Call for better governance, policies
India is endowed with a strong and stable Government but it needs to take a re-look on its governance and policies to tackle multiple challenges preserving democratic norms and ensuring its key policies, which command a broader national appeal during a necessary phase of critically addressing the left-over social and economic backwardness.
This is broadly a lesson that could be drawn by the Modi Government on the 70th Independence Day. There can be an iota of satisfaction that Mr. Modi, with all his showmanship, has begun to realise that big talk must be followed up in action and to let outcomes speak for promises, as reflected in his customary Red Fort Address.
The sooner he and his colleagues, and BJP as a whole give up cheap jibes and make consensual approaches and build social harmony the better. For, the majority of the national electorate is still outside its grasp. And no less formidable are challenges of ensuring internal security against threats across borders and re-strategising relationships with major powers near and far.
Mr. Modi has a special responsibility to live up to the prestige he has earned abroad and to act in tune with the compelling mandate bestowed on him at home in 2014.
Disturbing incidents over the last two years and odd, damaging for the social fabric of the nation, have brought into focus the shortcomings in adherence to our declared values. Mr Modi in his speech said for him, more than what the world thinks. “The image of the country is important.” But the Prime Minister has tried to simplify too many issues and reduced them to code words like “substance over symbolism, and empowerment over entitlement”. It would be laudable if precepts are turned into practice.
Now, at home, in the third year of Modi Government, our economy remains still trapped in low recovery and has to contend with even more global uncertainties. True, a fairly good monsoon holds out prospects of farm improvement in fiscal 2017. However, rising inflation well above the 4 percent benchmark and exceeding 6 percent continued industrial stagnation and low employment have to be addressed through both fiscal and monetary management.
The Prime Minister has claimed that his Government had not allowed inflation to go beyond 6 percent, despite two years of drought and the “poor man’s thali was not allowed to become unaffordable”. This may sound fanciful amid the recent accentuation of rural distress and farmer suicides, substantially in BJP-ruled Maharashtra. The Modi Government has no doubt moved in several directions and also promised to double farmers incomes by 2019. We shall wait.
Parliament’s Monsoon Session just ended, had a refreshing breakthrough on the long-delayed GST - though its enforcement at the Central and state levels bristles with several unresolved issues like rate structure and mechanisms to be determined by the GST Council. The Prime Minister has lauded the parties for the success of recent session but GST did not seem to be on his immediate priorities in the Red Fort speech. The government has to build on the cooperative process in legislation.
Internal political problems which require urgent attention of Government include ways and means to arrest any deterioration in internal security and secure national harmony by addressing imaginatively the people’s grievances in Kashmir and other such issues in North-East. It is unfortunate that the Modi Government has also delayed on the appointment of judges, and CJI, Justice T S Thakur has deplored the lack of any mention on the subject in PM’s address.
On the economic front, there has been less news to cheer, after the Reserve Bank’s third bi-monthly policy statement of August 9 which left unchanged the key lending rate at 6.5 percent, taking into account the rising inflation trend. As if to validate, the July data showed CPI inflation touching a near two-year high at 6.07 percent while food inflation soared to 8.35 percent.
The CPI rise above RBI red line raised doubt on its central trajectory of holding it at 5 percent by March 2017, though the statement projected it with risks tilted upside. Further depressing the price outlook comes news of Wholesale Price Inflation (WPI) more than doubling in July to 3.55 percent. This jump is partly reflection of higher prices of cereals, rice, fruits, and pulses rising food inflation, non-food inflation has been driven mainly by fibres and oil seeds
Thus, the price situation will now top the concerns of Government, even if hope is nourished for a drastic turnaround from bumper crops in the post-kharif harvest season but meanwhile, the monsoon should also remain active over the dry regions for the next six weeks left. In the interregnum, prices may also get a further boost if demand picks up as a result of large cash flows into the hands of Government employees with the implementation of the 7th pay commission recommendations.
So far as food articles like pulses and sugar are concerned, any deficiencies in supply management would have to be made good to meet such contingency. The situation has lent urgency to the setting in motion of the new Monetary Policy Committee, already notified by Government for its constitution. The first meeting of MPC may be called in September when a new Governor, yet to be named, would have also taken over from Dr Raghuram Rajan. The timing of the next rate cut would thus be with the MPC.
On economic growth, the August Policy Review had retained the gross value added (GVA) at 7.6 percent while external projections for fiscal 2017 vary like IMF (7.3 percent) and World Bank and Asian Development Bank at 7.4 percent with higher growth in 2017-18. RBI had noted that successive downgrade of global growth projections by multilateral agencies and the continuing sluggishness in world trade points to further slackening of external demand going forward in 2016 and maybe beyond.
Overall, the passage of GST enabling Constitution Amendment Bill in Parliament has improved business sentiment in India and welcomed by global credit agencies. If GST implementation gets delayed, there will be expectations of investors for other reform measures, though doing business has been made relatively easier by the Modi Government.
(The views expressed are strictly personal.)