Narendra Modi's Davos speech: Land, labour reforms are key to nudge investors to put money on the table

Prime Minister Narendra Modi’s Davos pitch has been hailed by many and panned by some. Those who admire Modi’s efforts contrast his speech with that of the performance of H D Deve Gowda, the last Indian prime minister who had addressed the annual jamboree. Deve Gowda had gone there in 1997 with his extended family to enjoy an exotic vacation in the Swiss Alps; Modi, shorn of the family baggage, was at Davos on a serious business proposition – to sell India to the world. Modi protagonists insist that he succeeded in making the world CEOs see India as an attractive business destination. Modi was more a salesman than a statesman at the world stage, telling the big business leaders about the changes his government has brought about in the last three and a half years to make India the best business destination. Supporters of Modi credit him for his clear-headed preferences – for pursuing the goal of creating a prosperous India rather than the make-believe goal of a leader in the globalisation front. Let India first be China and then aspire for the world leadership role, they argue. Narendra Modi held out some salient points of the Indian economy for attracting foreign entrepreneurs. As an indirect attack on China, Modi, invoking Gandhi and Tagore, said that a free democratic environment, in contrast to a closed totalitarian culture, is more conducive to business growth. Modi was emphatic that he has done away with the red tape associated with the previous Congress regime, and in its place, has rolled out the red carpet for big business. He elaborated as to how he has abolished hundreds of archaic laws, and, as an upholder of the environmental cause, has strengthened the legal and institutional processes to ensure that development and environmental protection go hand in hand. [caption id=“attachment_4319215” align=“alignleft” width=“380”]  Prime Minister Narendra Modi at the Opening Plenary during the World Economic Forum (WEF) annual meeting in Davos, Switzerland. Reuters[/caption] But then just as Modi was delivering his landmark speech at Davos, the 2018 Environmental Performance Index (EPI) was released on the sidelines of the World Economic Forum meet. According to this Index, India is placed at 177 out of the 180 countries whose environmental performance had been taken into consideration. India did better than only three countries – Congo, Burundi and Bangladesh. China’a rank was respectable compared to India – it stood at 120. The question is: Will Prime Minister Modi take up urgent measures to clean up the air quality and reduce greenhouse gas emissions? And how will that square with the invitation to international manufacturing giants to come and set up shop in India? The even bigger question is, if the domestic private sector is refusing to make fresh investments in the manufacturing sector, then how can the country expect foreign enterprises to set up their manufacturing hubs in India as they did in China in the last three decades? After all, we know it well that Indian economy today is driven by public sector investment. But with the threat of fiscal deficit target being breached, there is a perceptible slowdown in government investment. However, the private sector is hardly ignited to fill in the void. In fact, most of the private sector is unable to harness its existing capacity, as there is a slump in the wider demand. That brings us to the Oxfam report, which was released just as Davos conclave began; the report tells us the richest 1 percent of Indians have cornered 73 percent of India’s wealth; some dispute this data and say that it is top 10 percent and not 1 percent who have cornered two-third of India’s assets. Even if that is the case, can you expect an uptick in the demand when the large majority of Indians are uncertain about meeting their basic necessities of life? As the development plank is primarily centred on the consumption pattern of the middle and upper class, any large-scale industrial enterprise has to be geared for big exports to flourish in business. But, unfortunately, India’s export story is also sputtering. Finance Minister Arun Jaitley has pooh-poohed the claim that the lack of land and labour reforms has created the bottleneck for the industrial expansion in India. He says that states are fully equipped to handle the land and labour issues and they are doing so. The only problem, according to the finance minister, was the slowdown in lending by the NPA-laden public sector banks. To tide over it, Jaitley has just announced a 1 lakh crore package for capital infusion into public sector banks. It is incorrect to entirely pass on the buck to states when it comes to land and labour reforms. The work should begin from the centre. Yes, banks have to be recapitalised if the economic system has to get back on tracks; but before the government committed fresh infusion of tax-payers’ money to bail out the defaulting banks, it should have taken punitive action against those bankers who were responsible for the loss of more than Rs 20 lakh crore of public money due to their callous and corrupt ways. Iceland, a small country, sent 29 of its bankers to jail after the 2008 meltdown for causing vast loss to banks through their reckless lending. That exemplary action brought Iceland’s economy back on the heels. True, Jaitley and the team have issued the warning to bankers against future misconduct. But the bankers know very well that the warnings are for mere public consumption. The government is showcasing demonetisation and GST as examples of its intent to take hard decisions. But more reforms, mainly in the areas of land and labour, are in order to nudge the investors put their money on the table.