Early next week, on 2 September, Narendra Modi's government will be completing 100 days in office. Surprisingly – or, perhaps, not so surprisingly, given the media competition to jump the gun even before the race begins - assessments are gushing in. The pink papers, for example, are publishing CEO surveys on Modi's 100-day performance when we are still on the 95th day.
This quibble out of the way, I must admit that judgment on the 100th day - Modi will actually be in Japan on that day - is unlikely to be significantly different from what it is today. For we now have a fair idea of how he handles things. Maybe we will see a slightly more aggressive reformer after October when some key assembly elections will be out of the way, but given his 95-day track record and 12 years in Gujarat, one can be sure he is not going to change his stripes all of a sudden. At best what we may see is a quickening of decision-making in the months ahead – till the next political event slows things down again.
So rather than assess how he has fared as Prime Minister, I prefer to assess what he seems to be about, and what he may do in the coming 100 days and beyond based on what we now know.
#1: The first thing to realise about Modi is that he is not a doctrinaire right-winger, economically speaking, that is. He is not going to dramatically reform labour laws (but he will make some improvements), or cut subsidies, or revise the Land Acquisition law beyond a point (ie, he won’t scrap it). Nor is he going to privatise public sector undertakings.
This is why he has disappointed almost all the economists who were his ardent fans (Bibek Debroy, Arvind Panagariya, Rajiv Kumar, Surjit Bhalla, among them) till now. While Debroy has assessed Modi’s performance so far as “so-so sau din”, Panagariya prefers to now pin his hopes for bold reforms in states (he likes what Vasundhara Raje is doing in Rajasthan). Bhalla is shaking his head in disappointment, wondering where the Modi he thought he knew has gone, and Rajiv Kumar, who hasn’t given up hope, believes Modi should now opt for “bold reforms”.
From what we have seen of Modi so far, it is likely that he will not try and do anything spectacular to earn the applause of fans even after the assembly elections. He will do reforms incrementally, speeding up when politics is not a constraint, and slowing down when it is.
Here’s what to expect after October onwards: I believe that all changes in FDI regulations (defence, railways, insurance, etc), and small changes in labour and land laws, will be pushed through in the October-December period. If the bills get shot down in the Rajya Sabha, he will call a joint session and get them through. As for subsidy reforms, I believe diesel will be deregulated in a limited way (oil companies can fix prices, but change only by 50 paise a month, as now). Kerosene and LPG will move towards direct cash payments, but only in stages. Gas prices will be raised by a smaller amount than what the UPA has planned (not $8.4 per mmBtu, but higher than the current $4.2), and fertiliser and food subsidies will remain largely unreformed for now. Sale of public sector equity will stop well short of privatisation, but their managements – especially banks - will be strengthened with greater autonomy.
In short, Modi will be bold and decisive in some areas, but not radical, in the next 100 days and beyond. Some of the bolder moves may come in the budget of February 2015, but only if Modi wins all the state assembly polls between now and then.
#2: The second point to realise about Modi is that he is trying to re-invent his image. He began the process after the 2007 Gujarat elections, when he shifted focus from Hindutva to development. Now, with Gujarat 2002 fading from public memory, he is trying to cover his left flank completely before making bolder moves to his right. Anyone who has listened to Modi’s speeches after 26 May will note that the poor are his new focus; his formal agenda has turned soft around the edges: financial inclusion, toilets for girls in schools, sanitation, skill-building, e-governance. None of these is controversial, and each of them will yield economic dividends only after a huge lag. Attacks from the Congress and the Left are thus falling flat. They are upset that he has stolen their clothes.
Modi is clearly trying to occupy the centre of Indian politics first before moving Right. However much this may distress his supporters, politically this is the right thing to do. You cannot build a long-term political platform in India by being robustly Right-wing. He is essentially building room for manoeuvre on economic reforms by decisively looking Left. He is leaving the pro-business talk to Arun Jaitley, so that he has plausible deniability if anything recoils.
In the coming 100 days and beyond, Modi will alternate between his political and economic agenda. The economic agenda will be prosecuted largely by stealth – like previous governments – but at a faster pace. Modi's first priority is to make his political power impregnable before moving more decisively in the economic and social spheres. In his view, his hold on power is not yet complete.
#3: Modi himself is pro-business, but not necessarily pro-market. He is unlikely to favour cronyism either. Being pro-business has come to mean crony capitalism in India, but Modi – contrary to his image - does not encourage cronyism of any kind. Not among politicians, nor among businessmen. He has not gone out of his way to befriend any businessmen (though they are trying their damnedest to get close). Most businessmen and journalists I have spoken to (and who have better ears to the ground than me on what Modi is about) tell me that he listens to all, but does not let anyone control his actions. He is a loner who likes control, and does not like being controlled by anyone.
