Directionless? Learn from Narasimha Rao

Former BJP minister Arun Shourie has lambasted Narendra Modi as directionless in policy. He says Modi’s haphazard, inconsistent and half-hearted reforms send conflicting signals. A prime minister must not move project by project or slogan by slogan: he must have a clear overarching vision, and move swiftly and unswervingly to fulfill it. Instead, Modi plays around with disconnected projects and ideas, all tactics and no strategy. Shourie likens this to focusing on small bits of a jigsaw puzzle without the overarching vision needed to solve the puzzle.

Shourie is right to criticize excessive centralization of power within the Modi-Jaitley-Amit Shah trinity, and its failure to assuage the concerns of religious minorities. But he is wrong to expect Modi to enunciate and bulldoze through an inflexible ideological agenda. This approach rarely works in democracies, least of all when the ruling party lacks a majority in the Rajya Sabha and controls only a minority of state governments. Hypocrisy, opportunism and inconsistency don’t necessarily mean lack of direction: they can sometimes be useful political tools to stay roughly on track in tricky conditions.

Narasimha Rao in 1991-96 demonstrated it’s possible to be muddled, inconsistent and incomplete in policy, yet achieve revolutionary gains. Rao too lacked a clear vision. He too excelled in tactics rather than strategy, in ambiguous slogans rather than determined action. He too played around with bits of a jigsaw puzzle. Yet this sufficed to transform India.

Rao was a political lightweight in the Congress and lacked a Lok Sabha majority. Having followed Congress socialist policies all his life, he had only vague ideas of how to reform. Far from being swift and decisive, he said that if you did nothing about a problem, it sometimes went away. Far from following a clear strategic vision, he often moved two steps forward and one step back.

Rao avoided many conventional IMF reforms, refusing to liberalize whenever he sensed this might lead to agitations by influential vote banks. So, he assured trade unions he would not liberalize labour laws, sack surplus workers or privatize PSUs. He assured farmers he would not reduce subsidies or agricultural protection. He repeatedly failed to meet IMF fiscal deficit targets. Far from claiming to be a great reformer, he declared he was for “the middle path”, the very slogan used by Nehru.

Rao’s greatest reform was the virtual abolition of industrial licensing. Instead of taking credit for this, he shifted it to Manmohan Singh in Machiavellian fashion. On Budget day, Singh was to present the Budget at 5 pm. Rao held a press conference at noon the same day to announce de-licensing. There were no private TV channels in those days for instant analysis, and the public learned of the Budget mainly through newspapers the next day. Naturally, the Budget proposals hogged the headlines, and the news item on de-licensing looked like part of Singh’s proposals. Very few realized that Rao was the real author.

Rao resorted to this subterfuge because Singh could be sacrificed as a scapegoat if things went wrong. Later, when Harshad Mehta created a boom and bust in the stock market, Congress members of the Joint Parliamentary Committee pinned the blame on Manmohan, who then resigned. Rao magnanimously rejected the resignation. Targeting Singh diverted attention from Rao’s own role in the affair: Harshad Mehta claimed to have bribed Rao.

Later Rao was accused of bribing three Jharkand MPs, as well as businessman Lakhubhai Patel. This further affected his ability or willingness to enact radical reforms. Yet his limited reforms broke some key binding constraints on economic growth. These included industrial delicensing, exchange rate reform, trade liberalization, freer entry of foreign investment, and stock market reform. These covered only a fraction of the economy, yet laid the foundation of a miracle economy. In his last two years, GDP growth averaged 7.5%.

The lesson for Modi: even partial, inconsistent reforms can achieve a lot provided they break binding constraints. Rao sought to placate every vote bank — landless labourers, farmers, bank staff, industrial workers, businessmen. Modi is doing the same. This can be clever politics, not lack of direction, provided Modi stands firm on the binding constraints.

Shourie says Modi seems keener on managing headlines than policy reform. True, slogans like ‘Minimum government, maximum governance’, ‘smart cities’ and ‘Swachh Bharat’ represent more talk than action. Yet slogans and media management are useful tools, though not vote clinchers. Rao’s “middle path” was as ambiguous and vague as ‘minimum government, maximum governance’. Yet Rao succeeded.

Bottom line: Modi can succeed despite inconsistencies, provided he overcomes a few key binding constraints on growth. These include land acquisition, the infrastructure mess, bust electricity system and massive red tape. Whether he will achieve all that remains to be seen.

One thought on “Directionless? Learn from Narasimha Rao

  • 2015.Jun.15 at 09:09

    The article seems to be inferential one, the circumstances and the environment during the tenure of Narsimha Rao and Narendra Modi are lot different. That time India was having reforms on global level where we were listed on the global market and policies changes on globalization enticed the investors towards our countrty and it is well evident from the GDP achieved in that period. Today the scenario speakes MAKE IN INDIA with the other policies , Modis visit to foreign nations as the activites to achieve it, thus it doesnt sound as words of wisdom that being the ambigious ( as he was ) if the targets on development were achieved in Rao’s time testifies that Modi being the next Narsimha Rao ( Till date ) will achieve the developmental goals. Thus labasting the acts of this governement shall be taken as a sharp feedback ( though acerbic ) to induce reforms in thinking of the government so as to gain momentum and meteculous work in the deals done so far. Modi should be a submarine driver rather than a Zetski specialiest.


Leave a Reply

Your email address will not be published. Required fields are marked *