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Special Report

Published on: Sept. 24, 2022, 8:18 p.m.
Preparing for 2024
  • Modi: sounding the poll bugle

By Rakesh Joshi. Executive Editor, Business India

As the countdown to the 2024 Lok Sabha election begins, Prime Minister Narendra Modi is engaged in a flurry of meetings with his council of ministers and departmental secretaries to ensure policy deliverables in the coming months. The idea is to convey the image of a government on the move, responsive to the needs of the people. With the Opposition stirring into action and an effort being made to forge a semblance of unity, Modi does not want to lose the political initiative that he has now. He wants to preemptively blunt the key points of the campaign that may be built up against him. 

Internal surveys by the BJP have revealed that most chief ministers in states ruled by the party are not hugely popular. Hence, the party will have to rely on Modi’s popularity and welfare schemes run by the Centre, to retain power in states going to polls before 2024.

Joblessness is one issue which can put the government on the defensive by snowballing into a major electoral issue. India’s unemployment rate, according to Centre for Monitoring Indian Economy (CMIE) data, increased to a one-year high of 8.3 per cent in August, as employment sequentially fell by 2 million to 394.6 million.

While rural unemployment rate may come down as delayed monsoon will increase agricultural activities towards the end of the monsoon season, it is not clear how the urban unemployment rate will play out in the coming months. Finance Minister Nirmala Sitharaman recently berated India Inc for not investing enough to create jobs (see box: FM’s outburst).

Early this month, Modi parlayed with his ministers on a host of issues, which could shape the electoral outcome. While the PM, addressing a BJP Mayors’ conference in Gujarat recently, has maintained that development cannot happen with just a single approach of winning elections, it is an interesting coincidence that most of the issues under his scanner will have a bearing on the electoral outcome in 2024.

Towards a developing economy

So, will Vision@2047, the grandiose multi-sectoral plan, aimed at India a developed nation when it celebrates the 100th year of independence 25 years later, materialise? B.V.R. Subrahmanyam, commerce secretary, says that within a few years from now, India will be among the top four economies globally and, by 2047, it will be the second biggest economy in the world under the vision laid down by Prime Minister Modi. India, which recently overtook the UK as the world’s fifth largest economy, is the world’s sixth largest economy, with a GDP of $2.7 trillion, but is still classified as a developing nation. 

On the top of the agenda at the meetings being convened by Modi is how to fill up all vacant posts in the Central government. Other issues include ensuring complete utilisation of capital budgets allocated to ministries, which are needed to push growth, and rationalisation of autonomous bodies within set deadlines (to make them more accessible to the people, free of external pressures).

Subsequently, periodic directives are sent across by Rajiv Gauba, cabinet secretary, to all secretaries seeking immediate action by all ministries and departments on these areas.

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Modi has projected filling up of vacant posts across the Central government as a priority area for the government, as part of which ministries and departments will have to finalise the calendar for both appointments by direct recruitment and also fill up vacancies created owing to promotions and retirements.

The directive states that ministries will also have to take steps in consultation with the Department of Personnel and Training (DoPT) to cut short the time frame further to complete the recruitment process, for which they should leverage technology and strengthen monitoring mechanisms. DoPT will have to co-ordinate with all ministries closely on issuing of appointment letters.

Filling up 1 million posts

In March this year, the government had announced filling up of 1 million vacancies in the Central government within the next 18 months. As per the data provided by the government to the Parliament, there are 4.04 million sanctioned positions in the Central government as on 1 March 2021, with only 3.06 million employees.

At his meeting with secretaries which followed, the PM asked for employment generation to be given ‘top priority’ and said that it should be the focus of government interventions across public and private sectors. “Every ministry should immediately take steps to fill up existing vacancies against sanctioned posts,” the directive said. The 1 million vacancies in Central government jobs are to be filled in the next 18 months.

On paper, filling up the 1 million vacancies may look easy. But the wheels of bureaucracy do not necessarily move fast enough, necessitating the directive and the regular follow-ups. 

