The people of Bihar delivered Narendra Modi a stinging rebuke by repudiating his attempt to once again gain support with his bamboozle and dazzle tactics. Modi, in an unprecedented effort that spared no expense and drew on more valuable prime ministerial time, addressed 30 public meetings across Bihar, or one for about every eight assembly constituencies. He was at his brash and sneering best, heaping contempt and calumny on his political rivals.
First he targeted Lalu Prasad, an easy mark given that he is a convict out on bail given by a sympathetic Supreme Court. Somewhere down the road, Modi realised that his primary electoral adversary in Bihar was the incumbent Chief Minister Nitish Kumar. He then turned the contest into a “Me versus Him” choice, and the people of Bihar wisely chose a chief minister who has served them well.
Narendra Modi and Amit Shah seem to be the kind of people who don’t learn from their mistakes. They used the same game plans in Delhi and were administered an equally stinging electoral rebuke. But instead of accepting defeat with humility, Modi busied himself pettily thwarting Arvind Kejriwal’s attempts to give Delhi an honest and caring government, something the Congress and Bharatiya Janata Party were never able to do.
The people of Bihar must have noticed how the Modi government has used a former joint secretary-turned-lieutenant governor to spite the people’s overwhelming mandate in Delhi. They must have also seen evidence of the man Modi is in his shrill speeches that were unbecoming of a prime minister. All things considered, Modi had given the people of Bihar plenty of reasons to reject him a year after they overwhelmingly endorsed him.
Lame-duck prime minister
An election is seldom about one or two issues. The verdict is a sum of many dissatisfactions and expectations. Modi’s vainglorious style, his inability to meet any of the promised economic and political reforms, and his inability to seriously get down to the business of being prime minister of a highly centralised system have together cost him a good chunk of the minority support (38% of 2014 voters) that propelled him to high office under our first-past-the-post system. When faced with a united opposition in Bihar or a singularly inspirational opposition as in Delhi, Modi’s overweening pride, intellectual dormancy and policy bankruptcy took the expected toll. He just wilted.
Badly singed, he is now for all practical purposes a lame-duck prime minister, just a year and a half into his term. Like Humpty Dumpty, all the kings’ men and all the kings’ horses cannot put him together again. He will continue to be worsted, next in West Bengal, followed by Assam and wherever else the sacrificial stallion goes. The BJP will do well to unhorse him and find a new standard bearer.
So what does a man in his place do after such a resounding rejection? A mature and thoughtful leader would introspect and appear in front of the people with his head bowed in contrition and tell them loud and clear that he has heard them and that they can now expect different and better from him. But our leader, of famed loquacity, suddenly goes into a deep funk. There is still not a peep from him. But suddenly his government, in the manner a persistent whelp is quieted with a bone, announced a set of policies, which it deems as reform.
Let’s now examine these policies and see if they indeed have something to make the people of India change their views about him?
'Refining foreign investments'
On the eve of Modi’s departure to the United Kingdom, mostly to connect with his bused-in adoring NRI fans, the Prime Minister’s Office issued a set of pronouncements claiming they are the much-needed impetus to the moribund economy. The PMO announced Foreign Direct Investment “reforms in as many as 15 sectors”.
According to the government’s release, “The crux of these reforms is to further ease, rationalize and simplify the process of foreign investments in the country and to put more and more FDI proposals on automatic route instead of government route where time and energy of the investors is wasted.” The government claims that these FDI reforms will benefit sectors such as agriculture and animal husbandry, plantation, defence, broadcasting, civil aviation and manufacturing. “Further refining of foreign investments in key sectors like construction where 50 million houses for poor are to be built.” But a reading of the details tells us that little has been added to what is already there. Let’s take a few for examination.
The release claims that the manufacturing sector will be opened for wholesale, retail and e-commerce so that industries are motivated to Make in India and sell it to the customers here instead of importing from other countries. The fact is that existing business entities can sell their services and products in any way they deem fit – whether by direct retail or by e-commerce. To announce now that they can do so is neither here nor there. It is just stating the obvious and making a virtue of it. This borders on sheer charlatanism.
