Minimum government

Prime Minister Narendra Modi’s Independence Day speeches from the ramparts of the Red Fort have typically been ones where he elucidates his government’s policy directions, and also defends the measures it has taken. The 2019 speech was no different, although there were not many announcements on policies — apart from the long-delayed creation of a chief of defence staff. Some aspects of Mr Modi’s speech stood out, however, and deserve greater attention than others. In one such section, the prime minister said: “I often ask my officers: Why cannot the government reduce its interference in the lives of the common man?” This is a throwback, perhaps, to his long-ago promise — before his first election in 2014 — of “minimum government, maximum governance”. The prime minister’s question to his officers needs to be seen in the context of the other measures he discussed in his speech and his government’s broad welfarist strategy. It is correct that the role of the government needs to be reduced in India, but it also needs to be available where and when needed. Typically, it has tried to do too much, but has failed to perform its core tasks with competence.

The basic role of any government is to provide law and order and to create and support a structure that permits individual aspirations. This can be seen as the provision of market-supporting institutions and promoting the ease of doing business. Every step beyond that basic role is one that should be closely justified by examining whether the government is capable of carrying it off effectively and whether it would lead to undue interference in “the lives of the common man”. The intent of the prime minister is clear from the fact that he also mentioned in his speech how the government had scrapped many antiquated laws. As a broad guideline for policy action, the prime minister’s question cannot be bettered. However, it is also true that many recent measures have not fitted this vision. India’s improved ranking in terms of the ease of doing business notwithstanding, recent tax and other policy actions have, in fact, made the business environment more difficult. The prime minister is perhaps putting his questions to a wrong audience — his officers will always have a bias towards increasing their power at the expense of the common man or ordinary business.

In his first Independence Day speech in 2014, Mr Modi had spoken of the need to promote manufacturing, which became his signature “Make in India” initiative. In this speech, too, he made many right noises about support for wealth creators, and the need to promote exports and domestic manufacturing. “Make in India” and exports growth, however, have seen only lacklustre success at best. In fact, exports are in some ways worse off than in 2014. This is linked to the government’s failure to properly implement the “reduction in interference” that the prime minister spoke of. Success in manufacturing and exports will need solid and sustainable improvements in competitiveness — essentially a real focus on the ease of doing business, rather than increasing state power in the economy and over entrepreneurs. The government will need to fundamentally alter course if Mr Modi’s stated vision is to be a real road map for the future.

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