Take the state-run banks. Bankers acknowledge that there is a shortage of staff at the branch level, as there are fewer hands than at private sector lenders, which have higher concentration in urban centres. While the number of public sector bank branches has gone up by 28 per cent during the last 10 years ending March 2021, the staff strength has gone up only marginally.

But public sector bank customers, including those in large cities and, especially in rural areas, still prefer going to these branches, which are grappling with a depleted pool at the clerical staff. The finance ministry has now asked these PSBs to take stock of the staff situation and prepare a monthly recruitment plan.

Fully utilize capex

Another priority area emphasised in the meeting was the full utilisation of capital budgets by all ministries. As per the directive, every ministry and department will have to closely monitor capital expenditure and ensure that its pace is stepped up to achieve full utilisation of the budgets allocated to them.

This directive came against the backdrop of several ministries not being able to utilise a significant portion of capital. Ministries project their revised estimates to the finance ministry in September-October every year.

Other points emphasised in the meeting were that the ministries should implement a special campaign for disposal of pending references, including in field offices in remote corners of the country. Ministries have also been told to take efforts to target 100 per cent of procurement of goods and services through the Government e-Marketplace (GeM), an Amazon-like venture, which the secretaries have been asked to review every month.

  • Internal surveys by the BJP have revealed that most chief ministers in states ruled by the party are not hugely popular. Hence, the party will have to rely on Modi’s popularity and welfare schemes run by the Centre, to retain power in states going to polls before 2024

Ministries and departments have been directed to meticulously study the Comptroller & Auditor General reports, take ‘remedial actions and undertake systemic improvements’, and complete the ongoing exercise on rationalisation of government autonomous bodies in a time-bound manner. The Department of Promotion of Industry and Internal Trade (DPIIT) has also been directed to finalise proposals related to decriminalisation of minor offences expeditiously, in consultation with the relevant ministries and Niti Aayog.

Targets are being set. Early in April this year, the PM gave a 28-point mantra to all government secretaries, including asking each of them to meet one related counterpart every 15 days, train 10,000 officers for implementation of the GatiShakti scheme, improve India’s ranking in global indices, and also make food labelling mandatory on snacks to curb obesity.

A document titled ‘Action Points’ from the PM’s interaction with secretaries on 2 April spells out a number of policy measures from the prime minister to improve governance. A big direction was to regard global indices as ‘opportunities to benchmark ourselves against best practices, identify shortcomings in our framework and processes, and undertake necessary improvements’.

Global indices

Ministries were also asked by the PM to have targets for various global indices and that efforts be made to improve the ranking of the country in them. “Proposals submitted to the Cabinet/ Cabinet committees relating to various projects, schemes, programmes and policies should incorporate benchmarking with global standards with respect to the proposal,” the document says.

Secretaries have been tasked to study in detail ‘cutting-edge global technologies’ in different sectors and take steps to adopt them in India. Each secretary should meet the secretary of another related ministry once in 15 days ‘to deliberate on the cross-cutting issues, to facilitate working in a more co-ordinated manner’.

The PM’s signature GatiShakti initiative also found mention in the directions, specifying that for expeditious implementation of the scheme, mapping of the skill set of officers is necessary. “A target of training 10,000 officers on infrastructural issues, financing models and related subjects, may be fixed, which may be imparted online anywhere, anytime and on demand,” the document says.

Modi also asked all ministries to use the GatiShakti master plan for granting in-principle clearances to projects and base regulatory clearances on the same to expedite infrastructure projects. The GatiShakti platform was launched by the Prime Minister to streamline the execution of infrastructure projects.

The PM sought the strengthening of the economics and statistics divisions in the Department of Economic Affairs and Ministry of Statistics & Programme Implementation respectively, as well as in other ministries. He also said that each ministry should assess ‘long-term opportunities’ for exports and fine-tune their policies to ‘fully leverage such opportunities’.

Some other ideas

The PM has asked for the launch of a ‘National Mission on Coastal Shipping’, to be anchored by the two key user ministries, “which will directly benefit for it – the Ministry of Power and Ministry of Food and Public Distribution”. He also asked for the development of ‘manufacturing enclaves’ with simplified rules and procedures to promote employment opportunities and greater participation in the global supply chain.

