Social sector schemes led by Jan-Dhan and crop insurance, along with efforts to resolve knotty issues like spectrum availability, show a clear change from the UPA’s time, but a forward movement on retrospective tax and multi-brand retail FDI is still pending
By: Santosh Tiwari | Updated: May 8, 2016 9:02 AM
Take the case of Jan Dhan-Aadhaar-Mobile (JAM). It is a refined and much better form of the UPA’s Aadhaar-based direct benefit transfer (DBT) scheme that was launched in January 2013 – the difference is, while the former failed, the latter is progressing well. (Reuters)
Two years is a good enough time to judge performance of a government, especially one that has come to power promising to completely change the way its predecessor worked. In that sense, with the NDA government, led by its star campaigner in the 2014 Lok Sabha polls, Prime Minister Narendra Modi, completing its two years in office on May 26, the UPA sympathisers have reason to ask ‘what has changed from 2014’, if more or less the same policies are being pursued. But, on the ground, the reality is that the government functioning, especially in furthering social sector schemes and policy reforms, is a lot better than the UPA’s last few years, even though in terms of investments and the economy picking up to usher in so called ‘achhe din’ promised by PM Modi, a lot of distance still needs to be covered.
This makes the setting perfect for a Congress-NDA battle on the achievements of PM Modi government as the ongoing Parliament session ends. While the government machinery is all set to blow its trumpet of the successes through punch lines like ‘Zara Muskara Do’, as reported by The Indian Express, which will be the theme of a grand event to showcase NDA success stories, the opposition ranks will cry ‘nothing has changed’. That may be an unending debate, but net-net, the policy paralysis and despondency witnessed during the UPA regime due to the scams like 2G, coal and Commonwealth Games, among others, has taken a back-seat. And though it is a fact that the NDA government has focused predominantly on fine-tuning and better implementation of the already existing policies and schemes under a repackaged brand to make them attractive and look new, the exercise has been fairly successful and has yielded good results.
Take the case of Jan Dhan-Aadhaar-Mobile (JAM). It is a refined and much better form of the UPA’s Aadhaar-based direct benefit transfer (DBT) scheme that was launched in January 2013 – the difference is, while the former failed, the latter is progressing well. The core of the NDA’s DBT model to disburse subsidies and all social sector entitlements such as scholarships and pension, Jan Dhan scheme, launched on August 28, 2014, boasts of 21.68 crore bank accounts now with Rs 36,796 crore of deposits in them along with 9.42 crore Suraksha Bima policies and 2.96 crore Jeevan Jyoti Bima policies. Facing the threat of being left in the lurch as a scheme not to be touched because it was touted as a game-changer by the UPA regime, when it left office, Aadhaar has in fact been pursued by the NDA government with the zeal that is required for pushing such a scheme. The number of Aadhaar enrolments surpassing the 100-crore mark last month, along with the enactment of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits, and Services) Act, 2016, has no doubt created one of the biggest reform platforms in the country. Going by the success of the DBT in LPG, which helped government save Rs 21,000 crore in the last two financial years, the implementation of Aadhaar-based DBT across all government social spending, including those on food and fertiliser, is expected to ensure substantial savings by curbing leakages that could be as high as 40-50% in some areas.
Another significant measure that will help farmers across the country far more than any of the vote-catching loan waivers is the liberal crop insurance schemes, as only 5% of them are covered by it because of higher premiums. Under the new scheme announced by the government now, in which it will bear a major chunk of the premium, farmers will have to pay a uniform premium of only 2% for all Kharif crops and 1.5% for all Rabi crops. For commercial and horticultural crops, the premium will be only 5%.
If the steps taken for improving the returns on the government’s social sector spending are looking impressive, in case of dealing with some of the pending issues in areas like telecom also, such as the handling of spectrum shortage to improve telecom services and support Digital India and other government flagship schemes, there is a clear change visible in the approach.
Though the UPA government did the groundwork for releasing 3 carriers of 5MHz each in the 2100MHz band, it could not happen because the agreement with the defence ministry could not be worked out, that led to high bids in the 2015 auctions. Not only the defence ministry has now been brought on board making this spectrum available in the July auctions, the permission to allow spectrum trading and sharing has ensured the optimum use of the available spectrum by telecom operators through tie-ups.
While these are bright spots and big hits, among others, including those in the power sector, such as promotion of LED bulbs and streamlining of the coal block allocation and linkages, there are quite a few concern areas. Despite PM Modi and finance minister Arun Jaitley hinting at the scrapping of the 2012 retrospective tax amendments a number of times, it is still in the statute, and the two top cases, Vodafone and Cairn, are no way near any resolution. Unless these two cases are resolved, the ghost of retro tax will be around, even if the government doesn’t take up any new cases.
Not being able to pass the Land Act changes to improve the land acquisition environment crippled by the 2013 Act and also the critical goods and services tax (GST) because of lack of majority in the Rajya Sabha is another big dampener for reforms, and the NDA dispensation has failed to build enough pressure on the Congress for co-opting the party to support these Bills. If it succeeds in getting the Bankruptcy Bill passed in the Rajya Sabha, its score card on this will improve to a certain extent, as the Real Estate Bill has already been passed with the Congress support earlier in the session.
Indeed, the two years of the NDA government are more of a mixed bag in terms of results, but the overall atmosphere is far better than the UPA period – foreign direct investment in the country touching an all-time high of $51 billion in FY16 (till February) is an indication of that. The biggest concern, however, of the investment not picking up still remains, and the situation is unlikely to improve at least in the next two years in any significant manner – private sector investment slowed down to 29.4% of GDP in FY16 from 38% in FY08, and capacity utilisation in factories is 71-74% for the past two years. In the absence of any betterment of the global growth scenario in the near future, the government needs to target big reform measures like opening up multi-brand retail window for foreign investment and the passage of the GST and labour reform Bills in Parliament by finding ways to ensure Congress support to the reform legislations.
The road ahead in the next three years for the NDA government is going to be no less bumpy, even though with a GDP growth of around 7.5%, India is being considered a bright spot globally.
