'Will 'Make in India' be able to harness the demographic dividend so it does not become a disaster?'
'Will 'Digital India' live up to the lofty promises the government and private sector made as part of its recent launch?'
An associate with the South Asia Progamme at the international think-tank Carnegie Endowment for International Peace in Washington, DC, Dr Milan Vaishnav's research focuses on corruption, governance, state capacity, distributive politics, and electoral behaviour in India.
His tentatively titled book, When Crime Pays: Money and Muscle in Indian Politics, will be published next year.
Dr Vaishnav, who visits India every 3, 4 months, finished three years as an associate at the Carnegie Endowment, which will launch its Delhi centre next year.
In the second part of his e-mail interview to Archana Masih/Rediff.com, he identifies the best performing ministers in government, the big issues that the Modi government needs to tackle urgently and why the BJP risks looking like the Congress.
In terms of popularity and the faith that people have reposed in him -- where does Mr Modi stand among other Indian prime ministers?
It is very difficult to make these sorts of historical comparisons. Certainly, I do not recall a politician who has so thoroughly saturated the political space in India since Indira Gandhi.
Clearly, the two differ in a great many respects. But in terms of their dominance over their respective parties, their top-down command-and-control method of operating within government, and their ability to forge direct connections with the voter that bypass intermediaries or filters -- they share a lot in common.
And, of course, they came to power at a time when the country was on uncertain footing. With Indira, her stint as PM began amidst ongoing economic woes and unease over corruption, doubts about the country's political leadership in the wake of Nehru's death (quickly followed by Shastri's), and then the devastating losses suffered by the Congress in the 1967 assembly elections.
Modi, for his part, inherited an economy recovering from crisis, a rising chorus of doubts about India's role in the world, and waning confidence in the outmatched public sector being able to meet the quickly rising aspirations of a very mobilised populace.
What have been the strengths/achievements of this government and where has it scored impressively?
For starters, this government gets high marks for investing in macroeconomic stability. To be fair, this process of stabilisation began under the previous government, led by then finance minister P Chidambaram and RBI Governor Raghuram Rajan, and the NDA (National Democratic Alliance) government has continued this.
As global economic storm clouds gather, India is on much better footing today than it was a few years ago. Inflation has been contained, growth is slowly ticking up, the fiscal and current account deficits are on a downward trajectory, foreign exchange reserves have grown, and so on.
Second, the government has adopted many reform measures that were clearly seen as projects of the previous government, but they have nonetheless been convinced of their utility -- despite naysayers within their party.
Two immediately come to mind -- Aadhaar/UID and the set of financial sector legal and regulatory reforms (known as FSLRC) -- both started by the UPA (United Progressive Alliance.
Third, it has tried to reset relations between the Centre and the states, whether by abolishing the Planning Commission (and replacing it with Niti Aayog), implementing the recommendations of the 14th Finance Commmission, and allowing states to amend laws on concurrent list subjects like labour and land even when they go against central statutes.
Finally, it has had amassed a positive record thus far on foreign policy. The government, and the PM, have signaled a renewed Indian interest in the neighbourhood, the near abroad, and in relations with the major powers.
In terms of generating inward investment flows and raising the level of interest among foreign stakeholders, foreign policy has been a success story.
By design, however, Act Two will be much harder. In his first year following the end of the George W Bush administration, Barack Obama scored major points (and a Nobel Peace Prize) for changing the narrative about America's role in the world. Realising his lofty vision, however, proved much harder.
Modi too will face an uphill climb ensuring that the rhetoric of his world tour matches the realities to follow in years two through five of the first term.
Who are the ministers in government that have stood out for their competence?
As for ministers rating high for 'competence', it would be presumptuous for someone like me to issue individual report cards about ministers. But what I can report are the impressions from my conversations, research, and personal observations.
Nearly everyone I speak with is very impressed with Railways Minister Suresh Prabhu. When he did not make the initial cut for inclusion in the Cabinet, there was a clamour for the Modi government to reconsider and make space for him. They eventually did, and investors are cautiously optimistic that he will be able to deliver some of the big reform promises he made in his first Railways Budget.
Similarly, there are very high expectations for Highways Minister Nitin Gadkari and he seems to have the confidence of investors and the powers-that-be that he will be able to make serious progress on his ambitious road-building targets.
If you look at the recent increase in the government's capital expenditure, an increase that required a bit of a detour in terms of the preexisting fiscal consolidation roadmap, the bet of the PM and the finance minister is that Ministers Prabhu and Gadkari will be able to deliver what their ministries have promised.
In terms of others, Petroleum Minister Dharmendra Pradhan and Commerce Minister Nirmala Sitharaman also get high marks.
Frankly, before External Affairs Minister Sushma Swaraj got bogged down in the recent allegations around the Lalit Modi affair, she also was perceived to be competently executing her brief in spite of whatever tensions existed between her and the PMO.
Mr Modi had come with a lot of promise and the situation in the country -- the charges plaguing some of his ministers at the Centre and states; Moody's disappointing report on the rate of reforms; the data from the latest census showing that only 10 per cent households have someone with a salaried job and only 8 per cent households earn Rs 10,000 or more every month -- show a rather grim scenario. Are acche din still far away?
There is a cyclical economic upturn that seems underway now. This is obviously good news. Whether it has much to do with what this government has done or not is a side issue; the fact is that in all countries it is the government of the day which takes credit or blame for the state of the economy, period.
The debate then is really about the trend growth of the economy -- a debate that has been seriously muddied by continuing confusion and doubts over India's new GDP numbers.
Incremental reforms, greater attention to getting stalled projects unstuck and removing supply-side bottlenecks, low global oil prices, weakness in other emerging market economies -- all of these factors will have positive impacts.
