of ministers , and ordered ministries to shift to moving files digitally instead of physically.

While the changes in project clearance procedures may cause concern among NGOs and genuine green and tribal rights activists, the government has obviously taken the pragmatic view that when growth is grinding to a halt, getting the economy moving again is the first priority. The green concerns will be addressed a short while later, when the economy is chugging along fine.

While the non-legislative changes in rules went largely under the media radar till recently, the sudden push for changes in labour and foreign investment laws indicates new thinking in the Modi government after the temporary insurance bill setback. Though no one is talking about it openly, the government has probably realised that pussyfooting around what is critical cannot wait indefinitely.

The labour law and FDI changes, for example, are going to face huge political opposition not only from the opposition, but also the BJP’s own labour unions. The BJP-linked Bharatiya Mazdoor Union is one of India’s most powerful labour unions and it is growling unhappily about it.

If the Modi government is now in overdrive, as this Mint story suggests, why is it doing so now, more than two months after taking over?

The chances are the Modi government has realised that delaying change is not going to help it, especially since the opposition to it is solidifying. While laws can be passed in the Lok Sabha, thanks to the BJP’s majority, they will be delayed in the Rajya Sabha, where they will either be defeated or delayed by references to select committees and other panels where the BJP won’t have a majority.

During the tussle over the insurance bill, Finance Minister Arun Jaitley asked the opposition to “approve, defeat or amend” the bill , in the hope that defeat will show up the Congress’s anti-reform stand and enable the government to call a joint session of parliament under article 108 of the constitution to clear the bill. Article 108 allows the government to call a joint session of parliament under the following conditions: a bill is passed by one house and then rejected or amended by the other which the houses can’t agree on; or when one house fails to pass a bill even after six months.

The reason why the Congress wanted to send the insurance bill to a select committee was to prevent the calling of a joint session of parliament over the next six months - and where the BJP may have an edge. Voting against the bill would have immediately allowed the government to call a joint session.

It is probably this strategy of the opposition that the government has now wised up to. It has realised that all laws may now be delayed by up to six months in the Rajya Sabha, where the government (including its NDA allies) is in a hopeless minority. The decision to rush many laws through the Lok Sabha is probably an indication that it will try and pass them quickly and transmit to the Rajya Sabha, which can then delay them for a maximum of six months. After that, it will be time for a joint session.

At worst, this means a joint session can be called by February 2015.

Moreover, calling a joint session piecemeal for every new law can be tiresome, and political moods can change quickly. The BJP has probably decided that it may be best to get many more bills through one or two joint sessions instead of calling such sessions repeatedly.

This is sound strategy.

However, if the BJP wants to put a real stop to the opposition’s efforts to delay its reforms, it needs to take one more precaution - and this relates to federalism.

Narendra Modi talked a lot of federalism before he became PM, including plans to run India jointly with its chief ministers.

It is actually time to take both the political and legislative ideas forward on federalism so that no one - repeat no one - can ever stall any state from proceeding with reforms vital to it.

In order to prevent constitutional deadlock, Modi needs to put federalism at the core of his legislative and administrative strategy. He can undercut the Congress only if he teams up with Congress and other regional party chief ministers. Their political interests are not the same as that of the Dynasty. But that is another story.

For now, it appears that Modi has learnt from the insurance bill roadblock and changed his strategy.