As we come to the end of the year, many are beginning to ask what the government has actually achieved since it came to power in May. Parliament looks like it is once again stalled (even though Lok Sabha productivity actually went up significantly).
Despite assurances that the Modi government would give us development instead of Hindutva, the national debate has been about everything from the spread of communalism to Hindu conversions and even statues of Mahatma Gandhi's assassin Nathuram Godse. From the looks of it, this National Democratic Front government is no different than the last.
So what has the government actually done in all this time? The Finance Ministry’s Mid-Year Economic Analysis, which came out on December 20, gives the government itself a chance to answer that question, at least on the policy front.
Here’s what the document boasts about having achieved.
Petroleum policies
*“Deregulating diesel prices, paving the way for new investments in this sector.”
Continuing a process begin by the previous government, Finance Minister Arun Jaitley announced in October that diesel prices had been fully deregulated. This means that the prices will be set by the retailers rather than the government and will fluctuate based on the global price of diesel. It also means the government subsidy burden should see a significant reduction. Plus, diesel cars are no longer more economical than petrol ones.
*“Raising gas prices from US$ 4.2 per million British thermal unit to US$ 6.17 (a 33 percent increase), and linking pricing, transparently and automatically, to international prices so as to provide incentives for greater gas supply and thereby relieving the power sector bottlenecks.”
Instead of raising the gas price to $8.4 per million British thermal units as the previous government had recommended, prompting an election-time debate over who that would benefit, the cabinet approved only a 33% hike and said that it would revised every six months, while being linked to international prices. Considering the issue was up in the air for the first few months, just having a credible policy laid down is a positive move, although it stands in contrast to the move to deregulate diesel.
Bringing in money
*“Increasing FDI cap in defense to 49 percent, and targeting 100 percent FDI in investment.”
The government made a big deal about increasing its FDI cap for Defence to 49% earlier this year, but this has yet to see much impact. The Foreign Investment Promotion Board received only six proposals since June 2014 in this sector, and only two of those propose 49% investment. The aim of moving to a full 100% FDI in this sector has, however, raised lots of questions about national security.
*"Implementing a programme of disinvestments."
An ambitious target of raising Rs 43,000 crore through disinvestment was laid out for this fiscal year. Of that, the government has only managed to pick up Rs 1,700 crore so far, through a 5% stake sale in the Steel Authority of India Limited. And it might not be able to even come close to its target this year.
*"Reforming the coal sector via auctions and greater private sector entry."
The Supreme Court’s decision to cancel the coal block allocations has given the government an opportunity to auction blocks and earn some revenue instead, but the policy is currently tied up in Parliament where. If the Coal Bill is not passed by the Rajya Sabha, the ordinance passed by the government will lapse and it might be difficult to once again use an executive order to carry out a policy that might have such a big impact.
Spending smarter
*"Instituting the Expenditure Management Commission that will lay out a plan for rationalising expenditures."
This commission is expected to be the key to next year’s budget, after there were no ambitious plans for attacking the subsidy bill or reconsidering India’s approach to welfarism in this year’s budget. Jaitley has promised ambitious reforms with the help of this commission, headed by former Reserve Bank of India government Bimal Jalan.
*"Continuing the push to extending coverage under the Aadhaar programme, targeting enrollment for one billion Indians."
Completing a process that was begun by the United Progressive Alliance, Modi has set a huge enrolment target for a policy that was constantly criticised by the Bharatiya Janata Party when they were in the opposition. Although the one billion number is ambitious, the cards are still expected to see huge numbers brought in by next year.
*"Replacing the cooking gas subsidy by direct transfers on a national scale."
A United Progressive Alliance policy that was suspended after the Supreme Court said it couldn’t mandate the use of Aadhar numbers, the new government rolled out the scheme, which gives people cash directly in their bank accounts instead of a cooking gas cylinder, to 54 districts in mid-November. Starting January 1, it is expected to be available across the country.
*"Instituting a major program for financial inclusion, the Pradhan Mantri Jan Dhan Yojana, under which over nine crore new accounts have been opened till December 11, 2014."
The government has managed to increase the number of those within the banking net by a huge amount over the past few months alone, but the actual functionality of this programme depends on how it will be maintained. More than three-quarters of the accounts don’t have any bank balance in them, and the government has just severely restricted the benefits it will be doling out under the programme.
Removing obstacles
*"Expediting environmental clearances.”
The government has sought to address an issue that seems to be a frequent bugbear for industry: environmental clearances. But it’s attempted to do this by removing safeguards that were in place to protect India’s environment. In doing so, it has misdiagnosed the problem, endangered the ecology, and made policy changes that could have seriously damaging effects.
*"Eliminating the quantitative restrictions on gold."
To remove trade distortions and reduce illegal trade in gold, the government got rid of a rule requiring 20% of all imported gold to mandatorily be exported before new shipments are allowed in. Although it’s not expected to have a huge impact on the price of gold or the amount of smuggling, it has been received as a useful effort to reduce red tape at a time when analysts were expecting tighter controls.
*"Facilitating Presidential Assent for labour reforms in Rajasthan, setting an example for further reform initiatives by the States; and consolidating and making transparent a number of labour laws."
The President has given his assent for amendments to three major labour laws in Rajasthan, which would make it easier for companies to hire and fire But the changes are more of a “signal” that the government wants to be business-friendly, with little expected changes since existing labour laws were barely being enforced in the first place.
