Was it the Policy Paralysis the Paralysis of Implementation which Slowed the Growth of our Country? | HPSC Preparation: All subjects - HPSC (Haryana) PDF Download

Introduction

In a federal polity, the Union government frames policies and releases the finances for the execution of projects by the state governments and the local bodies. Policy paralysis is a situation where important laws and reforms are not passed because of a lack of commitment on part of the government or the inability of the government to reach a consensus over the specifics of the reform.

What caused the slowdown

Policy paralysis was the often-used catchphrase to describe the governance of the Manmohan Singh government in its latter half. After the launch of MNREGA and announcing the Rs 58,000-crore farm loan waiver scheme, the UPA government had slipped into a phase of indecision vis-à-vis economy policy. It was accused of leaving a glaring legacy of ‘policy paralysis’ or a deep sense of uncertainty pervading the economy that marred India’s business climate, stopped investment dead in its tracks, and contributed to India’s worst growth performance a quarter-century. This overriding sentiment of the electorate cost it the 2014 Lok Sabha election.
Governments provide a framework for economic agents to operate, and the reforms that are implemented help facilitate growth. There are always time gaps between policies and the effects, and spillovers are imminent. Also, careless practices can have a negative impact after a lag. Therefore, it is hard to separate the two, which means the slowdown came as a natural cyclical occurrence. So, the blot of policy paralysis on the UPA government may not be really be justified.
If a variable-to-variable comparison is made between the UPA and NDA governments, they seem to be almost even in terms of a number of successes. A study in perspective by Livemint found that in 11 out of 15 economic indicators, the second term of UPA vis a vis the first term of NDA growth, the economy grew at a faster pace. As a matter of fact, India’s economic policy has seen no break in continuity since the economic reform package of 1991; so, what the new dispensation did was better the implementation, though later there were some major policy changes as well, namely the deep structural reforms of demonetization and Goods and Services Tax (GST) as well as the Insolvency and Bankruptcy Act.

Decisive policy implementation

The NDA implemented innovative schemes like Swachh Bharat, Make in India, Digital India, Skill India, Start-Up India, Beti Bachao Beti Padhao, Mudra Bank, financial inclusion, and social security measures. New welfare and employment programs were implemented to make economic growth more inclusive. Another path-breaking decision was to promote 100 per cent neem-coated urea production to increase soil fertility capacity. The highest ever urea production of 245 lakh MT in the country was recorded in 2015-16.
The World Economic Situation and Prospects Report published by the UN noted that India’s economy was slowly gaining momentum, with the GDP expected to grow at 7.3 per cent and 7.5 per cent in 2016 and 2017, respectively. Foreign direct investment (FDI) had increased by 48 per cent, while manufacturing growth picked up from 1.7 per cent in June 2014 to 12.6 per cent in 2016. Inflation was under control while foreign exchange reserves touched a record high of $ 363.12 billion. Similarly, the FDI inflows recorded a new peak of $ 51.64 billion during the first 11 months of 2015-16.

Foreign Policy

There was a sea-change on the foreign policy front, with the PM establishing a personal rapport with world leaders like the US President and the Japanese premier. He connected with the Indian diaspora and encouraged them to become partners in the nation’s development story. The appointment of a veteran banker K.V. Kamath as the first president of the new development bank of BRICS, was another feather in the cap of the Indian government.
While more than 18,000 people, mostly Indians, were evacuated from crisishit Iraq, Yemen, Libya, and Ukraine, Jesuit priest Father Alexis Prem Kumar, Taliban abducted, was released from eight-meight monthsity, thanks to the diplomatic initiative of the PM. He similarly used his personal rapport with then Sri Lankan President Mahinda Rajapaksa and got five Tamil Nadu fishermen, who were on death row, released in 2014. Other milestones include the declaration of International Yoga Day by the UN and the Indo-Bangladesh Land Boundary Agreement to facilitate the exchange of 162 enclaves, an issue that had remained unresolved for 40 years. The government also approved the OROP scheme for ex-servicemen.

Infrastructure Development

The all-important sector of infrastructure development also showed a turnaround. The government unlocked the Rs 3.8 lakh crore road projects held up under the previous regime. Road construction rose from 8.5 km/ day to 11.9 km/day in 2014-15 and to 16.5 km in 2015-16. Similarly, the construction of national highways went up from 3,500 km in 2013-14 to 10,000 km in 2015-16. Rural infrastructure also witnessed the laying of 35,000 km of rural roads in 2014-15, which was 11,000 km more than the previous year. Allocation to MGNREGA was increased substantially to Rs 38,000 crore, and the guidelines were modified to ensure that the money was utilised to build durable assets in rural areas.
Among the biggest policy implementation of the NDA government was the transparent auctioning of 74 coal blocks, which would make the coal-bearing states richer by Rs 3.44 lakh crore over the lifetime of the mines. A transparent telecom spectrum auction fetched the exchequer Rs 1.10 lakh crore, while a loss-making, state-owned BSNL (which suffered a loss of over Rs 8,000 crore during the UPA period) posted an operating profit of Rs 672 crore during 2014-15.
In a watershed decision, the Union government accepted the recommendations of the 14th Finance Commission to transfer 42 per cent of the taxes to states from the divisible pool and five per cent to local bodies, reflecting the spirit of cooperative federalism. Electrification of 18,452 un-electrified villages within 1,000 days was taken up as part of power sector reforms, and the UDAY mission for energy efficiency sought to improve the DISCOMS to provide 24×7 supply.
Even the productivity of Parliament increased with important legislation passed on Insurance Laws (Amendment) Bill, the Companies (Amendment) Bill, the Labour Laws (Amendment) Bill, the Coal Mines (Special Provisions) Bill, the Mines and Minerals (Development and Regulation) Amendment Bill, the Real Estate (Regulation and Development) Bill, the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Bill, the Insolvency and Bankruptcy Code and the Anti-Hijacking Bill.

Conclusion

The ubiquitous decision-making of the NDA government threw a stark contrast with the semblance of policy paralysis during the UPA regime. However, the number of stalled projects only increased. Stalled projects refer to those which were under implementation but were then halted. Data released by the Centre for Monitoring Indian Economy (CMIE) showed that the percentage share of stalled projects in total projects had risen. However, as it happens, the cycle has eventually turned to reach another slowdown. India’s economy toppled to a 5 per cent GDP growth rate—a 25-quarter low—during the first quarter of the 2019 fiscal. Experts and multilateral organisations are in agreement that demonetisation, consumer demand slump, real estate slowdown, unemployment, and low investments are the major factors behind the current slowdown.