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  • The two faces of Narendra Modi – Politically bold and economically timorous

    Posted On October 26, 2014

    By Karan Thapar

    It’s a paradox but Prime Minister Modi’s response to the political challenges he faces is significantly different to the way he handles the economic challenges that confront him. You could almost say they are the opposite of each other.

    When it comes to politics, Mr. Modi is not just bold and ambitious but willing to take risks and follow through with unprecedented energy and passion. His Maharashtra and Haryana campaign leave no doubt of this.

    More importantly, these gambles pay off. This proves his instinct is spot on. It also shows he has confidence in his ability to pick the right choice out of a range of options, even when it’s not the safest and the cost of getting it wrong can affect him both strategically and personally.

    Alas, this is not true of his handling of economic challenges. Here Mr. Modi is not a risk taker. Instead, he is cautious, even timorous, and reluctant to push the boat against the tide of conventional opinion even if his instinct tells him he should.

    When confronted with political challenges Mr. Modi’s response is that success lies in attempting the most. In the economic sphere, however, it seems success lies in only attempting what’s safe. The fire in the belly, the passion of commitment, the determination to forge ahead are missing.

    Let me give you three examples. The government announced what it calls labour reforms but they’re limited to making provident funds portable and reducing the harassment of multiple forms or vindictive inspections. These are, no doubt, welcome. They will make for easier governance. But that’s about it.

    What these reforms don’t tackle is the fundamental challenge Mr. Modi must overcome if ‘Come, make in India’ is to become a reality.  He needs to permit employers to fire employees when they no longer need them. Vasundhara Raje Scindia in Rajasthan is attempting this. Reports suggests Shivraj Singh Chouhan in Madhya Pradesh and, earlier, Bhupinder Singh Hooda in Haryana too. But not Mr. Modi.

    The same half measure is visible when you look at what the government intends in terms of amending the Land Acquisition Act. Industrialists say both its procedures and its costs are far too onerous. That’s what they want tackled. The government, however, is only going to increase the exemptions. It’s a welcome step but insufficient.

    That half measures don’t work but only disappoint was actually proven when Arun Jaitley’s budget didn’t revoke retrospective taxation but simply promised not to repeat it. Nothing stopped the government taking the full step other than its own lack of resolve. Now it’s in the unhappy position of asking investors to believe its promise whilst they respond what’s the guarantee you’ll keep your word.

    So far what Mr. Modi has delivered is faster decision making, quicker implementation and a more responsive bureaucracy. That adds up to good governance. But without the bold reforms he’s ducking we won’t return to 8 per cent growth.

    In contrast, the Prime Minister knew that alliances in Maharashtra and Haryana were a safer way to a big victory. But he chose to fight alone because the reward of winning on your own was greater still. The message that sent out was dramatic.

    So isn’t it strange he’s chosen to play safe and cautious when it comes to economic change? Here, he doesn’t mind being accused of timidity, even lack of commitment. Worse, he’s not worried about the message this sends out.

    Has Mr. Modi forgotten fortune favours the brave?

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