Prime Minister Narendra Modi’s adroit move to end the inter-ministerial battles over Aadhaar, which was first reported in Business Standard last Sunday, came just days before Carrefour, the global retailing giant, announced it was pulling out of India. Are the two connected? Not at first glance, but they show a continuity in the effects of politics and policies that have carried over from the Congress-led government to the Bharatiya Janata Party (BJP) administration.
Aadhaar, in the words of the economist Surjit Bhalla, normally parsimonious in his praise of the Congress, was “the best policy introduced by the Congress government in the past 10 years”. Indeed Mr Modi is to be applauded for quickly throwing his weight behind it and rescuing our best chance at turning around India’s woeful record of delivering benefits to the poor. This is more than the Congress leadership appeared capable of doing when Aadhaar was caught in a tug of war with the home ministry under P Chidambaram.
Carrefour’s withdrawal was likely a response to the fact that it saw no prospects for the approval of multi-brand retail under the BJP, but I think the retailer was probably exhausted by seeking clarifications about dealing with the restrictions imposed on them by the Congress administration. Walmart and others have complained about the thoroughly impractical local sourcing strictures that force them to buy almost a third of their goods from small and medium enterprises in India, if they want to open supermarkets.
In saddling multinationals with these requirements, the Congress-led government was almost as narrow in its definition of the national interest as the BJP’s opposition to foreign direct investment in supermarkets is. What is lost in both cases is the chance to obtain foreign money and expertise to build supply chain networks and, thus, help improve the delivery of vegetables and fruit that rot on their way to our cities and towns. A better way to help our small businesses than handcuffing foreign companies is to make it easier for them to operate, as they disproportionately bear the brunt of the delays in receiving permissions and licences in India.
What is clearly discernible six weeks into the BJP-led government is that, for all its electioneering abuse hurled at the 60 years of the Congress rule that sometimes made me believe Jawaharlal Nehru was a modern-day variant of Mahmud of Ghazni, the BJP is quite content to follow its lead on everything from its subsidy programmes, the Mahatma Gandhi National Rural Employment Guarantee Act and the National Food Security Act among them, to its muddled approach to gas pricing and managing Coal India. On subjects like Aadhaar and indeed rail fare hikes, such continuity of policy is mature and a good thing. On tackling subsidies, bringing the land acquisition Act’s compensation formulas back to the realm of basic arithmetic or breaking up Coal India, the government looks much less reformist than we were led to believe.
The question is, why is it so hard for a party in India to be right of centre on economic policies? The Rashtriya Swayamsevak Sangh’s Organiser, using its talent for conspiracy theories, blamed the bureaucrats in its current issue. The Organiser argument is similar to the plot of Salman Rushdie’s The Satanic Verses in which Salman, the scribe, mischievously writes his own version of the holy book. Organiser warns, “The PM and his team should remember that these babus have been working for decades with Congress-led governments and many still have unquestionable loyalty towards the party.” It is at least true that in virtually all the ministries, the same bureaucrats are in charge. The Modi government has unwisely denied itself the benefit of having committed reformist technocrats who might take the government in fresh directions. Comparing Mr Modi to Margaret Thatcher looks premature.
A couple of months before the election, JPMorgan’s Sajjid Chinoy predicted we would see such a continuity of policies, both good and bad. “After accounting for all the political noise, there is a remarkable convergence of broad economic thinking. This is not the case (with) the Democrats and Republicans in the US – who are very far apart on the economic ideological spectrum,” Mr Chinoy wrote in early April. “Instead, both of India’s national parties seem to have the same reformist instincts and the same welfare instincts, though the semantics are often different.”
We see this in recent speculation that the implementation of the food security Act will be expanded along the lines followed by Raman Singh’s BJP government in Chhattisgarh, which may have been the inspiration for the Congress in the first place. It would be better if there were a way to revamp it so that it was targeted better and offered our woefully malnourished poor more than just cereals. It is visible also in Nitin Gadkari’s statement that the principal pillars of the land acquisition Act – including the daft compensation rules that mandate sellers of land are paid six times the market price – will remain intact. Having come through what has been touted as the most important election in history, our economic policy still looks confused – witness the archaic response to reining in onion and potato prices. Or the railway minister’s belief that foreign companies will rush in to build our new rail tracks just because we don’t have the money to do this ourselves. He must believe in fairies, too. Today’s Budget is likely one of our last chances to rescue this unequal country from the effects of decades of whisky-soda socialism and ineptly regulated oligopolies.