What Modi Govt Means When It Says ‘Min Govt, Max Governance’

What Modi govt should understand is that clearing files in a short time does not amount to minimising statism.

Published
Opinion
5 min read
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“That government is best which governs least,” said Henry David Thoreau. His quote is highly significant, especially in today’s age, when governments across the world are maximising their motive towards the concentration of power at the cost of citizens’ liberties.

Are we not witnessing protectionism then, instead of globalisation?

Ceteris Paribus (other things being equal), power and freedom can never be in a state of equilibrium. There is always a mismatch between these two variables when it comes to the economics of governance. When the government intervenes to a limited extent, the scope and quality of economic freedom becomes greater, inching towards prosperity. Most of us benefit, including the so-called ‘crony capitalists’ who find their way around the draconian laws.

New Order Economic Liberalism?

Before coming to power in 2014, PM Narendra Modi insisted on “maximum governance, minimum government”. Many entrepreneurs, start-ups, aspiring entrepreneurs, business students, traders, venture capitalists, etc continue to be infatuated with the slogan. He was even compared to Ronald Reagan, 40th President of the US.

Post-1991 LPG (Liberalisation, Privatisation, Globalisation) model, India has seen tremendous growth — albeit gradually — by divorcing the ‘license raj’ system. It has eventually benefited from the modus vivendi of the Indian economy that is looking to achieve the target value of USD 5 trillion before the next election year, ie, 2024.

This is not to undermine the narrative that India is not growing at her capable speed under the current dispensation.

But, there are a few features that require critical introspection of narratives and facts. Technically speaking, ‘maximum governance, minimum government’ is about limiting the interventionist power of the government in our financial lives, social spaces, and cultures. It is the market, and the equilibrium in the transactions/conversations that will determine mutual satisfaction, when left free and independent. But, practically-speaking, this is not the case.

From banning beef to mob lynchings (over the suspicion of beef possession), from inflating the rates on imported books, newsprint, and signing off debt up to Rs 5.5 lakh crore, the government is systematically reversing the logic of economic liberalism (free market catallaxy).

Effects Of Large Borrowings & Demonetisation

The ‘animal spirit’ of the Modi government is on a spending rampage — a Keynesian logic. Compared to the latest data available till September 2018, when the total debt of the central government stood at Rs 82,03,253 crore, the corresponding amount till June 2014 was Rs 54,90,763 crore, the Finance Ministry's data on government borrowings shows.

The investment cycle does not seem to rise again — thanks to the ‘deteriorating’ capital formation climate.

In a report published by Quartz India in March, it has been highlighted that gross fixed capital formation in the private sector peaked at 27 percent in 2011-12. However, subsequently, it fell steadily to touch 21.1-21.4 percent in 2015-16 and 2016-17. And most strikingly, there has been no recovery even with a supposedly pro-business ‘minimum government, maximum governance’ regime. Indian capitalism faces a crisis of credibility that was last seen in the 1950s.

RBI data shows large borrowers — those with outstanding payments of Rs 5 crore and above — to account for 54.8 percent of the gross advances, and 85.6 percent of the NPAs of scheduled commercial banks as of March 2018, with the corresponding shares of the top 100 alone at 15.2 percent and 26 percent.

Further, demonetisation — touted to fight black money — has failed us.

The fact that only 0.7 percent (Rs 10,000 crore) of the ‘demonetised’ currency did not return to the system, sufficiently proves the failure.

Modi’s Meaning Of ‘Minimum Government, Maximum Governance’

PM Modi, in a recent TV interview, explained his slogan of ‘minimum government and maximum governance’ quite ambiguously: “Earlier, my Cabinet note would take six months to reach the entire Cabinet but now, it only takes 15 days. This is what minimum government and maximum governance is. Same number of people but the result is more. Earlier, we had to travel abroad to sign an MOU. I said no. Just do a video conference and we'll only go once it's finalised.”

Till now, I have cleared projects worth around Rs 12 lakh crore in just an hour. These projects were pending for over 30-40 years. This is what minimum government is.
PM Narendra Modi to media

He also blamed his critics for misunderstanding the concept.

‘Red Tape Is Worse Than Corruption’

What the government needs to understand is that clearing files in a short span of time does not constitute minimising the power of statism.

‘Minimum government’ is when the power of bureaucracy is defined to stay within limits so that corruption and poverty can be arrested. India is still not past the hangover of Nehruvian socialism and it is systematically deflated when the Modi government proactively plays a constructive role in maximising the quality of economic freedom at the expense of governmental interventionism.

A recent World Bank study (2016) by Shrayana Bhattacharya, Maria Mini Jos, Soumya Kapoor Mehta, and Rinku Murgai on pensions shows that corruption is often only among one, and a relatively insignificant reason, as to why benefits don’t reach the poor. The bigger hurdle is the bureaucratic procedure that makes identifying the poor, and enrolling them into the pension programmes, all but impossible.

Liberty is undermined when the ‘babus’ (bureaucratic administrators) act like expropriating agents.

Issues like land acquisition, tax spending accountability, closure of start-ups, etc do not find much space in public discourse due to the government’s ‘preoccupation’ with other issues like ‘Pakistan’ and ‘Muslims’. Even Lord Ram has no idea as to when the so-called pro-business government will reintroduce the ‘right to property’ as a fundamental right — which was abolished during the Cold War era by the then Indira Gandhi government.

The Way Forward

Although India’s rank on the global indexes of ‘ease of doing business’ and ‘economic freedom’ have significantly improved in recent times, the ground reality is yet to reflect its benefits. Unless bureaucracy and governmental interventionism are not diminished, trickle-down-benefits would be almost impossible. A single data improvement also needs to have a multiplier effect on the other because India is yet to see improvement on indexes like freedom of speech, ease of obtaining a construction permit, speedy judicial trials, water conservation, environmental protection, etc. The time lag and policy lag continue to prevent India from minimising her statism.

There is a lot of homework to be done and all of it is pending.

(Jaimine Vaishnav is a lecturer based in Mumbai, and tweets at @jaiminism. This is an opinion piece and the views expressed are the author’s own. The Quint neither endorses nor is responsible for them.)

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