My assessment of Modi government

I have been a long-time supporter of Shri Narendra Modi. But I am seriously disappointed at his performance as prime minister. Certainly he has done better than his predecessor, Sonia Maino. But she’s an Italian who really did not care for India. Doing better than Sonia Maino is no achievement. I expected better than this from Modi. I think Modi’s greatest achievement so far has been political. He disarmed the Maino mafia. But I fear that there are Maino moles in the Modi management team.

Anyway, here’s a piece I wrote for the New Indian Express where I claim that India is still on the same old policy path. It was published on June 14th. I reproduce the piece here, for the record.

India is still on the same old policy path

The second anniversary of the NDA government of Prime Minister Modi is an appropriate milestone to reflect on its performance. In May 2014, the possibility that India would embark on a path to prosperity was real. The BJP led by Shri Modi was given an unprecedented mandate by the people and expectations were high that the new government would break from the dismal past. A move from what I call the PPP (perpetually planned poverty) policies of the past to policy reforms necessary for wealth creation was expected.

The sad truth is that instead of change, India in essence is still on the same old path India has been on since 1947. Heavy handed and inept government interference into the economy had prevented India from reaching anywhere close to its full economic potential. Though the realization that the needed structural reforms are unlikely to happen has dawned on most serious observers, it is politically incorrect to voice that concern for fear of antagonizing the powers that be.

Governments, central and state, have immense power and control over all aspects of the economy, as is the norm for socialist countries. That leaves very little room for the expression of dissatisfaction by the people and the private sector. Industry leaders, for instance, may (and they do) privately bemoan the lack of reforms but they know that it would be foolish to say so publicly since the fate of their commercial enterprises are in government hands. They wisely choose to rate every budget a solid 11 on a 1 to 10 scale. They just grin and bear it because they have to, and if possible they vote with their feet.

A powerful government is a two-edged sword. It can implement growth-inducing policies that are the engines of prosperity. But if instead the government chooses growth-retarding policies, because of its power it can also prevent any challenge to its bad policies and therefore be immune to any possibilities of reform. India’s government is unfortunately too powerful for India’s welfare. The reason is that the structure and nature of government is a continuation of the British colonial government. Although Indians democratically choose their government now, that fact is consistent with an all-powerful, anti-freedom, exploitative and extractive government like before.

Economic prosperity is built on a few basic building blocks such as good rules, urbanization of the economy, free markets, property rights, and individual freedom. Instead, the government has focused on their anti-thesis, and perpetuated poverty rather than prosperity.

Like the previous governments, Modi’s government continues to focus on villages, which necessarily implies rural poverty and therefore the continuance of fruitless rural poverty alleviation programs like MNREGA and Jan Dhan. Those don’t create wealth but merely redistribute what little there is. The stress is always on subsidies and dole, instead of freeing people to create wealth. The poor need freedom and opportunities to use their labor to create wealth, not Rs 2 per kilo rice as handouts.

Lack of property rights, unclear land titles and regressive labor laws limit employment in urban India. Add to that the lack of investible funds. The financial institutions are in dire distress with massive non-performing assets (NPA). Estimates of stressed assets in the banking sector top 15%. Almost every public sector bank is broke multiple times over. The only avenue appears to be the injection of even more money into them. That is not the solution.

In short, the government has demonstrated neither the vision nor commitment to structural changes. What kind of changes? For instance, it could have liberalized the education sector, instead of introducing even more onerous requirements.

Lack of availability of land has hamstrung industrial growth, and thus the growth of manufacturing jobs. Public sector undertakings and defense occupy prime real estate in urban areas. These could have been made available to industry for growth. Furthermore, land that the government holds is urgently needed for affordable housing. The housing sector can be another powerful engine of growth.

The government must vacate the spaces in which the private sector can and does do a much better job than the public sector can. Why must the government run Air India, BSNL and the like when the losses made by these have to be suffered by taxpayers who have no control over them?

There have been no administrative reforms. The British Raj-inherited bloated bureaucracy continues to thrive. It is an unaccountable mass of people absolutely resistant to change and whose main output is red tape. Another neglected area is judicial reforms. Certainly, the Modi government did not create the system but it has done nothing to address the problem of over three crore pending court cases.

Has Modi’s NDA government done anything at all? Of course it has. Any government in power, especially an all-powerful government, always does things. But did it make the right choices in doing what it did? Did the promised ‘acche din’ materialize? I think the answer is no, and I believe most observers think so too but are unwilling to come out and say so.

With three years still to go, there is time for the Modi government to change tack. That will only happen if it understands why India has not prospered so far. No country has become rich without the right rules, without urbanizing, without economic freedom. No country has become rich without letting markets function or by pandering to special interest groups. The numbers speak for themselves that India is mired in poverty. When the realisation dawns on the Indian people and their leaders that it is possible to create wealth with the right rules and policies will India’s trajectory really change. Until then, it is futile to expect any real change.

9 thoughts on “My assessment of Modi government

  1. Recently there was this pvt bus service provider called zipgo who started a fantastic business that could have cleared all traffic problems of Bengaluru, he catered to the educated lot, office/college goers a one way trip from south to north Bengaluru was just Rs.30 and just when we began to thank our stars the Govt peeked in with all their horrible and redundant demands of useless documentation/clearance and various approvals that choked his neck, it was made sure he could not sustain and was shown the door and now we are back to square one with hands at our steerings struck in the menace of the traffic jams as there are no good public transport connectivity visualized on the basis of demand and supply.