Modi is pro-business in the sense that he wants to make it easy for all businesses to work without red tape, not in the sense that he is pro- any particular businessman (though Adani is on everyone’s minds, I doubt he dances to Adani’s tune). But Modi is not necessarily pro-market; he may not let the market decide prices, winners, or losers all the time. He has a limited, but strong, belief in the public sector, to the extent that he thinks they can be run better. He does not believe that they need to privatised. He will avoid that – as long as it is possible. He may believe in market pricing of goods only to the extent it does not have to do with his social agenda (hence his emphasis on food security, LPG and kerosene subsidies for the poor, all anti-market policies). But if he opts for direct cash subsidies, it would be pro-market.
Modi will focus on reducing red tape and speeding things up for business, not change the economy’s basic direction fundamentally. He will be right-wing with a small ‘r’. The big change has brought in is himself: business knows that he will not do anything anti-business.
#4: Modi has gotten off to a wrong start with the judiciary. He will have to cool things down to get his agenda going. The government’s initial interactions and run-ins with the judiciary – over the appointment of Gopal Subramanium as Supreme Court judge, and the enactment of the National Judicial Appointments Commission Bills – have not set the right tone. In many areas – from coal block cancellations to the recomposition of the wildlife board to the setting up of the SIT on black money – the Supreme Court is likely to try and set or influence policy. This is bound to create executive-judiciary friction, since the government cannot let the Supreme Court enter the details of policy-making.
In the next 100 days, Modi will have to offer an olive branch to the judiciary even while asserting its legislative and executive rights. It is not clear if he will do so.
#5: Modi harbours an essential contradiction within himself on federalism. As a former Chief Minister, he believes in federalism. But as a person he is a centraliser, someone who likes to hold all the levers of power. This is why the bureaucracy is more important to him than fellow politicians. His ability to control the political agenda, both within his own party and outside, depends on only one thing: his ability to talk directly to the people over the heads of everybody. It is this direct rapport that is the basis of his power. Not for nothing did Pratap Bhanu Mehta liken him to Charles de Gaulle, a Republican Monarch of sorts. His power and authenticity come from his plebeian roots and this aids the concentration of power.
In the coming months, Modi will face several contradictions as he tries to bring his social agenda to the states. True federalism means not imposing an agenda from Delhi; it also means voluntarily reducing the centre’s powers in several areas and handing them over to states. Will he do this? His stand on toilet-building – lauded by one and all – is no different from the Gandhi dynasty’s efforts to push one-size-fits-all schemes like NREGA and food security down all states’ throats. Modi’s schemes will work only if states buy into them. But Modi made no effort to get that buy-in before announcing the schemes on Independence Day, nor has he said something to this effect: “This is my priority, but states are free to set their own priorities in this area.”
If he is a true federalist, in the coming 100 days Modi will push all central schemes down to the states, saying here is the money, now do what you need to. He will also tell states that if you pass any law that conflicts with a central law on the concurrent list, your law will prevail in your state.
In the next 100 days, we will know whether Modi is a true federalist or a centraliser. I hope he is the former. His long-term success depends on making India more federal so that we have an effective centre and effective states – even of the latter move at different speeds.
#6: Modi is clear about India’s place in the world. His has a broad ‘Look East’ policy, which means Japan, South-East Asia and China are his inspirations and will be his foreign policy priorities. This is why his first big foreign trip outside the Indian sub-continent is to Japan – a country he truly admires and with whose current PM, Shinzo Abe, he has a good equation. He needs Japan both as a counter to China, and as a source of investment funds for his mega projects – including the Delhi-Mumbai Industrial Corridor, smart cities and bullet trains. He can also source funds from funds-flush China, but politically the relationship is clothed in mistrust. Relationships with Asean will improve, with Singapore being a key focal point. The Smart Cities ideas will probably have Singapore as model.
As for America, Modi will be pragmatic, doing quid-pro-quo deals – in defence and other areas. But the political relationship with the US will be formal, not warm.
In the next 100 days, Modi will definitely strengthen his ties with Japan and (possibly) Russia, stabilise them with China, and have a business-like relationship with the US. Japan, US, Russia, and China will be his big power priorities – possibly in that order. On neighbours, despite his initial enthusiasm, we will see only slow progress beyond Nepal and Bhutan.
Bottomline: in the next 100 days, Modi will move away from the political agenda to the economic one. But he is likely to be less radical and reformist that what his supporters expect, but more pro-poor than what his detractors paint him to be.
He will set the agenda on his own terms.