Why Narendra Modi govt is shying away from big-bang reforms

Narendra Modi government

The first couple of months for a new government are always crucial as this is the time when it lays down its broad framework of policies and their thrust areas. 

A government that fails to make the right impact in this period often regrets its lack of focus or urgency later during its tenure. 

The Narendra Modi government was sworn in on May 26. This, therefore, is a good time to assess what the key signals on governance the new regime has sent out in the last few weeks. 

The Modi government has so far taken a host of important decisions, including the unveiling of the Union Budget for 2014-15 on July 10. 

One, there is reluctance to go in for big-bang reforms. Expectations from the Modi government that it would unleash major economic reforms within weeks of its formation were high. 

None of that really happened. 

Compare what happened in the Modi government’s first two months with what the Narasimha Rao government achieved in the same period in 1991 and you will notice the stark differences. 

Manmohan Singh’s Budget in 1991 and the economic policy changes announced around that time including the industrial policy liberalisation brought about dramatic changes in the country’s economic policy landscape. 

The Modi government was expected to bring about significant changes in the land acquisition law, the subsidy regime and labour policy. 

None of that has happened so far, although suggestions of changes in the land acquisition law have been made and a new expenditure reforms commission is expected to make recommendations on the subsidy regime before the end of the current financial year. 

Perhaps comparing the Modi government with the one led by PV Narasimha Rao is wrong. 

The government in 1991 was faced with a major economic crisis and had no option other than ushering in those bold policy changes. 

In contrast, the economy at present is certainly in better shape, though its challenges are quite daunting and any negligence could land it in deeper trouble. 

Even then, it could be argued that the compulsions that forced the Narasimha Rao government to take those bold steps are not a factor for the Modi government. 

Yet it is puzzling that the Modi government should be reluctant to usher in big-bang reforms. 

One reason could be that the government’s leadership has come round to the view that the country is simply incapable of absorbing the political impact of any major change in one go.

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