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  2. I don’t know, man… you come out as someone who paints with a wide brush, thinks American model can be replicated in India. You refuse to recognize that India has its own constraints and challenges.

    India’s destiny is not the same as that of the industrialized west.

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    1. Mr Plural Self,

      Your “I don’t know man” is telling.

      I don’t advocate “American model” for the simple reason that there’s no such beast. I argue for freedom of individuals, and why free individuals prosper. There’s nothing “American” about individual freedom. Perhaps you would be happy to be dictated to by others. In that case, if you are in India, you are where you are most comfortable. In fact, most of the world is not free in that sense. And the poverty that most of the world suffers is a consequence of the absence of the drive to be free.

      Good luck.

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    2. You don’t seem to be having doubts about whether “american android” will fine in india, or the internet or the iphone.

      Science is just science man, nature is nature. There’s just no other way to go about it. America is a piece of land with lot of humans and india is the same, now what differs is our culture, our upbringing and our values, our PHILOSOPHY and on that front we have not done anything great. The indian and by extension the hindu culture is one of failure. Now I don’t know how well this view of hindu culture fly with Atanu, hoping for the best here.

      And that’s not it, there’s gender dynamics at play here as well, the hindu culture is a culture of emasculating men with the concepts and ideals of “family”, “duties” and such and doesn’t let them function to create and explore or strive for the “pursuit of happiness”. Hence the extreme dogma in our society with regards to getting married by 25 and so. Now you might argue that islamic culture gives it’s men a lot of “freedom” and they act like wild animals (most of them). But when you look closely they are just locked into the same concepts as in indian/hindu culture of duties and family with extreme emphasis on bringing their sons up with the same strong islamic values and making their sure daughters and sisters are not fucking anyone. It was in only the western culture that men were encouraged to “pursue their happiness” 200 years ago. Christianity did it’s part of fuck ups in the west and I think by the time the founders wrote the constitution, christianity was a joke and people had stopped taking it seriously.

      Now we can look at the language. Collectivism seems to be inherent to our culture, and also something I’d call “automatic respect”, like the hindi word “aap”. The word simply means a higher status for someone on the basis of mostly age and position. Both extremely bad ideas. English doesn’t have that. And then you raise generations of men “aap-ing” away their lives to their fathers, teachers etc. and you won’t have a lot many proponents of individualism left around. Intellectuals like Atanu thinks of capitalism as a system or a subject maybe which Indians failed at because we don’t teach it to our kids in school. I think of it as an force of culture itself. You cannot “teach” capitalism to men who cow down to their mothers when it comes to choosing a wife. It is a way of life, for eg: in america, most kids are leaving homes by early 20s itself. It’s just strongly embedded in their social fabric and way of life, “live and let live” in
      Isn’t it obvious then it is these men who create multi billion dollar enterprises then and celebrate the american dream. While in india guys are afraid to tell their fathers they want to work in the pvt sector and not on the farm, of course things are changing now, but it’s slow as is any real change. Don’t we even today give a weird eye to the 30+ single guy, lol.

      I keep harping on the men men men, we can be all PC about women ceos and firefighters, but hey let’s be honest, it’s a culture’s men who decide it’s std of living, thinking and existence. This is not because some imaginary patriarchy, it’s biology and millions of years of evolution and testosterone which drives the gender to achieve, fight, kill, create, destroy and all that.

      Indian culture even today tries it’s best to put out that drive.

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  3. do you have any model for poverty alleviation ? how could free market help in it ? how will you feed the crores poor who have nothing to do! what about the historical geographical and social inequalities which ultimately benefit only some privileged groups when they come in so called free market . individual success can’t be replicated by whole community so how should we work at level of communities ? you are talking about individual freedom but didn’t mention a single word how individual’s freedom has been compromised in this so called modi era. what about the people who already have looted the Commons and have become owner of all resources like land and have better acces to water ,educationpublic, health ,information and wealth too just because of their forefathers and social status! how could we handle such problems ?

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    1. Mr Omeshnomadic,

      A model for poverty alleviation?

      Certainly. Poverty is always alleviated by the old-fashioned way: it’s called production. Why do I call it old-fashioned? Because that’s the way it has worked since neolithic times. Humans produce and they consume what they produce.

      And what’s the best way to produce the most? Free people produce the most. If an individual or a collective of individuals is unable to produce as much as they are capable of producing, just look at the situation and you will find that someone or something is preventing them from being free.

      What’s the mechanism that helps free people produce? It’s the mechanism that enables the free exchange of goods and services among producers. That is called a “free market.”

      Free markets has created all the good (not just goods and services) in the material world.

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  4. And let me tell you this, if ever I have an opportunity to be reborn, I would never want to be born in this country. I agree with you 100%, nothing at all is happening! it’s zilch all. The country has come to a standstill, and I expect no miracles from this team.

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  5. Dear Sir – You should start following Rajiv Malhotra….he has written a book called BEING DIFFERENT. You echo the same ideas. Perhaps you will learn a lot more.

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