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View: Modi has established his reformist credentials alongside PMs like Rao and Vajpayee

Economic reforms enacted during the ten day monsoon session ending September 23 firmly establish Prime Minister Narendra Modi’s credentials as a reformist PM. His record now rivals those of Prime Ministers Narasimha Rao and Atal Bihari Vajpayee and surpasses by a wide margin that of Prime Minister Manmohan Singh during his entire ten year tenure.

What Modi has done begins to look particularly impressive when we take into account the fact that the reforms he has enacted have been politically far more contentious than those enacted by predecessor governments. The need for some of his big-ticket reforms had been recognised for nearly two decades, but all prior governments sidestep them on the pretext that there was no consensus for them.

Begin with the Insolvency and Bankruptcy Code. As far back as 2000, Justice VB Eradi Committee had documented the glacial pace at which companies under bankruptcy proceedings could be liquidated in India. It noted that as of December 31, 1999, 48% of the cases took more than ten years and 15% cases more than 25 years to complete. The present author had pitched for a bankruptcy law along the lines of the United States Bankruptcy Code in his 2008 book, India: The Emerging Giant. But it was not until 2016 that Modi government enacted such a law.

Labour law reforms have an even longer history. They were discussed as far back as 1991 when Rao implemented the first set of reforms. But they did not get traction at the time. Later, finance minister Yashwant Sinha promised them in his bold 2001-02 budget but was unable to deliver.

UPA, which came to power in 2004, ruled out these reforms. Indeed, it went so far as to drop even a small provision for a more flexible labour law regime in special economic zones (SEZs) that the outgoing Vajpayee government had made in its draft SEZ Bill of 2004. During its ten year rule, UPA introduced no labour law reforms. Ice was finally broken by the state of Rajasthan in 2014.

But genuine wide-ranging reforms have come only now, with the Modi government replacing 29 disparate and occasionally contradictory labour laws by four considerably more coherent labour codes that make labour markets far more flexible and employment friendly. The new labour law regime gives employers the right to terminate workers in enterprises with 300 or fewer workers (up from previous threshold of 100 workers). More importantly, it gives states full freedom to raise this threshold.

Gujarat and Uttar Pradesh governments, which had recently wanted to suspend labour laws for three years, can now be genuinely bold and raise the threshold to 10,000 workers – to encourage large enterprises and create well-paid jobs. The new labour codes also cut inspector raj, lower compliance burden, empower women to work night shifts and do away with registration requirements for enterprises with less than 40 workers if not using power and 20 workers if using power.

The third set of reforms relates to marketing of agricultural produce, contract farming and controls on transportation, storage, prices and distribution under Essential Commodities Act (ECA) of 1955. The Vajpayee government had initiated marketing and contract farming reforms in 2003 through a model act to be adopted by states, but the latter implemented it only half-heartedly. The problem remained largely unsolved. As regards ECA, economists have called for its repeal or restrict its use for decades. Modi government has finally implemented these reforms.

The fourth difficult-to-navigate area of reform has been medical education. UPA had repeatedly tried to replace the highly corrupt Medical Council of India (MCI) with an alternative regulatory body, but failed. The present government has successfully put in place an entirely new legislation under which the National Medical Commission has finally replaced MCI. The government has additionally passed parallel laws governing education in homeopathy and Indian systems of medicine and laid down the foundation of a new regulatory architecture in medical education.

Fifth, Modi government has gone on to liberalise foreign direct investment in sectors such as defence, civil aviation, railways, coal, mining and e-commerce that prior governments had found difficult to open. It has also opened the automatic route to the point that it could disband the foreign investment promotion board.

Finally, we have two truly mega reforms: GST and the drop in the corporate profit tax to 17% for new manufacturing firms and 25% for other firms.

Plugging of leakages in social programmes through direct benefit transfers; introduction of commercial mining in coal; building of roads, bridges, tunnels, ports and airports at accelerated pace; a robust digital infrastructure founded on innovative Unified Payments Interface platform; digitalisation of numerous government services to improve the ease of living; toilets for all in rural India; electrification of all rural households; and rapid expansion of rural roads and rural housing are some additional achievements worthy of note.

The government’s record is not without blemish and I have written critically of its embrace of import substitution and inaction on privatisation. But criticism without appreciation of positive accomplishments misleads rather than informs the readers.



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