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Economists Agonize Over a ModiNomics Budget

-Atul K Thakur

They said “economists make more opinion than their own numbers” – thus means, most of their opinions see no light of the day. This year’s Union Budget came like a shocker to all those, who are in the ‘business of complexity and disillusionment’ – ‘frission of thrills’ replaced by the essentiality of ‘common sense’ in key policy formulations, hence leaving the flock of double minded economists and policy wonks without any anticipated prominence.

Pratap Bhanu Mehta’s piece in Indian Express (Achhe din, like old times, 29th July 2014) otherwise offers a hurried overview on the works of new government at centre but in patches exudes well, the agony of ‘those economists and policy wonks’, who lent their helping hands to the ruling party, in anticipation of plum positions, which did not materialise!

Free from preoccupations so far, this government means business and that more for maximum common good rather than the appeasement of an affluent few.

A very well meaning book by Sameer Kochhar, ModiNomics: Inclusive Economics, Inclusive Governance - came before the term ‘Modinomics’ eminently positioned as a bandwagon in policy circle and seems having strong effect on this year’s budget. The heart of the matter of this book lies in knowing first, and then highlighting the developmental works of Narendra Modi, as the Chief Minister of Gujarat – something, which is known as the “Gujarat Model”.

Precisely this book sums-up the “Gujarat Model”, as nothing but applying common sense in policy planning and ensuring implementations through good governance practices. In that case, bureaucracy becomes an enabler rather than a ‘hassle making blocks’, disowning clarity, honesty, common sense and sense of purpose.

Above all, the intention of leadership makes real difference – and its within recognition, Modi today epitomises it in effect, better than anyone else in Indian politics.

The new government’s preferences are akin to the developmental thinking of Prime Minister, who puts priority on top and work on that. As clearly visible, the budget underlined some of the key visions configured in the first chapter from ModiNomics, The essence of ModiNomics:

Rethinking Subsidies (page 28-30):“Sound fiscal management is essential in promoting sustained, strong economic growth” – following that line, the Finance Minister during his maiden and interim budget, tried setting the finance of government in order by strong moves of fiscal correction. The budget aims a new fiscal deficit target of 4.5 per cent and GDP growth forecast between 5.4 and 5.9 per cent for current fiscal year, reflecting the policy clarity from the government – noticeably, ModiNomics pitched high on this.

Financial Inclusion (page 32-34): “The idea of inclusive growth rests on financial inclusion. Savings mobilised through regular institutional sources can sustain India’s economic growth. The role of regulators and bankers is important on this.” During his budget speech, the Finance Minister made it clear that the RBI will issue few more bank licenses and those banks would be differentiated banks, for catering the specialised needs in rural areas.

There are many other provisions but most importantly, on Independence Day, the Prime Minister will be announcing something big on financial inclusion plans, which means common men are the focus of this government in deeds, not only in words.

On Social Inclusion (page 34-36), ModiNomics says, “One of the biggest benefits of good governance is that it does not look at welfare of any particular section of the people; it results in welfare of all. For example, if you improve education or health services, all citizens in an area benefit. That is why we have adopted the mantra of ‘Sabka Saath Sabka Vikas’. After all, this is good governance. In fact, Sarva Jana Hitai, Sarva Jana Sukhay is the basic mantra.” The budget came in conformity with that.

On Digital Inclusion (page 36-38) – ModiNomics mandates, “We must accept that e-governance has a major role to play in our efforts to establish good governance. Gujarat has empowered Panchayat institutions through technology and not replaced them with technology. If I merely centralise all governance through technology, it weakens the participatory process. In our state, the basic philosophy is that technology should strengthen the institution’s capability to deliver services. We have one of the largest networks at the state level under GSWAN, and also the highest connectivity in rural areas. Gujarat is the only state in which 13,685 gram Panchayats have broadband connectivity” – the budget carefully carved niche for technological innovations across the India with the vision shared in the book.

Employment and Skills Development (page 40): ModiNomics says “To realise the full potential of the demographic dividend, he believes that a fundamental transformation has to be made in the way in which the government realises the potential of its youth” – the budget has shown ample orientation towards achieving employment elasticity (relationship between GDP growth and employment data).