“Research Parks are required to be transformed into Industrial Parks, through handholding by both government and private players,” the document says, citing the PM’s instructions.

  • GatiShakti master plan: will it bring electoral dividends?

He also suggested that there should be an ‘eco mark label or a green label’ on products and directed that to curb obesity, ‘food labelling on snacks may be made mandatory’. This could be a major reform, as obesity has been flagged as a major health hazard among Indians. “Health informatics is an important emerging area. Information about rare diseases is to be collated and made available for strategically utilising the same”, informs the document.

The PM asked for the creation of facilities at the district level where chemotherapy may be given by trained doctors and nurses and the use of telemedicine to be emphasised and made available at every health centre. Also, the university system, he said, should be strengthened by bringing more state universities onboard and added that the aim should be to enhance the number of scientists from 100,000 to 300,000. “Scientific institutions, which are taking risk should be given tax benefits to promote innovation,” the documents say.

The PM also said that ministries concerned with a sector should be given the responsibility of implementing projects in neighbouring countries in co-ordination with the Ministry of External Affairs for expeditiousness. “Legal agreements should not only be scrutinised from legal angle but also in terms of outcomes and whether the clauses achieve/ protect national interests,” the document says, specifying the PM’s instructions to the Law Ministry.

Fiscal discipline

At the 2 April meeting, the PM also said timely payments to the MSME sector should be ensured both by the public and private sectors. He said that the importance of fiscal discipline at the states level needs to be suitably communicated and long-term fiscal implications of policy measures/decisions should be analysed and the findings shared with state governments.

Modi also sought the simplification of procedures to promote agro-based forestry and cultivation of bamboo as this may generate employment, particularly in the MSME sector. He asked for a ‘mission mode’ exercise towards decriminalisation of minor offences and violations and their repeal or amendment in a time-bound manner. 

Along with these moves on the administrative plane, the BJP is ramping up its political strategy for 2024. The need on the part of the BJP to step up politically became obvious when the party suffered a jolt in Bihar with its partner, Janata Dal (U), led by Nitish Kumar walking out of the alliance and joining hands with the political rival, Rashtriya Janata Dal, to form the state government. 

 Political plan

The BJP is now working on a multi-pronged plan to win at least half of the 144 Lok Sabha seats it lost in the 2019, as part of a strategy to repeat – if not improve upon – its 2019 tally of 303 seats. In the 2019 Lok Sabha elections, the party had won 21 seats more than it had won in 2014. The idea behind focussing on these 144 seats is that, if the party loses a few seats in some states, it should be able to at least make up for the shortfall by winning new ones.

  • Subrahmanyam: soon India will be among the top four economies globally

At a recent high-level meeting in New Delhi, Home Minister Amit Shah and party president J.P. Nadda tasked three senior Union ministers – Nirmala Sitharaman, Narendra Singh Tomar and Jyotiraditya Scindia -- for more party work. Shah wants top Opposition leaders like Sharad Pawar, K. Chandrashekhar Rao, M.K. Stalin, Mamata Banerjee and Uddhav Thackeray to be targeted so that they are pinned down to their states or areas of influence.

As far as Rahul Gandhi goes, the party is closely monitoring the public response to his Bharat Jodo yatra. The BJP feels that, if the venture succeeds, then Rahul may join the phalanx of leaders on the party’s watch list. The party will then evolve its strategy accordingly. The strategy will also depend on who will become the new Congress president. 

BJP leaders are confident that the government’s administrative thrust and the party’s evolving strategies, helmed by Modi and Shah, will form a winning strategy to overcome the challenge of 2024, no matter what the index of opposition unity. The Opposition, on the other hand, says that the hyper-activity on the part of the BJP/government betrays its nervousness about the 2024 outcome. “That is why enforcement agencies have been let loose on top Opposition leaders and fake cases slapped against them,” says Akhilesh Yadav, Samajwadi Party leader and former chief minister of Uttar Pradesh.

