Pink papers love to do business “confidence” surveys. I’ve found those to be superfluous, simply because they are entirely predictable. If the stock markets are up, business confidence will be buoyant. If the markets are in a funk, even a temporary few-days-old funk, the mood swings sharply down. Frankly, these “confidence surveys” should not be bequeathed such a robust sounding nomenclature; it’s best to call them “business mood swings”, that’s how fragile and fickle they are!
Not So Fast & Furious?
The other day I read an astonishing tweet from a respected home-grown entrepreneur: “Sheen is falling of Modi government in the context of promises, and gradual delivery. Need to move fast, hope interest rates are reduced today.” Check fact: the stock markets had corrected by a sharp 10% just days before this tweet was sent. In my book, therefore, it’s a mood swing, the male entrepreneur’s equivalent of a pre-menstrual syndrome.
Seriously, guys, what’s the definition of “fast”? Just because entrepreneurs can run their enterprises like benevolent dictators, we assume that political leaders in a boisterous democracy enjoy the same leeway. They simply don’t. Political quid pro quo has to be bargained, perception has to be managed, a perennially adversarial media has to be communicated to, an activist judiciary has to be contended with, and hostile interest groups kept in check. It’s not easy to effect “fast” change in a lacerating framework of public checks and balances.
Modi’s Political Alacrity
Still, I would argue that the Modi government has acted with unusual political alacrity, if not “fast”. I can rattle off several difficult calls that would have scared a less confident politician:
The holy cow of ever accelerating MSP (minimum support prices) of grain, significantly responsible for our food inflation, was arrested; finally a politician had the gumption to take a hard call. Finally, also, we had a Rail Budget without any “populist trains”, instead committing a $ 130 billion investment over 5 years.
The Prime Minister has also stood steadfast in the electoral quicksand of the Land Acquisition Bill. The last time one saw a similar act of political courage was when Prime Minister Manmohan Singh put his job at stake on the Nuclear Deal with America (and a wise electorate ignored Opposition posturing to hand him a handsome victory).
Coal mining has been effectively privatised. Can you believe it? And other mining reforms have become law. Even the Insurance Act, held up for a decade, is done.
Telecom spectrum has been auctioned; the only quibble is over whether it will increase call rates by 1 or 6 paise per minute.
The Goods & Services Tax will get into the statute books in a few months; sales of public sector shares have begun within a week of the new financial year, and were over-subscribed several times; private companies raised a record amount of equity last year; the subsidy cost is well under 2% of GDP (first promised by Finance Minister Pranab Mukerjee 3 years ago, but implemented only now); foreign exchange reserves are at an all-time high; the rupee is stable, and if anything, a bit over-valued; the stock markets are the highest they’ve ever been; India has finally become the fastest growing large economy on our planet; and gosh, even the usually sour rating agencies are beginning to give a grudging thumbs up, led by Moody’s.
Really, Fading Sheen?
Not “fast” enough, did you say? Guys, what is your definition of “fast”? Do remember that it’s only been a little over 10 months; do also remember that economic policies are being boosted with an equally strong foreign policy thrust, perhaps again for the first time.
Do also note that the economy is emerging from a half-decade-long funk; it shall take time to bank out of it. Remember what we learnt in Economics 101? That economic policies work with a lag. So guys, we are currently in that lag – please remain calm because the curve is turning up. And finally, recall what we learnt in Economics 102, that once the lag is over, and growth picks up, a virtuous cycle kicks in, of savings, investments and consumption, until we mess it up again and descend into another funk. That’s the law of business cycles, let it play out – remain calm, keep the faith.
As for a sharp cut in interest rates, that’s the one thing yet to happen. But then, that’s Governor Rajan’s call; so the “fading sheen” tweet should have been directed elsewhere.
Postscript: Of course much more could have been done in these past 10 months. This piece does NOT mean that everything is perfect; or that all that had to be done has been done by Prime Minister Modi. It’s a long, arduous road ahead, but I for one refuse to buy the argument that economic change has been “slow”.