Modi and building of a Welfare State.

On the occasion of Gandhi Jayanti, Narendra Modi launched the Urban Swacha Bharat Mission and also reviewed the Jal Jeevan mission. (connecting rural areas with Tap water). This triggered the idea of this article. Watching him on YouTube, which took me to some of his older interviews, he was asked about the importance of Bapu's thoughts in todays world. As a CM he said he would like to build a true welfare state on the ideals of Bapu's Ram Rajya. Words can sometimes mean nothing until they are backed by actions. Hence now 7years on and a global pandemic later, it is a nice time to review Modis work as PM, and has he stood on his words of building a welfare state. For the purpose this article, we will try to focus on the economic aspects. 

Welfare State is different form Socialists State:

Welfare state IMO is very different from a Socialists /Communist's State. The Socialists state chases a Miraj of equality for all in all fields, a high sounding ideal but an impractical goal which as evidenced by global history an experiment which has not only been violent but also has led to hyper inflationary economies and abject poverty. Marx ones called religion 'the opium of masses'. History has proved that his ideals other than nothing else have turned out to be that 'opium'. The latest example of this failed Socialists experiment is Venezuela.  Welfare state on the other hand is not about chasing the Miraj of equality but is grounded in the realities like not living the underprivileged behind i.e. providing a safety net for the needed and leaving the larger economy to compete in the free market.

India's tryst with Socialism: 

India's tryst with socialism started with its first Prime minister, The Chacha of Bharat in 1947. It took flight with the nationalization of Air India against the wishes of JRD Tata its original owner, expanded under Mahanobalis with his five year economic plans and top down planning commissions, reached it peak under Indira with almost nationalisation of each major industry including banking.  Socialism was even  added in the preamble of the Constitution via back door through an amendment during the emergency when all opposition was in jail and constitution itself was suspended. The result of all this was clearly visible by the 1980's with increasing balance of payment crisis. The situation was so grim that, by the time Rao & MMS duo took over India's charge, it  had only 13 days of foreign reserves left and India was at the brink of bankruptcy. So this was the context or should I say compulsion for the economic 'reforms' that MMS initiated.

Modis 1st term : ALL about creating Safety Net.

Modi’s 1^st term was led by ‘pro poor’ schemes like the DBT (direct benefit transfer), Ujjawala (cooking gas subsidy scheme), PMAY (housing for all), Swacha Bharat (toilet for all), Electricity for all, Kisan credit cards (access to formal credit for farmer)  and Ayushyaman Bharat (medicliam facility for 50cr BPL people), which are classic redistribution schemes. Not that such schemes were not designed by previous governments, but the difference with Modi was he reformed the entire delivery mechanism. Even the critiques of this government had to admit that what was promised was in most cases delivered.' Jal Jeevan Mission was introduced in the in 2019 aim to deliver potable tap water to every household. For Farmers he introduced crop insurance and soil health cards. Thus the 1st term of Modi was all about Safety nets. This led many to believe that Modi was returning to the Socialists days. Modi the politician understood that till he provides safety nets for the poor, he will not have the electoral success to take the free market Capitalists turn.

Modi-Sitaraman Duo and the dismantling of Nehruvian Socialists State: 

On the back of his electoral success and having provided the safety net for the poor, they embarked on the journey to dismantle the entire edifice of the older economy. In 1st budget or just after that, the 1st shot was fired. Corporate taxes were slashed to historic lows with even lower rates for green field manufacturing. But, the real overhaul started with the Pandemic. 

The global pandemic gave the entire think tank the time to reimagine the entire architecture. So in came the reforms. The labor codes were also passed in the parliament reducing the 44 odd labour laws into 4 simplified codes. Then came the big announcement of privatisation policy. The government announced a policy to divest its stakes from major PSUs. On the back of consolidating the PSBs into 4 major banks, the government went ahead and declared to exit from two PSBs and also from one general insurance company as well, a thing never attempted by anybody in the past. The Maharaja was also put on the block to be sold. 

If this was not enough, the Government went ahead and did the unthinkable by abolishing the retrospective tax that was imposed by the 'great' economist PM, MMS in 2013, that literally led to the flight of capital from India. Also many sectors were freed from unnecessary regulations like the Space sectors, Mapping sector which allows new innovative private capital to enter the new sectors that enable risk taking. The other major thing attempted is brining private capital in Infra heavy industry like railways which is WIP. 

Add to this, to attract new manufactures, PIL schemes were announced in 11 sectors and world beating companies along with Indian Majors were invited to setup shops in India. To get rid of the old bad assets and clean the banking system IBC was also introduced, followed by recapitalization and then followed by the bad bank. Also to revamp the military manufacturing, the OFB (ordnance factory board) now stands abolished and 7 new PSU are to replace it in manufacturing military equipment's which now have to compete with private players. Also 74% FDI via direct route is now possible creating a way for foreign giants to partner with Indian companies in Defense architecture. All this has been happening along with the heavy push to build infrastructure across the country at some serious pace.  

The Result: 

The result of the 2 terms combined is that the economy is slowly but surely taking the "Right" turn. This is visible in the stock market Scaling new heights, record FDI inflows increasing MOM, exports hitting new highs and leading economic indicators turning positive. Also India has recorded highest unicorns in its start up sector, with new companies popping up all over the country. 

It is also pertinent to note that as Nehru's socialist state took flight with nationalisation of Air India, Modi's next leg of welfare state has also taken flight with the "Gharwapsi' (read privatisation) of Maharaja to its original owner the Tata's. Of course challenges remain. The old elites who cry death of the 'Idea of India' and ironically, who  have been the biggest beneficiaries of the 1991 MMS 'reforms' initiated under compulsion, are creating obstacles at every stage. Apart from that the vision is no doubt ambitious and has to be implemented successfully to reap the intended benefit. If 1991 MMS budget was the the 1st nail in the coffin of Nehru's 'Idea of India', Modi in 2021 is ensuring that he not only is hitting the last nail, but also burring the coffin so deep that it would be difficult to resurrect any time soon. 

Nehru's Idea of India was about high ideals that pushed India into poverty with low growth rates, which were result of Socialism, blamed on the majority of Hindus as Hindu rate of growth instead of flawed economic policies. Narendra Modi's "Idea of a Welfare state", on the contrary is rooted in reality and focused in balancing the act of welfare with the act of creative destruction of the old Idea and charting a new path of wealth creation. Modi Understands that to feed the needy a strong welfare state is required, but the foundations of it lies in free market wealth creation of the 'greedy' (read risk taking capitalists).  Signs of such a state are now starting to emerge. This New India will achieve the 'real Hindu rate of growth' leaving behind dark days of socialism and scaling new heights and its roots lie not just in empowering the poor but also giving wings to the aspiration of the youth. Modi and Sitharaman duo are doing just that and  laying the foundations for bringing the Laxmi to India's houldholds.