Modinomics: The missing but necessary details

“It’s like the directive principles of state policy,” said CNBC-TV 18’s Latha Venkatesh, dressed appropriately in a bright saffron top, after Narendra Modi’s speech outlining his economic vision at the India Economic Convention in New Delhi today. She was referring to the only prepared part of his speech, where he spoke about an agenda for speedy yet sustainable economic growth, that is inclusive of all, respectful of individuals, responsive to innovations, responsible towards the future generations, improved standards of living, increased human well being and assured social justice.

There were, indeed, a lot of motherhood statements in Modi’s speeches today at different fora - traders, chartered accountants and the corporate sector. He steered clear of contentious issues and from outlining a Friedman-ist right-wing vision which would have been a red rag to his many ever-ready-to-pounce left-liberal critics. Till the time of writing this, the best they could come up with was that he had insulted the armed forces by saying traders take more risks than soldiers do!

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One criticism that his outings today will attract is that Modi is not a very original economic visionary. Perhaps. But for a country whose economy has been run to the ground by a government headed by an eminent economist, perhaps more than great ideas what was needed was an assurance that the man who may be in the driver’s seat in a few months’ time understood what the problems were.

Modi certainly seemed to know that and he came across as such. Great policies are fine, he seemed to be saying, but what is more important is how they are implemented (his frequent references to his administration in Gujarat could be panned as boastful but basically drove home this point). So he came across as less of a visionary and more as a nuts-and-bolts man. Sure, it gives scope for his trenchant critics to sneer and his ardent supporters to be a tad disappointed, but there is no denying that this is what the country needs right now. The country was set on the right path in 1991, the problem is that the progress on that path has been slow because many of the reform ideas have not been implemented.

And yet, for someone who comes across as an implementer, there was a curious lack of engagement with contentious issues. These are issues Modi will have to grapple with when he gets down to the nuts and bolts. Each time he appeared to be getting close to these issues, he left them unsaid. But building a stronger economy will need these issues to be tackled head on.

Take his statements on energy in response to a question. Energy saving is important, he said. That, logically, should have had him talking about pricing of energy. But he did not go down that road, veering instead to talk of a sons-of-the-sun movement (countries with solar energy potential coming together), and a rather sensible idea about focusing on power generation from different sources in different parts of India (hydro power in the east, wind power in the south and solar power in the west and north).

While that is certainly needed to reduce our dependence on imported petroleum fuels, these are long term solutions and in the short and medium term, the right pricing of petroleum products and phasing out of subsidies will have to be done. Not doing so will reduce resources for the investments that these new projects will need.

When he spoke about the manufacturing sector, hopes rose when he criticised the penchant among left-liberals to view all investment and big industry with suspicion, and when he spoke about the need for availability of raw material and the need for peaceful labour relations. But then he made no reference to the mining-environment face-off or of amending labour laws, two issues that are at the heart of the unfavourable investment environment in the country. Perhaps he will speed up environmental clearances and make them more transparent (he spoke about increased technology-enabled transparency to reduce corruption when talking to the chartered accountants).

Perhaps he will ensure that labour laws will not bite even if the controversial provisions of the Industrial Disputes Act remain. Perhaps he needed to be more vocal on these.

What he said instead was why talk only of investment in manufacturing - agriculture and services also need investment. Sure, they do, but right now manufacturing is in pretty bad shape and that alone will generate the large number of jobs the country’s youth (the target of Modi’s attention) so desperately needs.

He spoke very rightly about the huge wastage of foodgrains and the need for cold storage and warehouses. But did he envisage the government or the private sector filling this crucial infrastructure gap? And if it was the latter, how would he deal with the various policy obstacles to private investment in these? What about the Agricultural Produce Marketing Acts, which are a huge disincentive? Sure, this is a state subject and he did say that states should get more freedom in decision making, but one would have liked to hear his view on this issue, since the middlemen who control the mandis have immense political clout. Did he not want to antagonise them? But how will he get the agricultural sector to improve its share from less than one-fifth of the economy to one-third without tackling these problems?

Also missing from his address was the problem of land acquisition, which will come in the way of his ideas of urbanisation and a massive infrastructure push. Industry has red-flagged the Land Acquisition Act, a law that the BJP supported. How will implementer Modi deal with the problems the Act will throw up when he gets down to brass tacks?

Government finances are in a mess. If and when Modi gets down to the task of putting the economy back on rails the first problem he is going to come up against is the sorry state of the exchequer. One expected more from Modi than just a statement that fiscal deficit is not the only problem and that there are several other deficits.

Perhaps this was not the right forum for Modi to deal with these specifics. After all, his speeches were meant to outline an agenda for the future and so a broad-brush approach was inevitable. Perhaps some of these details will come out in the BJP’s manifesto closer to the elections. But even an indication of how his mind worked on these issues - which will trip up any government working for an economic revival - would have been enlightening.