The budget ensures that additional jobs have to be generated through the structural changes that Indian labour market has been going through. This has to happen with outbound movement of people from agriculture and allied activities to manufacturing and services. In all probability, this should be a reality with the latest policy supports.  

On Public Private Partnership (page 42): ModiNomics recounts the experience of Narendra Modi as Chief Minister of Gujarat, “My experience tells me the same government set-up, the same laws, the same officers can still deliver good governance. What governance needs is good leadership, and not merely political leadership. Quality leadership must be available at every level, including within the bureaucracy. The government cannot run merely on dreams. The government must be policy driven. If the governance is policy driven, those who have to execute those policies will be clear in their mind as to their functions – responsibility and accountability will follow. When decisions are take, the nation moves forward.”

Much on this line, Public Private Partnerships (PPP) have given the heavy weightage in this budget for infrastructure creation but the Finance Minster has also called for to improving some of areas where PPPs are waiting for that. Intently that means, now the PPPs would be working, rather scrawling or not working at all.

And among the many positive stances in the budget, the praiseworthy is assurance to the investors that the Indian tax administration is not adversarial – also that the very effective tax dispute mechanism would be at place soon – to counter the ‘stuck cases’ and lacunas, those constrict tax collection in India.

The revival of economy would be possible through transparency and efficiency in taxation policies those plug leakages. This is for the country’s economic progress and inclusive national growth.

With clarity in mission, this budget will give country a much required growth impetus – at the same time, without overlooking on the incessant ire of inflation and unemployment. Afterall ModiNomics is about applying intelligent economic principles and executing them properly. This budget has shown, aiming growth and inclusiveness is very much possible through the same yardstick.

Atul K Thakur is Senior Associate Editor, INCLUSION

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Economists Agonize Over a ModiNomics Budget
Atul K Thakur
The new government’s preferences are akin to the developmental thinking of Prime Minister, who puts priority on top and work on that. As clearly visible, the budget underlined some of the key visions configured in the first chapter from ModiNomics...
...read more  
On Budget»
A Budget for Rural India
K G Karmakar
This budget is not about financial markets, not about reforms, not about kick- starting the economy and is also not about banking reforms and what have you. This is a solid budget for Rural India and if the rural economy is safe, India’s economic growth is not in doubt. This budget is aimed largely at Rural India and we need to look at it from a rural perspective and it begins to make sound economic sense. There are a whole lot of goodies for the rural sector, analyses K G Karmakar
...read more  
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Q & A »
Indian Financial Sector on the Edge of a Precipice says Yashwant Sinha
Excerpts from an interview with Sameer Kochhar, Editor-in-Chief, INCLUSION
Question: What do you think of India’s financial sector performance?
Answer: We are really on the edge of a precipice in India as far as the financial sector is concerned. A declining, decelerating economy has created enormous problems for our public sector banks ...read more  

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Feedback - Inclusion:
Effective Leadership Is The Answer

The article by Mr Tarapore on the 'Financial problems of MSMEs' is an excellent piece, a well researched one.  RBI, SIDBI et al should look at the issues flagged by the author and see that the MSME sector gets better deal. As he has mentioned it is more a 'glamour' in lending to larger units than MSMEs. See the way every banker has walked in to lend to King Fisher Airlines which has left a huge NPA of over Rs.7000 crore with very little hope of recovering it from the owners. Recently, the newspaper report mentions that the CBI when approached the SBI, the consortium banker to provide certain information on KFA, the latter had refused to do so. The RBI has also not taken any forensic study to see if any complicity in financing such large units. It is sad its own representatives are on the Boards of these banks which have lent huge loans to KFA and others. It is sad to see that Mr Mallaya is happily watching the IPL matches cheer-leading his cricket team while 1000s of KFA employees are in the lurch without any pay for months on. Will RBI listen to the cries of common man? 
Dr S Santhanam PhD(Eco), CAIIB General Manager (Retd), NABARD & Consultant - Development Finance Pune

Feedback - Inclusion:
Ideas for Growth, October-December 2013

I appreciate your thoughtfulness.
Manohar Parrikar, Chief Minister, Goa

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