Similarly, allowing FDI of up to 49% in the construction sector is a modest refinement of the existing rules. Under these rules, foreign investment was permitted in projects with a minimum built area of 20,000 square metres, and the minimum capital investment by foreign companies was $5 million. India also allowed 100% FDI in real estate development but with strict conditions, including a lock-in period of three years during which the investment could be repatriated. Now that lock-in period is removed, but capping the FDI in construction to 49% now is regressive rather than reformist. Besides, how does this address the problem facing the construction sector?
The reason why FDI had not flowed into the construction sector is that the growth has become sluggish due to a major demand contraction and a huge oversupply of home and commercial real estate. How does the government announcement stimulate investment in this area, which is critical too for generating employment for the million unskilled and mostly rural youth entering the work force every month? What is needed to rejuvenate this sector are a slew of monetary and fiscal measures to make consumer investment easier and attractive. Clearly, the PMO has no hard-headed solutions, but is only looking at making it to the headlines.
Seeing through the cheers
Raising FDI limits from 26% to 49% in any sector can hardly be deemed a reformist move. What the foreign investors are looking for is unfettered control over their investments, and not being forced into a partnership with regimes of CII and FICCI cronies. It makes little difference if FDI is raised from 26% to 49%. For instance, which defence major will transfer its proprietary technology to a venture in which it is forced to have a minority stake?
Besides, what is the rationale of imposing a 49% ceiling on a business planning to make weapons in India when 70% of India’s defence purchases are from overseas companies that are 100% foreign owned? Wouldn’t it have been simpler and more intelligent to announce sourcing from even 100% FDI companies as long as the manufacturing was local? By doing this the value addition will accrue to India’s economy and there could also be collateral benefits in the form of local vendors and technology absorption. It seems little thinking has gone into this “supposed fast tracking by the PMO”. What seems to be the motive is to make it appear that it is business as usual in the PMO and that the prime minister is unfazed by the Bihari rout.
It would seem the only beneficiary of the PMO announcement is IKEA which, when it sets up shop in India, will not be required to source 30% of the goods sold from local companies or artisans. And who does IKEA benefit then, apart from itself and its overseas suppliers?
The usual suspects in business and trade associations applauded the PMO’s announcement. But few others were taken in by them. It was reminiscent of an anecdote from the heyday of the license permit Raj, when a major industrialist, the late Lala Charatram, was asked if he supported the then prime minister. He replied that he indeed supported the prime minister, and added sotto voce “any prime minister”. It’s a good investment to cheer up a prime minister when he is down, but a wise prime minister will see through this cheer. I am not sure Narendra Modi will.
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First he targeted Lalu Prasad, an easy mark given that he is a convict out on bail given by a sympathetic Supreme Court. Somewhere down the road, Modi realised that his primary electoral adversary in Bihar was the incumbent Chief Minister Nitish Kumar. He then turned the contest into a “Me versus Him” choice, and the people of Bihar wisely chose a chief minister who has served them well.
Narendra Modi and Amit Shah seem to be the kind of people who don’t learn from their mistakes. They used the same game plans in Delhi and were administered an equally stinging electoral rebuke. But instead of accepting defeat with humility, Modi busied himself pettily thwarting Arvind Kejriwal’s attempts to give Delhi an honest and caring government, something the Congress and Bharatiya Janata Party were never able to do.
The people of Bihar must have noticed how the Modi government has used a former joint secretary-turned-lieutenant governor to spite the people’s overwhelming mandate in Delhi. They must have also seen evidence of the man Modi is in his shrill speeches that were unbecoming of a prime minister. All things considered, Modi had given the people of Bihar plenty of reasons to reject him a year after they overwhelmingly endorsed him.
Lame-duck prime minister
An election is seldom about one or two issues. The verdict is a sum of many dissatisfactions and expectations. Modi’s vainglorious style, his inability to meet any of the promised economic and political reforms, and his inability to seriously get down to the business of being prime minister of a highly centralised system have together cost him a good chunk of the minority support (38% of 2014 voters) that propelled him to high office under our first-past-the-post system. When faced with a united opposition in Bihar or a singularly inspirational opposition as in Delhi, Modi’s overweening pride, intellectual dormancy and policy bankruptcy took the expected toll. He just wilted.
Badly singed, he is now for all practical purposes a lame-duck prime minister, just a year and a half into his term. Like Humpty Dumpty, all the kings’ men and all the kings’ horses cannot put him together again. He will continue to be worsted, next in West Bengal, followed by Assam and wherever else the sacrificial stallion goes. The BJP will do well to unhorse him and find a new standard bearer.