  • Sitharaman: hectoring tone

FM’s outburst

Only blaming India Inc won’t do, says Sitharaman

The Finance Minister Nirmala Sitharaman recently drew a mythological parallel between India Inc and Hanuman, the monkey God in the Ramayana, to push for manufacturing. She sought to know from the industry what is holding it back from investing in manufacturing, though foreign investors were showing confidence in India. Besides, the government had cut corporate tax and announced a production-linked incentive (PLI) scheme for sunrise-field manufacturing, while the RBI had held back interest rate hikes to facilitate easy lending. She asked India Inc not to doubt themselves as Hanuman did. Many in the industry feel that her hectoring tone was uncalled for.

Sitharaman is right to an extent. It is also obvious that the government is worried about the non-availability of jobs. While top-league investors are ploughing hefty sums into big assembly units (like Vedanta’s $20-billion chip-making project with Foxconn in Gujarat and the Adani, Reliance, A.V. Birla and Tata groups finalising big-ticket plans), what’s missing is an across-the-board surge that can open up diverse avenues for job-seekers.

While investments as a percentage of GDP rose year-on-year in the first quarter of 2022-23, they were still below the 30 per cent mark required to push the economy on to the path of sustained growth. Gross fixed capital formation (GFCF), numbers also show that there was an improvement in investments in the first quarter compared to the corresponding period of the previous year. This improvement was probably aided by government capital expenditure. However, it is clear that investments have still not recovered to pre-Covid levels.

From the disaggregated data that is unavailable, the government continues to be the source for a large chunk of the GFCF. The government had been hoping that capital expenditure would lead to the crowding in of private investments, which would give economic growth the push it needs. Despite significant Central outlays, the private sector has remained investment shy. 

However, the FM should also realise that what is holding back Indian firms from coming forward and making investments is a question with many answers. To begin with, Indian businesses are not confident about the durability of the demand recovery. 

This is evident from the growth rate of gross block formation of Indian companies falling to single digits in the last two years, as the pandemic hit consumer demand. Private final consumption expenditure (PFCE), rose 13.5 per cent in the first quarter of 2022-23. Also, it was almost 10 per cent higher than the corresponding pre-Covid period of 2019-20. PFCE denotes demand in the economy. However, India Inc is not certain that demand will continue to gather momentum because retail price inflation has remained above the RBI’s tolerance level of 6 per cent.

Then there are the prevailing external headwinds, which may hit the sustainability of demand and one gets a clear picture of what’s stopping firms from increasing investments. Moreover, the combination of the pre-Covid slowdown, the Covid shock and the current global growth challenges, emerging from the ultra-tough monetary stances adopted by central banks, are other factors.

To this, one can add high commodity prices and geopolitical uncertainties. The FICCI president Sanjiv Mehta, who heads Hindustan Unilever, recently said that businesses need to be prepared for possibilities of a continued or higher inflation in the next 2-3 years.

  • The FICCI president Sanjiv Mehta, who heads Hindustan Unilever, recently said that businesses need to be prepared for possibilities of a continued or higher inflation in the next 2-3 years

This is not to say that capacity utilisation has not been improving, of late. According to the RBI’s OBICUS Survey, capacity utilisation in the manufacturing sector rose to 75.3 per cent in the fourth quarter of 2021-22 from 72.4 per cent in the third quarter of that year. In fact, capacity utilisation levels have improved consecutively for three quarters since the first quarter of 2020-21. However, Sitharaman clearly wants more.

What can be done to get India Inc to turn on the investment tap? For one thing, businessmen say one can’t hold a gun to their head and make them invest. A tax cut does enhance India Inc’s investible surplus, but what’s invested goes by market prospects. Besides, the benefits of tax cuts have been used by businesses to deleverage their balance sheets.

As for a strategy revolving around the state acting as a resource-hog, it is now obvious that bulky state expenditure can prove sticky, after it outlives its utility. Also, the fiscal glide path outlined for a deficit squeeze to follow hasn’t inspired confidence.

Similarly, PLI packages have been crafted for self-reliance more than export orientation – which requires close adaptation of trade policy to a globe that’s girdled by cross-border supply networks. Till now, the policy holds domestic appeal, but only a weak promise of global success. As critics of big barriers point out, we still lack the overall policy coherence. So, the government too needs to buck up.

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