India: The challenges are immense

The need for the Congress-led United Progressive Alliance (UPA) to balance coalition politics took its toll on the speed of reforms. This, along with environment clearance issues, policy delays and inflation slowed down the investment cycle by companies. Tight monetary policy kept the cost of borrowing high. Infrastructure slowed due to regulatory delays, challenges of public-private partnership model and long-term funding. New projects froze and a number of existing projects are stalled. Sanctioning of approvals slowed, as ministers and bureaucrats preferred not to give any decision rather than risk getting embroiled in any scam. In this environment, Gandhi aims to build upon the success of the Cabinet Committee on Investments, which has made some headway in moving stalled infrastructure projects in recent months. He aims to speed up the completion of the industrial corridors and freight corridors, set up a national manufacturing policy to make it 22 per cent of GDP (gross domestic product) by 2022 and enable a single-window clearance for manufacturing projects. Modi aims to create an enabling environment for business via single-window clearance systems for faster approvals, time-bound environment clearances, investments into logistics/infrastructure, etc. These are major expectations that companies have from Modi, given his track-record in Gujarat's industrial and infrastructure development. But two challenges that Modi might face here are activism by opposition (something which members of the National Democratic Alliance have also done in recent years) and managing coalition brinksmanship. Gandhi and Modi also talk of high-speed rail connectivity, developing urban clusters/cities, road connectivity and also of supporting greenfield industrial townships and global hubs of manufacturing respectively. Kejriwal's focus is on an 'honest enterprise', free from corruption and crony capitalism. He talks of streamlining regulatory processes, fostering healthy competition in the market economy, curb monopolistic tendencies and ensuring active participation from the private sector. All three also talk of infrastructure development in urban and rural areas, irrigation areas, renewable energy etc. Modi adds improvements to agri-rail network, while Kejriwal adds agro-processing. Kejriwal's stress on monopolistic tendencies might have some relevance. There has been talk of 'big-businesses' being friendly to Modi due to the incentives extended to get them to invest in Gujarat in very large-scale projects. Some of these incentives are cost advantageous for the large companies. Hence, such incentives might end up making the big guys bigger, while marginalising out the small players.
It might also be pertinent to add that they are all open to foreign direct investments (FDI), except on the contentious issue of FDI in multi-brand retail of which Gandhi is the only flag-bearer. Nevertheless, Modi has broached relevant terminologies like value-chain and value-addition, which leads to the belief that his economics-first approach would lead India to deepen two-way linkages with countries (including India's neighbours), even if it means importing something at a competitive cost which is also produced locally (at a higher cost), so that India can end up producing something in the eventual value-chain of that product. This expands scope for business and is in mutual benefit of both countries. If local businesses can innovate and produce at comparable costs, that is their credit. There seems an element of economics-first in Modi, whereas the UPA has not shown concrete results in deepening foreign trade/investment despite its engagements, especially with neighbours. So far, Kejriwal seems inexperienced in this.
COMBATING CORRUPTION: Corruption is a plague keeping the economy from realising its efforts in entirety. Combating corruption is where Kejriwal's candidature shines. His plans for an effective Jan Lokpal Bill (citizen's ombudsman), targeting the black economy and transparency in governance processes might be useful in increasing the government's productivity and maximising the benefits flowing to the citizens post-systematic leakages. But the issue here is the time required to clean the system as Kejriwal envisions it, and whether people have the patience to wait that long - especially now in a crisis when majority of them are reeling under years of income stagnation and price rise. Modi also talks of Lok Pal and transparency, while Gandhi also mentions corruption and black money. All of them have plans for speeding up the judicial process and ensuring women's safety, which are essential. They are also keen to leverage technology for governance, which means faster, accurate delivery of public services. These include processing of passports, licenses as well as ambitious network connectivity plans. Gandhi envisions digitisation of rural land records and a disaster management communication system. Modi and Kejriwal plan to use technology for healthcare delivery and skill imparting, respectively. All these areas of governance are critical for India, and technology can help create some transparency, though its effective implementation remains a concern.
CENTRALISATION VERSUS DECENTRALISATION: Not many Prime Ministers in the world face the gigantic task of managing a country of 1.2 billion people, where ethnicities, cultures, mindsets and mannerisms change every few kilometers. Would a decentralised management style or an autocratic style be better to govern India? Kejriwal has advocated empowerment of decision-making and functioning to the grassroots-level blocks (Gram Sabha). This would bring the people directly into the governance process. It might mean development effort is better directed, leakages are minimised and benefits are as per the region's need. In Kejriwal's model, local communities would have a role in managing the region's natural resources, get revenue-sharing and a say in the displacement of people. But the challenge is operational success, as implementation can get delayed due to in-fighting amongst members of the local community. In contrast, some believe Modi to have an autocratic style of management. Whether this is baseless or merits discussion is separate, the question is: would an autocratic style be more apt to stabilise a ship which is currently in a crisis? Currently, it is imperative for the economy to get on track and excessive decentralisation might just delay that process. But autocracy also has another side. Opinions of critics might not get an ear and dissent might not be tolerated. For example: media reports allege land was given to big industrial houses at subsidised rates in Gujarat. If this is indeed true, it indicates the land owner either received minimal compensation for his asset, or the State put itself in fiscal pressure if it compensated the owner separately. But it is equally important to get big businesses to invest into long-term commitments as it creates jobs and demand for ancillary products/raw materials - critical for economic growth. This is really a trade-off which developing countries often face. As far is Gandhi is concerned, the UPA regime had set up a National Advisory Council to achieve its agenda. However, this council is believed to have largely failed as it spent on non-asset creating social projects without enhancing economic opportunities, although empowerment across the social strata was also essential.
Credibility of ultimate delivery is where Modi's track-record outranks that of Gandhi and Kejriwal, especially when the Indian economy is undergoing its worst crisis in recent years. Modi's work in converting Gujarat into one of India's most developed states (across industry, agriculture and services) has built this credibility. In contrast, the depth of Gandhi's involvement in the UPA between 2004-2014 has been unclear, and the opinion of some is that he might still be inexperienced for the top role. There is a similar issue of experience-deficit that people opine about Kejriwal, especially after his rather abrupt end to Delhi state's Chief Ministership after only 49 days of rule in January-February. What Gandhi and Kejriwal are missing is a track-record of demonstrated achievements, which Modi has tactfully built over the last decade and is now leveraging to build his credibility for the role of Prime Minister. When the economy is in crisis, there seems a human tendency to repose faith in experience. However, there are interesting observations regarding his Gujarat track-record as well. Growth rates in state-wise net domestic product shows Maharashtra, Delhi, Tamil Nadu, Haryana did just as well during the last decade - even bettering Gujarat in some cases. Rajasthan and Bihar bettered Gujarat in Industrial sector in last four years. Rajasthan, Bihar and Madhya Pradesh beat it in Agriculture, while Bihar, Haryana, Maharshtra and Madhya Pradesh beat it in Services.
In conclusion, the challenges are immense. As mentioned earlier, India possibly needs a dose of all the three but will get only one. The question, which one does it need most urgently, which one would ensure holistic development and which one that would keep its image clean.
The author works with a leading capital
markets company in India. Views expressed are entirely personal and do not
represent those of any entity.
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