When existing steel companies are already reeling under distress owing to falling demand, why is the Union government going to establish new steel companies in the public sector? What is the need for forming new banks (monetary banks) to provide loans to small companies when several financial institutions of the government are already doing this?
Why is there a need for a new government agency to clean the Ganga when already different agencies, along with the Pollution Control Board, are making a living out of it? If vocational education and jobs are to come from the private sector, then what is the need for creating a new cadre of government officers for skill development?
On February 13, when leaders of companies from all over the world come together in Mumbai (1,000 companies from 60 countries expected) for the first annual conference of Make in India, these questions will haunt them.
In fact, the greatest worry nagging investors is not that the BJP lost the Delhi and Bihar assembly polls. What troubles them is the fact that the model of government control is slowly making a comeback, dashing hopes of a free economic order and reform-oriented governance model that the BJP had promised.
The dazzling success of economic reforms in the context of new jobs and rise in income levels has ensured that advocates of free market and private entrepreneurship will be hailed in India as reformist leaders.
In this backdrop, the expectation from Prime Minister Narendra Modi to be a champion of open market is justified because he carries Gujarat’s entrepreneurial fervor. Modi had emerged as the messiah who would end the restrictions on liberalisation, which the Congress had imposed in its obsession with inclusive growth.
However, in the last 18 months, the Modi government did not take even ten such decisions which would theoretically or practically prove him to be a courageous reformer or a champion of free market.
On the contrary, the list of his decisions, which shows the government to be an advocate of closed market and protectionism that stands close to the socialist economic creed, is pretty long.
Over the last 18 months, the Modi government has laid the foundations of half-a-dozen government companies. On the other hand, it has been fighting shy of disinvestment in banking, Air India, railways, Coal India and foreign investment in retail. Also, the obsession with swadeshi has blocked ongoing negotiations on global free trade agreements.
When Modi talked about minimum government last year, it was felt he correctly sensed public expectations because minimum government implies cutting bureaucratic red tape, introducing transparency, administrative reforms and other measures to remove obstacles that have hobbled growth in India. Contrary to such expectations, the Modi government introduced a new scheme raj which reflects maximum governance.
The reforms I have mentioned represented the minimum expectation from Modi. In fact, the government had to move beyond it to dismantle all types of cartels in the market, establish corporate governance, start privatisation in the states, constitute new regulators and promote transparency in political parties which would have decided the direction of far-reaching changes in India.
Budget 2016, the third one for the Modi-led NDA government, is just three weeks away and Modi still seems to oscillate between pro-poor and pro-market choices. His recent speech at a global business summit is a further confirmation of his classic dilemma whether to follow a business-oriented and investor-friendly model or the Congress model of subsidies and scheme raj.
Modi must understand that getting the BJP to win the forthcoming state elections is not as important for him as to present the Modi budget studded with big, bold reforms. The impression that India did not get the reformer in Modi, that it was hoping for is gaining ground. Will Modi be able to neutralise this impression? The answer lies in Budget 2016.