Monday, 19 January 2015

Decoded: Why Narendra Modi opted for the ordinance route to push his economic agenda..........

Just a day after the winter session of Parliament got adjourned sine-die after the opposition scuttled the government's ambitious economic reforms plan, Prime Minister Narendra Modi has gone ahead and adopted the ordinance route.
The Union Cabinet approved promulgation of the Ordinance on Insurance Bill, re-promulgation of the Coal Ordinance and allowing 100% FDI in medical devices in the pharmaceutical sector. Interestingly, towards the end of UPA-2's regime when the government had decided to bring anti-graft ordinance, the then BJP President Rajnath Singh dubbed it as 'anti- constitutional'. So what exactly changed in a few months that the BJP is in such in a tearing hurry to bypass the parliament?
There are several reasons for it.
Political reasons:
As Tuesday's result has shown, the Modi wave is clearly on the wane. It is not an indictment of the Prime Minister, only a natural phenomenon. The groundswell of emotion Modi could gather before the general elections was a collective yearning for change and hope for a strong leadership. The momentum of the wave has served BJP well in Maharashtra, Haryana and has just got them over the line in Jharkhand. It has also given a commendable performance in Jammu, ending up as the second largest party.
But as an Indian Express report shows, even in Jharkhand, in tribal areas the party didn't do as well as expected and in the Kashmir Valley the party came out complete turkey. So it is very obvious that people have again started to vote for BJP on its merit, keeping in mind relevant considerations like caste, religion etc rather than merely voting for Modi, the person. The Lok Sabha election was perhaps an aberration where all local considerations were eclipsed by the Modi phenomenon. The BJP plans to expand aggressively in the East and South of the Vindhyas, but it doesn't have a strong organisation. It is heavily dependent on Modi to breach those barriers.
Hence to sustain the Modi phenomenon for some more time to enable the path of a 'Congress mukht Bharat', the government needs to show its proactive nature. Especially with the Delhi Election on the anvil and many unsavoury controversies like the conversion row embarrassing the BJP, the party needs to show that it is serious about economic reforms to keep the newly modified middle class under its fold. Hence, the government has gone ahead with ordinances to implement key economic reforms. As Finance Minister Arun Jaitley indicated, they may even go for a joint session of Parliament to ratify all these bills. Hence it is not only a message to the electorate but also to the opposition parties, that the government will not allow anyone to hijack its reform agenda.
Economic reasons:
Arun Jaitley's first budget only got a lukewarm praise, but many believed the bold initiatives are soon to come. To be fair, the government has taken some steps like increasing FDI cap on defence, railways and real estates. Diesel prices have been deregularised and the government has managed to reach a consensus with the states on the much delayed GST bill, albeit in a slightly compromised form. But many corporates who were fervent backers of Modi feel that not enough has been done, especially with the free hands they have courtesy their thumping majority. An ET article quoted top industrialists early this month, which said that initial enthusiasm has waned and India Inc is worried with the 'lack of boldness' of the government. Many corporates think the government is tinkering with already existing policies instead of going for big bang reforms. This no-nonsense attitude to virtually bypass parliament and bringing the ordinance in key fronts can be a potential message that the government is bold enough to get its way ahead if the going gets rough.
Also, the government has been extremely lucky in the first six months with the crashing of crude oil prices. BJP President Amit Shah has repeatedly claimed in rallies that oil prices are down due to the Modi government. But this streak of good luck is unlikely to continue forever. Already, the Current Account Deficit is increasing although it is within the accepted limit. But manufacturing and other segments are in dire need for fresh investments. Jaitley hopes that hiking of the foreign investment cap in the insurance sector will result in capital inflow of US$ 6-8 billion.
Similarly, allocation of coal blocks and subsequent start of mining will give a fillip to steel, power and other related sectors. Today's moves, though still are not sufficient enough, are a start in the right direction. The government called the bluff of the opposition and without dilly dallying went for an ordinance. Now will the opposition fall in line come the budget session, is something that will be closely followed by all.  

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