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Despite assurances that the Modi government would give us development instead of Hindutva, the national debate has been about everything from the spread of communalism to Hindu conversions and even statues of Mahatma Gandhi's assassin Nathuram Godse. From the looks of it, this National Democratic Front government is no different than the last.
So what has the government actually done in all this time? The Finance Ministry’s Mid-Year Economic Analysis, which came out on December 20, gives the government itself a chance to answer that question, at least on the policy front.
Here’s what the document boasts about having achieved.
Petroleum policies
*“Deregulating diesel prices, paving the way for new investments in this sector.”
Continuing a process begin by the previous government, Finance Minister Arun Jaitley announced in October that diesel prices had been fully deregulated. This means that the prices will be set by the retailers rather than the government and will fluctuate based on the global price of diesel. It also means the government subsidy burden should see a significant reduction. Plus, diesel cars are no longer more economical than petrol ones.
*“Raising gas prices from US$ 4.2 per million British thermal unit to US$ 6.17 (a 33 percent increase), and linking pricing, transparently and automatically, to international prices so as to provide incentives for greater gas supply and thereby relieving the power sector bottlenecks.”
Instead of raising the gas price to $8.4 per million British thermal units as the previous government had recommended, prompting an election-time debate over who that would benefit, the cabinet approved only a 33% hike and said that it would revised every six months, while being linked to international prices. Considering the issue was up in the air for the first few months, just having a credible policy laid down is a positive move, although it stands in contrast to the move to deregulate diesel.
Bringing in money
*“Increasing FDI cap in defense to 49 percent, and targeting 100 percent FDI in investment.”
The government made a big deal about increasing its FDI cap for Defence to 49% earlier this year, but this has yet to see much impact. The Foreign Investment Promotion Board received only six proposals since June 2014 in this sector, and only two of those propose 49% investment. The aim of moving to a full 100% FDI in this sector has, however, raised lots of questions about national security.
*"Implementing a programme of disinvestments."
An ambitious target of raising Rs 43,000 crore through disinvestment was laid out for this fiscal year. Of that, the government has only managed to pick up Rs 1,700 crore so far, through a 5% stake sale in the Steel Authority of India Limited. And it might not be able to even come close to its target this year.
*"Reforming the coal sector via auctions and greater private sector entry."
The Supreme Court’s decision to cancel the coal block allocations has given the government an opportunity to auction blocks and earn some revenue instead, but the policy is currently tied up in Parliament where. If the Coal Bill is not passed by the Rajya Sabha, the ordinance passed by the government will lapse and it might be difficult to once again use an executive order to carry out a policy that might have such a big impact.
Spending smarter
*"Instituting the Expenditure Management Commission that will lay out a plan for rationalising expenditures."
This commission is expected to be the key to next year’s budget, after there were no ambitious plans for attacking the subsidy bill or reconsidering India’s approach to welfarism in this year’s budget. Jaitley has promised ambitious reforms with the help of this commission, headed by former Reserve Bank of India government Bimal Jalan.
*"Continuing the push to extending coverage under the Aadhaar programme, targeting enrollment for one billion Indians."
Completing a process that was begun by the United Progressive Alliance, Modi has set a huge enrolment target for a policy that was constantly criticised by the Bharatiya Janata Party when they were in the opposition. Although the one billion number is ambitious, the cards are still expected to see huge numbers brought in by next year.
*"Replacing the cooking gas subsidy by direct transfers on a national scale."
A United Progressive Alliance policy that was suspended after the Supreme Court said it couldn’t mandate the use of Aadhar numbers, the new government rolled out the scheme, which gives people cash directly in their bank accounts instead of a cooking gas cylinder, to 54 districts in mid-November. Starting January 1, it is expected to be available across the country.
*"Instituting a major program for financial inclusion, the Pradhan Mantri Jan Dhan Yojana, under which over nine crore new accounts have been opened till December 11, 2014."
The government has managed to increase the number of those within the banking net by a huge amount over the past few months alone, but the actual functionality of this programme depends on how it will be maintained. More than three-quarters of the accounts don’t have any bank balance in them, and the government has just severely restricted the benefits it will be doling out under the programme.
Removing obstacles
*"Expediting environmental clearances.”
The government has sought to address an issue that seems to be a frequent bugbear for industry: environmental clearances. But it’s attempted to do this by removing safeguards that were in place to protect India’s environment. In doing so, it has misdiagnosed the problem, endangered the ecology, and made policy changes that could have seriously damaging effects.
*"Eliminating the quantitative restrictions on gold."
To remove trade distortions and reduce illegal trade in gold, the government got rid of a rule requiring 20% of all imported gold to mandatorily be exported before new shipments are allowed in. Although it’s not expected to have a huge impact on the price of gold or the amount of smuggling, it has been received as a useful effort to reduce red tape at a time when analysts were expecting tighter controls.
*"Facilitating Presidential Assent for labour reforms in Rajasthan, setting an example for further reform initiatives by the States; and consolidating and making transparent a number of labour laws."
The President has given his assent for amendments to three major labour laws in Rajasthan, which would make it easier for companies to hire and fire But the changes are more of a “signal” that the government wants to be business-friendly, with little expected changes since existing labour laws were barely being enforced in the first place.