The question really comes down to jobs and where they are going to come from.
Will 'Make in India' be able to harness the demographic dividend so it does not become a disaster?
Will 'Digital India' live up to the lofty promises the government and private sector made as part of its recent launch?
Will this government be able to broker a reasonable compromise on bringing about a GST (Goods and Sales Tax), which is not perfect, but not fatally flawed?
Right now, we have to state these as questions. We simply do not have the answers.
How much time does the government have before it gets too late to start big ticket reforms/changes -- and more importantly, what are the three big issues that the government needs to handle urgently?
I worry that the window for 'big ticket' reforms is rapidly closing. I think the government can get GST through and possibly the land legislation as well, although the Congress has really dug in its heels on the latter.
Both of these must be classified as big reforms. The government is talking a big game about labour reform, but one has to reserve judgment until they unveil their plans.
Certainly, that has the potential to be a big-ticket reform. However, the Bihar election is going to have an impact on the government's ability to get things done. A loss there could make the government even more cautious about pushing for contentious reform.
In terms of the three things it needs to handle urgently, I would put administrative reform at the top. This is a perennial backburner issue because politicians simply do not perceive the impact on votes.
Everyone in government knows that the Indian bureaucracy circa 2015 is not equipped to handle the challenges of India's democracy, economy, and society circa 2015—but yet it continues to tinker at the margins.
There is no need to reinvent the wheel here; there are many good ideas waiting to be taken off the shelf, such as those produced by the Second Administrative Reforms Commission.
They were announced with great fanfare by the previous government and then never heard from again. This government has an opportunity to revive elements of this blueprint and then force the Congress to oppose ideas its own leaders came up with.
Second, I think this government must demonstrate greater leadership on fixing India's banking system. As a non-economist, it is hard for me to understand how the government can revive India's moribund investment cycle without fixing the mess with India's public sector banks and, of course, the over-leveraged infrastructure companies who massively over-borrowed during the boom years.
The present government has emphasised reforming the management of the PSU (public sector units banks, reducing political interference, and so on --- all worthy goals. But it seems to me anyway that the time to frontally address the issue of non-performing assets (NPAs) is overdue.
Finally, I think regulatory uncertainty remains the Achilles' heel from the perspective of investors. The recent tax brouhaha over the MAT issue is the latest example. To its credit, the government has set up a commission led by Justice Shah to deal with what it calls 'legacy issues' on tax.
Setting up a blue-ribbon panel could be a savvy way of deflecting political blame for taking tough decisions or it could just be window-dressing -- to project the idea that the government is doing something.
We don't yet know what the outcome will be this time. I certainly hope it is a better one than we saw with the Expenditure Management Commission, which was an announcement in Jaitley's first Budget, but whose work on expenditure and subsidy reform has not seen the light of day.
The PMO will not even allow for its interim (not its final -- its interim) report to be posted on a Web site for fear it could lead to criticism from allies and foes alike.
Has the BJP become personality dependent and personality driven like the Congress?
The BJP, if it continues down its current path, risks making the same mistake the Congress made previously. One of the advantages of the BJP prior to 2014 is that it resembled a network of somewhat autonomous regional outfits, rather than a stereotypical centralised, command-and-control party.
Most parties -- across the political spectrum -- fit into the latter mould. With the marginalisation of the old guard, the rise of the Modi-(BJP President Amit Shah combine, and continued centralisation of authority, the BJP does risk falling into this same trap.
The only countervailing centres of power within the BJP are the set of chief ministers whose rise predates that of Modi: Shivraj Singh Chouhan, Vasundhara Raje, and Raman Singh. Two of the three are facing serious political crises at the moment.
The government's crackdown on NGOs on the premise of making them more accountable, has been seen my many as a way of muzzling dissent. Do you think the government has overstepped and is targeting select NGOs?
I think it is counterproductive and demonstrates a kind of insecurity that frankly India should not feel. I don't quite understand the political cost-benefit analysis from the perspective of the government.
I understand that the issue plays well among elements of the base, but it also helps erode gains the PM has made with foreign partners over the past year.
There is a real need for a broader political debate on this issue within India. This cannot be reduced to a BJP versus Congress issue; all parties have engaged in this sort of opportunistic behaviour.
On the issue of civil society and its regulation, as with the investment climate, there is a need for predictability and certainty. Right now, the system reeks of arbitrariness and discretion.
The Congress seemed to display some spark after Rahul Gandhi's return from introspection, but has largely been lackluster so far, what is your assessment of its role as the Opposition and what are the chances of its revival?
The Congress has clearly set its sights on using the Rajya Sabha to exert its power since it stands so badly diminished in the Lower House. But even in the Upper House, it has been quite selective in what it has chosen to oppose.
After some initial opposition, it eventually went along with five of six ordinances the government promulgated (the sixth being land). Land is a legacy issue for the Congress, so I do not expect it will roll over easily.
Unlike the insurance, coal, or mining bills, the Congress high command sees the changes to the land acquisition bill it brought about during its tenure as a crowning achievement of its decade in power.
In terms of the future, the party has been given a fillip by Rahul's comeback and aggressive rhetoric. But the content remains disappointing: it is back to black-and-white, rich versus poor, haves versus have-nots, etc.
The hope among many in the Congress is that Rahul is doubling down on this class warfare rhetoric because he has an internal mobilisation and morale problem. The first order of business is to fix that.
Once the cadre is back in action, some within the Congress speculate the rhetoric will evolve. I am not so sure.
What evidence do we have to make this claim? It is a hope at the moment -- we cannot conclude this based on anything Rahul Gandhi or Sonia Gandhi have said or done in the past.
Image: A man with a Modi mask before a campaign rally in Chennai before the general election last year. Photograph: Babu/Reuters