A senior French journalist, who has spent nearly seven years in India, called me recently for my views on the first year of the Narendra Modi government. Unlike most others attempting an evaluation of the government’s year in office, he was already aware that the economy was in better shape with inflation down, the growth rate up, foreign reserves rising, current account and fiscal deficits in control and some major reforms having been undertaken. These, inter alia, included the transparent auction of coal mines and the telecom spectrum; the successful launch of schemes for financial inclusion; the much-needed de-freezing of defence orders and contracts; raising the cap for FDI in insurance and defence; and the passage of the historic GST Bill in the Lok Sabha. Ignoring these achievements, he pointedly asked which segments of the population were happier or more supportive of Modi today than a year ago. To my utter surprise, I found myself honestly stumped at this apparently innocuous query.
Minorities are quite clearly unhappy because of the goings-on of the crazy communalist fringe. Farmers have not rallied in Modi’s support, although proposed amendments to the Land Acquisition and Rehabilitation and Resettlement (LARR) Bill do not harm their interests and instead will facilitate their much needed move out of agriculture. Workers in the formal sector and their trade union leaders, including those from the Bharatiya Mazdoor Sangh, are apprehensive that the government is likely to follow the Rajasthan initiative in diluting the provisions of the Industrial Disputes Act.
Large industrialists and domestic investors are not investing in new capacities, which is reflected in the growth rate of commercial bank credit to non-food sectors plummetting. FDI has not really picked up in any significant manner and portfolio investors (FII) have voted with their feet against the government, bringing the Sensex down sharply. The real estate sector is in the doldrums and the middle-class is not rushing to buy new homes or assorted consumer durables.
Therefore, at the end of one year, despite ostensibly very hard work and a significant number of reform measures, largely incremental, though, in nature, Modi finds himself facing disquiet and impatience from the middle, neo-middle and business classes who were his star supporters during the campaign. During my recent visits abroad, I also ran into negative mutterings within the diaspora who were clearly not willing to shower accolades upon their icon.
But one large section of the population must surely be happier and now more supportive of Modi. This is the informal sector where Bharat lives. Modi, quite consciously of course, and working to a plan, has focused his major reform initiatives and energies on multiple schemes to benefit this important bottom of the pyramid segment, in which he has to consolidate his support. The Jan Dhan Yojana, the three social sector insurance schemes with their minimal premiums and reasonable pay-outs, will surely help him to easily stave off the charge of being a “suit-boot ki sarkar”. As long as these schemes are implemented universally and without discrimination, which I am reasonably sure they will be, it will bring over to the Modi camp a significant section of voters who at present support political leaders with either regional or identity based appeal. To have focused his reform energies initially on the marginalised segments of the population may be a masterstroke as it will widen his political support and ensure electoral success in the coming critically important polls in Bihar and Uttar Pradesh. Much-needed reforms will be taken up subsequently once political support is ensured. This is not a strategy to be scoffed at.
Modi’s middle-class support base has taken a rather severe mauling since AAP’s most surprising victory in Delhi in January. To them Modi, the Prime Minister, appears inaccessible and insensitive to their need for better public services like education, health, electricity supply, law and order and, above all, employment. The investor and business community is also increasingly sceptical, especially in light of the hostile stance taken by the tax authorities and virtually zero change in ground realities so far. Modi should not wait too long to reverse negative perceptions in these segments as well.
An effective beginning can be made by making it mandatory for all secretaries heading major ministries and departments to include a list of negative perceptions about their department’s performance along with their achievements over the past year. This would provide much-needed feedback to the PMO. Any administrative system without a feedback loop is often headed towards undesirable instability and possible implosion. This must be avoided.
Modi needs to marshal a much larger resource base of expertise and skills. There is now sufficient empirical evidence of a marked decline in the quality of human resources even in the covenanted services. The closed shop created by the IAS in filling not only all senior government positions but also all quasi-independent bodies must be forced open and people with domain expertise inducted. Apart from rejuvenating the talent pool, this would also help to overcome the present divide between the ‘rulers and the ruled’. The Japanese practice of creating tripartite advisory committees for important ministries could be replicated with good effect. These would comprise bureaucrats, domain experts and representatives of private industry. Such a collaborative effort, which would truly represent ‘Team India’, is today needed for India to successfully compete in globalised markets.
A related issue is to overhaul the public education system at all levels. A country with a broken public education system, where even the poorest are forced to send their children to private cramming shops, cannot achieve the desired balance between growth and equity. Along with financial inclusion, which he has focused on so far, Modi must focus now on ‘education inclusion’. This requires a sharp course correction in the working of human resource development establishments both at the Central and state levels. Modi must know that there is sufficient evidence, expertise and experience available in the public domain which he can tap to bring about change in the education system.
India cannot hope to earn the demographic dividend without the necessary investment in human resources. It is well established that markets and the private sector will not provide the required investment in this sector, which, like physical infrastructure, has strong ‘public good’ attributes. Therefore, the sooner Modi can bring his attention to this sector, the better. An improvement in the delivery of public education will directly respond to middle-class aspirations. This will ensure their continued support. Given the long lag in producing desired outcomes in this sector and the fickleness of the middle-class, Modi would do well to attend to this important task before all others.
Rajiv Kumar is Senior Fellow, Centre for Policy Research, and Founder-Director, Pahle India Foundation.