Debashis Basu: Mr Modi, jobs and rule-making

At a time when he has completed just over 20 per cent of his five-year term, after a thumping election verdict, Narendra Modi now evokes two kinds of responses among the vast majority of people who don't belong to political parties. There are his sympathisers who believe that his tireless energy, boundless vision and ability to always think big will eventually deliver significant changes. The rest believe that a lot of money and effort is being spent on issues that ought to be low in priority. Several polls on public opinion about Mr Modi have shown that the first camp win hands down. People are still positive and see Mr Modi as a strong and well-meaning leader who needs to be given much more time to bring about much-needed change.

However, the hard truth is that people's role mostly begins and ends with capriciously voting for this or that party candidate, a wonderful real-life example of what behavioural economists call availability bias. We choose from what is available. In this case, voters don't even have much of a choice. We select from several half-literate leaders waiting to loot us after elections. Among opinion-makers, I notice that those who have access to the government are more sympathetic. Maybe they feel obliged to sound positive because of the access they are getting.

The people who really matter for the long-term well-being of a country are those who create jobs. On paper this comprises the government, public sector companies and private businesses. But, in fact, the government merely robs us to create a lot of useless jobs. The incremental jobs will set off a chain of growth that everybody is waiting for, will come from small and big, Indian and foreign, businessmen - whether in manufacturing, services or trading. In our cultural milieu we are suspicious of these job creators, even when we benefit from them.

What do they have to say about the job-creation climate since May 2015? They remain mostly guarded and quiet. Privately, when they open their mouth, they are frustrated; their public statements are however full of vapid, mandatory cliches. Over the past one year there has hardly been any dramatic increase in the creation of new jobs.

To be sure, we don't have systematic job creation surveys and so we rely on anecdotal evidence here. But we do know for sure what holds back job creation and there is no change there. Mind-numbing rule-making, the single biggest source of abuse of citizens and hurdles for businessmen to create jobs, is thriving as before. Here is one example.

After a decade of effort by successive governments we now have a law that allows foreign insurance companies to hike their stakes to 49 per cent in Indian associates. This move started under the Vajpayee government, was half-supported by the United Progressive Alliance and finally passed under Mr Modi. So you think foreign companies can easily raise their stakes now? Not so fast. The insurance regulator (one of the worst when it comes to safeguarding consumers interests) has interpreted the law to mean that companies whose parents are foreign cannot increase their stakes.

For instance, ICICI Bank has promoted ICICI Prudential Life of UK. Prudential wishes to raise its stake in ICICI Pru. But the Insurance Regulatory and Development Authority of India (Irdai) says no, because while ICICI Bank may be an Indian company with no foreigner on the board, foreign institutional holders hold a majority stake in ICICI. So in the eyes of the Irdai, ICICI Bank is a foreign company. If ICICI is a foreign company, an obvious question would be, were ICICI and Prudential not already in violation of the law that prevented foreign companies from holding more than 24 per cent in Indian insurance companies! If ICICI (and HDFC and others) were not treated as foreign investors for the 24 per cent rule, how could they have suddenly become foreign investors for the 49 per cent rule?

There are thousands of such examples across the economy. It is admirable the prime minister is a tireless worker, serving our interests. But the people who will really carry his vision of vikas are businessmen who create jobs and pay taxes, a lot of which is wasted by the government. Mr Modi can help them in two ways. One, with significant one-time changes, which will make sure that the government does not get in their way. This job is has been left to government departments who are merely tinkering. Two, since businessmen have to mostly deal with states, the powerful prime minster that Mr Modi is can at least use the National Institution for Transforming India Aayog to work with the Bharatiya Janata Party-ruled states to slash and burn mindless rules that have held back India.

Mr Modi has inherited a system that taxes businessmen and fritters the money away over ministries, departments, divisions, commissions, companies, authorities and other institutions. They are all engaged in rule-making, even though such rule-making does not stop the endless loot, doesn't deliver money to the needy and doesn't raise productivity, the secret of wealth-creation by countries. They merely slow down enterprises, our only engine of job-creation. Mr Modi's social engineering objectives and event-management skills are remarkable. Shouldn't he spend some of it fortifying the magic bullet of job-creation? Millions of Indian youth are waiting in hope.

The writer is the editor of www.moneylife.in
Twitter: @Moneylifers