Last week President Pranab Mukherjee delivered the new government's first president's address to the 16th Lok Sabha. How important are these set-piece speeches? Well, judging by the one delivered by his predecessor five years ago, when the United Progressive Alliance (UPA) began its second innings, they can be important harbingers of the policies, programmes and priorities of a new government. Recall that in June 2009, after the UPA had won the elections and the Congress had greatly improved its seat strength, there was a great deal of hope that UPA-II, no longer dependent on the Left's support for parliamentary majority, would resuscitate the stalled programme of economic reforms. Such hopes were extinguished as the years passed, helping to land the Indian economy in its current mess of low growth, high inflation, stagnant employment and vulnerable external finances.
A careful reading of Pratibha Patil's address to Parliament in early June 2009 would have squelched these hopes right in the beginning. As I pointed out then ("The Leviathan Returns", June 11, 2009, Business Standard), her address was a clarion call for massive government spending on a broad range of entitlement and other programmes, with hardly a whisper about economic policy reforms. Even job creation, which only got a passing mention, was to be the government's direct responsibility: "High growth is necessary to provide the government [italics added] the capacity to expand opportunities for employment." Well, we got the massive spending all right, along with high and sustained inflation, collapsed growth, a plummeting rupee and shrinking job opportunities ... and no reforms. The lesson seems to be that we should take these addresses seriously, especially the first one from a new government.
What can one glean from last week's president's address about the National Democratic Alliance (NDA) government's priorities for policies and programmes in the new climate of hope and enormous expectations engendered by the recent election outcomes? One would have expected that the address, cleared by the Narendra Modi Cabinet, would outline fresh new policy priorities to revive growth and employment. One might have also expected strong words of encouragement for the private sector and a statement of intentions to free up onerous restrictions on land and labour markets. Well, such expectations were largely confounded. Indeed, what is startling are the similarities with the UPA-II's president's address of June 2009. The new address spends most of its 38 paragraphs (out of 50 total) about economic and social matters on government programmes such as the Pradhan Mantri Krishi Sinchayee Yojana for water management, the Indian Institutes of Technology and the Indian Institutes of Management in every state, a national multi-skill mission, a national health assurance mission, a "Swachh Bharat mission" for sanitation, a "Van Bandhu Kalyan Yojana" for tribals, a broadband highway to reach every village, dedicated freight corridors and industrial corridors, a "diamond quadrilateral" for high-speed trains, the Sagar Mala project for ports, 100 new cities with world-class amenities (what about the 8,000 existing cities and towns with poor amenities where India's urban citizens currently dwell?), a new Ganga-cleansing programme, a mission mode project for 50 tourist circuits ... and so on.
Like the president's address of 2009, it's all about government programmes and spending, and very little about policy reforms. Indeed, given its language and content, last week's address could have been comfortably crafted by the recently defeated UPA government! (So what was the election all about?) The obvious question is: where will the money for these programmes come from, especially bearing in mind the large needs of under-capitalised public sector banks and our under-equipped armed forces? From even higher fiscal deficits, with their demonstrably pernicious effects on inflation, growth and external balance? Individually, most of these projects, programmes and missions may seem quite worthy. But, as a government's overall programme, in the current dire straits of the Indian economy, they hardly seem to match the needs of the times.
Another eerie similarity between President Mukherjee's address and President Patil's speech is that both paid little attention to the paramount challenge of job creation that confronts India's young and burgeoning labour force. It is only in paragraph 27 that we find this: "For rapid creation of jobs in the manufacturing sector, the government will strategically promote labour-intensive manufacturing. Employment opportunities will also be expanded by promoting tourism and agro-based industries." Beware the word "promote" in policy documents. It usually means either expensive tax incentives or that the writer doesn't have much clue about the real policy requirements. In this case, as many years of development history has amply demonstrated, India has little chance of replicating East Asian success with growing labour-intensive manufacturing without a serious overhaul of the country's highly job-destructive labour laws. And there is little chance of any kind of manufacturing surging ahead without significant amendments to the recently enacted land acquisition law. Not that the president's address mentions any of this.
The big puzzle is: why does this speech appear to be a close cousin of President Patil's address? Didn't the drafters (including the Modi Cabinet) want to differentiate their approach to social and economic policy from the ill-judged one followed by the UPA government? Couldn't they have used this opportunity to have the president point out the exceptionally weak economic and financial conditions inherited from the bumbling UPA government and the tough and far-reaching decisions now required to undo the past damage and then take the country forward? Is it simply a case of "bureaucratic capture" by civil servant drafters who look at past president's addresses and the relevant election manifestos and cobble together 50 paragraphs?
Judging by recent press reports, Prime Minister Modi has been quite forthright in emphasising the poor economic health of the country and the need for tough and unpopular economic and financial corrective actions. It is a pity his clarity and candour were not reflected in last week's presidential address. It might have been wise to have the president forewarn all members of Parliament of the difficult choices and decisions necessitated by the UPA's bad economic legacy. Hope is a wonderful sentiment. But it cannot substitute for hard analysis and even harder corrective actions.
Now let us see what mixture of hope, realism and courage the NDA's first Budget unveils.
The writer is honorary professor at Icrier and former chief economic adviser to the government of India.
These views are personal
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