A government that knows its mind

The NDA government gave more evidence of its sensible, steady and surefooted approach to governing the nation over the weekend. These reforms, coming on top of the steps taken in the previous four months, should leave no one in doubt that this government knows what it wants to do and how to do them, how to pace them, etc.

Besides the changes in the Ministry of Finance about which I had blogged earlier, the government had also announced labour reforms on Friday. They are small individually but collectively sizeable. I am a strong believer in the adage that small things add up. India has neglected many of these small measures with big payoffs. For example, self-attestation could be very important in saving time, energy and mental stress. We should not forget that, for the most of the year, India is a humid, hot and dusty country. The more trips we save for people to government offices the multiplier effects on their time, mental and physical health are tremendous. The portability of Employee Provident Fund number is no less significant.

Reading Manish Sabharwal’s piece in Financial Express on the National Skilling challenge, I was pained to note that the Congress Party was planning to block the amendments to the Apprenticeship Act – amendments that were mooted during Indira Gandhi’s time. Some commentators note that this is how the BJP behaved when the UPA was in office. Well, but for the support of the BJP, the obnoxious and the colossally damaging Food Security Bill and the Land Acquisition Bill would not have been passed.

Then, over the weekend, they decontrolled the price of diesel. Now, Indian upstream marketing companies can fix the price of diesel in line with international prices of crude oil. Well done. On this one, we must credit the UPA government for having taken a major step by authorising an automatic 50-paise increase in the price of diesel every month sometime in 2013 and sticking to it. One of those rare instances of sound public policy by the previous government. But, all credit to them for that. Good to see this government taking that to its logical conclusion.

The government has also decided to follow the same model for gas pricing by announcing a modest increase now followed by a review every six months. Reforms are as much about packaging and giving time for change as it is about intent to sweep away the old, the unnecessary and the harmful.

Sajjid Chinoy of JP Morgan notes that, amidst the excitement over the labour reforms, one more crucial decision made by the government would go unnoticed:

Finally, in a move that is likely to get buried under the more dramatic diesel and gas price announcements – but one that, we believe, is equally important in reducing subsidy leakages in the medium term –the government announced it will be linking cash transfers (“Direct Benefits Transfer”) with recent efforts to increase financial inclusion (“Jan Dhan Yojna”).

The Finance Minister indicated that, as a start, in 54 districts of the country those with bank accounts will receive the LPG subsidy in the bank-account. While the details are still to be announced, tying financial inclusion with cash transfers is unambiguously positive. A move to cash transfers will eventually ensure that distortions caused by dual-pricing of products will disappear, better targeting (to the extent that the UID is involved and results in de-duplication) will result in fiscal savings, and that households have a reason to use and service bank accounts and build up a financial history that can eventually be used to avail of credit.

On this one, we have to note that the UPA, despite having begun the Aadhaar project, had developed cold feet in the wake of electoral setbacks. The BJP, on the other hand, had moved from resistance to embrace, thanks to the personal intervention of Nandan Nilekani, the Aadhaar czar with the current Prime Minister. The Prime Minister saw the logic and did not abandon the scheme. Full marks to both of them here.

Now is the time to shake up the Cabinet and bring competent folks to important portfolios. That is the point Arvind Panagariya makes here. It is also time to take the axe to the UPA’s Land Acquisition Act in some form.

In this context, I was dumbfounded to note that some 28 ‘economists’ had written an open letter to the government not to tamper with the National Rural Employment Guarantee Programme. A programme that set its face against asset creation and productivity and that should not be tampered with? What exactly was their motivation? I am glad that Rupa Subramanya (ht. Dr. Vidyasagar) saves me the trouble of commenting on their obnoxious open letter.

The nominal GDP of India, in US dollar terms, has barely crossed the 2 trillion mark. This milestone was expected to be reached earlier. It is to UPA’s credit that the milestone got delayed by a few years. Skills and jobs are the answer to India’s poverty and demographic bulge. This government’s USP must be ESP – Education/Energy, Sanitation and Productivity and a relentless focus on these three aspects is needed. A good start has been made on the middle one (S). To a good extent, productivity in government offices is being tackled and productivity of citizens is being facilitated through many small, procedural improvements. A lot more needs to be done. The PM has to make ‘productive work force’ as much his mantra as he had made ‘Swachh Bharat’ his message. Then, of course, there is Education…..

With the distraction of the elections to Maharashtra and Haryana over, one hopes that the Government maintains its policy overdrive.


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