Managing the hyperopia' of Modi government

Hyperopia, often referred to as far-sightedness, is a condition of the eye in which the light is focused behind the retina, and not on it. This results in objects that are up close appearing blurry, while distant objects appear normal. Policymakers are often worried about near-term adverse consequences of their potential actions and thus are unable to summon courage for difficult decisions potentially beneficial in longer term.

Far-sightedness in policy making may be a blessing in disguise. It can help in visualising the big picture, without unnecessarily excessively worrying about adverse short-term consequences of difficult policy decisions. It appears that many in the Narendra Modi government are blessed with this condition. This is evident from a review of the initiatives of the government in the past three-and-a-half-years. A clear long-term vision is a common binding theme of all major initiatives. These include bold decisions in the areas of extending access to formal finance to underserved, direct transfer of benefits to the poor, transitioning from non-renewable to greener energy sources, reinforcing a national biometric identification system, curbing illegal economy and introducing indirect tax reforms, among others. Mr Modi himself has often stressed on expected long-term benefits of measures taken by his government, and his willingness to trade them with short-term pains.

As a result of such bold measures, a section of population undoubtedly has the potential to be benefited. Greater transparency in implementation of government schemes, reduced leakages in transfer of government benefits and increased access to financial services can lift a substantial population out of poverty. However, there have been negative short-term impacts of these measures. Economic growth has taken a beating amidst global recovery and low oil prices. A perception of uncertainty and disillusionment has been created. There is a lack of credible strategy to generate employment and address the problem of under employment. In addition, the government has been accused of keeping critics at bay and yes-men closer.

Hyperopia can result in blurry vision, headaches and eye strain, which if left unattended, can result in further complications, and disability. Similarly, short-term adverse consequences of policy decisions, if not managed efficiently, can have adverse consequences for the economy in general and the government-in-office in particular.

The simplest means to manage the adverse impact of far-sightedness is the use of eyeglasses having convex lenses, used to magnify images of objects that are closer to the viewer. Similarly, for a government concerned with long-term vision, it would be important to ensure that it retains its ability to identify and tackle short-term adverse consequences of the measures it has adopted, and communicate to people adequately.

The role of bureaucracy is critical in this regard. It needs to act as eyes and ears of the government to understand ground realities and adverse consequences of decisions it takes. It also needs to perform the function of limbs of the government to ensure that decisions are properly implemented and communicated, in true spirit. Bodies like Niti Aayog need to act as independent watchdogs to verify the claims made by the bureaucracy, provide independent advice to the government, and offer constructive criticism of government decisions. The inability of a government to sustainably tackle short-term adverse consequences of its policy decisions is an indicator that bureaucracy and relevant advisory bodies are not functioning efficiently.

Albeit a bit late, the Modi government has begun to showcase that it has the ability to identify short-term pains and take appropriate measures. The Prime Minister himself has acknowledged the existence of growth slowdown and showcased the resolve of his government to reverse the trend. The tax rates on several items have been reduced and the period for small businesses to file returns under the recently launched Goods and Services Tax regime has been extended. Exporters have been allowed to keep previously existing exemptions until March next year. The government has made boosting exports a priority. The Prime Minister’s Economic Advisory Council has identified 10 areas to accelerate growth, which include job creation. It has also advised the government to stick to the fiscal road map.

The positive impact of such corrective measures is already beginning to show. The industrial growth has picked up pace to a nine-month high in August and consumer inflation has remained steady in September, exceeding expectations and raising hope that the economy is set for a revival after slumping to a three-year low in the June quarter. Advance indicators such as car sales and the purchasing managers’ indices for September have also been buoyant, suggesting some strength ahead of the festival season.

However, these are just early signs and much more needs to be done to ensure that economy remains on the right track. While the first three-and-a-half-years of the Modi government were dedicated to long-term reforms, the remaining one-and-a-half need to be about fixing the implementation and managing short-term pains of long-term reforms. These would involve reforming the administration and bureaucracy, introducing a carrot and stick system, providing right environment and incentives to perform and fixing accountability.

The Modi government will need to manage its hyperopia intelligently, failure of which may adversely impact its performance in forthcoming general elections in 2019. The Prime Minister knows that the elections are not far enough!