TeaThe Narendra Modi government has been quite successful in using its majority in Parliament to push its socio-religious agenda, but has failed to use this advantage to effectively implement economic reforms.
Furthermore, while supporters of the government will praise the prime minister for his decisiveness, a quality cynics would call arbitrariness, the fact is that this quality greatly increases the unpredictability of policy. And that’s not good for business confidence.
But what is at stake here is something bigger. When the BJP won the 2014 election, corporate India, small traders and businessmen across the country responded positively, and with great enthusiasm. The pro-business, pro-economic reform image is now tarnishing, even though this government is better positioned to drive positive change than before.
lose parliamentary majority
Let’s start with parliamentary actions. In its first year in power, in which it came with a historic majority, the Modi government passed an ordinance to amend the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (RFCTLARR) Act 2013. This act was brought. To replace the Land Acquisition Act 1894 by the UPA.
The government tried several times to get his amendments through. First as an Ordinance, then as a Bill, and again as an Ordinance once the Bill failed to pass Parliament. By a simple majority, the government should have been secure enough to debate the issue. Instead, it allowed opposition protests to complicate matters.
The same has happened recently with the agricultural laws. Instead of encouraging debate in the Lok Sabha, an area over which it had control, the Modi government allowed the movement to spread to the streets and the media.
In either case, with the land and farm Lawgovernment had to withdraw Its legislation.
While supporters will try to frame this as the government being responsive to differing opinions, they cannot hide the embarrassment of the public defeat.
Another example of the Modi government losing its parliamentary majority is complete lack of movement on labor code. Passed in Parliament during 2019 and 2020, the four labor codes are yet to be notified by the Center or the states.
Again, it can be seen as a good thing that the government is not coercive through legislation as it has been criticized by many stakeholders. But it can also be said that the government should have had more extensive consultations while formulating the codes. It could then use its majority in parliament to pass legislation so that it could actually see the light of day. Once again lost the majority.
The Modi government also has a strange hobby of bringing laws through ordinances. This is hard to understand because it only serves to undermine confidence in the parliamentary system, instead of which the Modi government should be keen to increase its strength in that institution.
Then there are instances where the government has made good use of Parliament, but then—through no fault of its own—oversaw responsibilities have been delegated to other, less decisive bodies. Take the example of the Goods and Services Tax (GST). It was a historic economic reform for the country. For the first time, India was a market for a particular commodity or service. This was a major pro-business reform. Parliament passed the relevant laws in 2017 and the new tax regime came into force in July that year.
Thereafter, decision-making on GST was passed from Parliament to a federal body called the GST Council. It was the right thing to do. The government cannot and should not approach Parliament every time it wants to change a GST rule, regulation, or tax rate. However, the flip side of the ease of decision making was that a lot of decisions started to be made. Each meeting of the GST Council – of which there have been 49 so far – has changed either the rules or the rates, and often both.
This is not the fault of the Modi government. But the fact is, despite having one of the strongest governments in India’s history in terms of parliamentary majority and implementing a historic taxation reform, unfortunately, we have to watch the reform move in a state of constant flux have been
game changing decisions
Finally, we come to the ‘pivotal’, ‘game-changing’ decisions that have actually increased uncertainty in the economy. The first, of course, was demonetisation in 2016. whatever be the stated purpose of the overnight ban 86 percent currency notes, and whatever the achievement or failure of these objectives, the fact remains that people and companies are scared that the Modi government will do something like this again.
Perhaps no other policy decision in recent times has dented the confidence in the economy more than demonetisation. There may have been retrospective taxation imposed by the UPA in the Vodafone case, but that too was aimed at corporates only.
The second announcement that was decisive, but also seemed arbitrary and unprepared, was the imposition of a nationwide lockdown in March 2020 in response to the COVID-19 pandemic. Lockdown was the right thing to do. This gave the government time to rapidly ramp up critical medical infrastructure.
A later second wave in 2021, just as terrifying and devastating, would likely have happened sooner and would have been even more severe if we hadn’t bought ourselves those few months.
But the way it was imposed, the need for a lockdown is not enough. As with demonetisation, the entire country was informed hours before the decision was to take effect, and then several ad hoc arrangements were made to deal with the crisis should it arise. Think of migrant laborers.
While the lockdown was necessary, unlike demonetisation, a few more days of preparation would have gone a long way. Instead, what it did was cement this government’s reputation for suddenly preferring Kaboom’s decisions. These are politically great – ‘Modi can do anything’ – but the same line strikes fear into everyone who stands to lose money with such a hammer-like approach.
A strong majority in Parliament was supposed to mean stability and predictability in decision making. At least in the case of India’s economy, this has not been the case with the Modi government.
The author tweets to @SharadRaghavan. Thoughts are personal.
(Editing by Therese Sudeep)