So what does a man in his place do after such a resounding rejection? A mature and thoughtful leader would introspect and appear in front of the people with his head bowed in contrition and tell them loud and clear that he has heard them and that they can now expect different and better from him. But our leader, of famed loquacity, suddenly goes into a deep funk. There is still not a peep from him. But suddenly his government, in the manner a persistent whelp is quieted with a bone, announced a set of policies, which it deems as reform.
Let’s now examine these policies and see if they indeed have something to make the people of India change their views about him?
'Refining foreign investments'
On the eve of Modi’s departure to the United Kingdom, mostly to connect with his bused-in adoring NRI fans, the Prime Minister’s Office issued a set of pronouncements claiming they are the much-needed impetus to the moribund economy. The PMO announced Foreign Direct Investment “reforms in as many as 15 sectors”.
According to the government’s release, “The crux of these reforms is to further ease, rationalize and simplify the process of foreign investments in the country and to put more and more FDI proposals on automatic route instead of government route where time and energy of the investors is wasted.” The government claims that these FDI reforms will benefit sectors such as agriculture and animal husbandry, plantation, defence, broadcasting, civil aviation and manufacturing. “Further refining of foreign investments in key sectors like construction where 50 million houses for poor are to be built.” But a reading of the details tells us that little has been added to what is already there. Let’s take a few for examination.
The release claims that the manufacturing sector will be opened for wholesale, retail and e-commerce so that industries are motivated to Make in India and sell it to the customers here instead of importing from other countries. The fact is that existing business entities can sell their services and products in any way they deem fit – whether by direct retail or by e-commerce. To announce now that they can do so is neither here nor there. It is just stating the obvious and making a virtue of it. This borders on sheer charlatanism.
Similarly, allowing FDI of up to 49% in the construction sector is a modest refinement of the existing rules. Under these rules, foreign investment was permitted in projects with a minimum built area of 20,000 square metres, and the minimum capital investment by foreign companies was $5 million. India also allowed 100% FDI in real estate development but with strict conditions, including a lock-in period of three years during which the investment could be repatriated. Now that lock-in period is removed, but capping the FDI in construction to 49% now is regressive rather than reformist. Besides, how does this address the problem facing the construction sector?
The reason why FDI had not flowed into the construction sector is that the growth has become sluggish due to a major demand contraction and a huge oversupply of home and commercial real estate. How does the government announcement stimulate investment in this area, which is critical too for generating employment for the million unskilled and mostly rural youth entering the work force every month? What is needed to rejuvenate this sector are a slew of monetary and fiscal measures to make consumer investment easier and attractive. Clearly, the PMO has no hard-headed solutions, but is only looking at making it to the headlines.
Seeing through the cheers
Raising FDI limits from 26% to 49% in any sector can hardly be deemed a reformist move. What the foreign investors are looking for is unfettered control over their investments, and not being forced into a partnership with regimes of CII and FICCI cronies. It makes little difference if FDI is raised from 26% to 49%. For instance, which defence major will transfer its proprietary technology to a venture in which it is forced to have a minority stake?
Besides, what is the rationale of imposing a 49% ceiling on a business planning to make weapons in India when 70% of India’s defence purchases are from overseas companies that are 100% foreign owned? Wouldn’t it have been simpler and more intelligent to announce sourcing from even 100% FDI companies as long as the manufacturing was local? By doing this the value addition will accrue to India’s economy and there could also be collateral benefits in the form of local vendors and technology absorption. It seems little thinking has gone into this “supposed fast tracking by the PMO”. What seems to be the motive is to make it appear that it is business as usual in the PMO and that the prime minister is unfazed by the Bihari rout.
It would seem the only beneficiary of the PMO announcement is IKEA which, when it sets up shop in India, will not be required to source 30% of the goods sold from local companies or artisans. And who does IKEA benefit then, apart from itself and its overseas suppliers?
The usual suspects in business and trade associations applauded the PMO’s announcement. But few others were taken in by them. It was reminiscent of an anecdote from the heyday of the license permit Raj, when a major industrialist, the late Lala Charatram, was asked if he supported the then prime minister. He replied that he indeed supported the prime minister, and added sotto voce “any prime minister”. It’s a good investment to cheer up a prime minister when he is down, but a wise prime minister will see through this cheer. I am not sure Narendra Modi will.
