3 reasons why Modi govt pushed through economic reforms during coronavirus crisis

3 reasons why Modi govt pushed through economic reforms during coronavirus crisis

BJP leaders say govt took long to come up with a stimulus package because it wanted to shut out any possible criticism a hastily-announced package could have invited.

Prime Minister Narendra Modi addressed BJP workers on the party's foundation day Monday | Photo: ANI

File photo of Prime Minister Narendra Modi | ANI

New Delhi: There were three factors that prompted the Narendra Modi government to push significant reforms, including many politically unpalatable ones, to revive the economy.

According to several BJP leaders, the factors were the need for an image makeover of the prime minister as a reformer determined to bring the economy back on track; feedback from the BJP about people looking up to the government to take bold decisions to mitigate the Covid crisis; and the opportunity to steamroll potentially unpopular measures when the opposition is in no position to block them.

A senior BJP leader said the government had an “overwhelming support” of the people as PM Modi took the “bold decision” to opt for a complete lockdown to curb the spread of the highly infectious Covid-19, but the people started becoming impatient as the lockdown was extended for over 50 days.

The leader said the government, apart from asking ministries to come out with specific plans, asked the party to sense the pulse of the nation by interacting with people. 

“Unemployment at all levels, the economy being in a bad shape and with pressure on the overall finances, people were now looking for a plan to bring the economy back in shape so that they could earn their living. The party through its grassroots connection conveyed all this to the government and it was decided to take up some bold decisions as it would get the support of the people, who are severely impacted by the lockdown,” said the senior BJP leader. 

According to another senior party leader, the government felt with the changing geopolitics due to Covid-19, it was the right time to carry out these “bold reforms” by taking tough decisions and to put the country on the path of recovery. 

However, the leader added it was also important to give out the right message to the masses, which is why the economically-weaker sections such as street vendors, traders were also made part of the Rs 21-lakh crore stimulus package.

The reason why the government took so long to come up with the package is that it wanted to root out any possible criticism a hastily-announced package could have invited, he said.

The work on the package had been on for a long time before it was actually rolled out, the leader said.

The last package of Rs 1.7 lakh crore aimed at the country’s poor was announced on 27 March, while the Rs 21-lakh crore stimulus package was announced last week — after a gap of over a month.

Also read: India lost more jobs due to coronavirus lockdown than US did during Depression

‘Initiatives will place the PM as a big reformer’

The second BJP leader told ThePrint this was also the best time to “resurrect” Modi’s image, which received a blow due to the anti-Citizenship Amendment Act protests that rocked the country earlier this year and also the Hindu-Muslim riots in northeast Delhi.

“Though it was not the best time to launch much-needed reforms for the country, it was the best time to resurrect the damaged image of the PM, which was severely affected due to the anti-CAA protests that started last year. It was severely damaged when the US President was in town and riots broke out in Delhi,” the leader said.

“These initiatives will now place the PM as a big reformer not only before the international community, but also before the domestic audience as it will create demand, investment and employment,” added the leader.

According to a minister in the Modi government, who was involved in the deliberations over bringing in the reforms, “During a meeting with ministers, the PM stressed on the fact that this is an opportunity to take tough decisions. We should not only look at immediate intervention but long-term impactful decisions need to be taken. Ministries were told to come up with 2-3 measures that were blocking investment and would lead to overall ease of doing business.”

The minister, who didn’t want to be named, said a few decisions such as raising the FDI limit in defence production to 74 per cent, strategic disinvestment of PSUs, power sector privatisation were new, but it was felt this was the right time to move ahead with these reforms.

“The amendment in Essential Commodities Act and change in contract-farming to encourage farm income was initiated during the first tenure of the Modi government, but due to several roadblocks, they could not be implemented. The change in the definition of MSME (micro small and medium enterprises) and fund of the fund was announced in the budget (earlier this year), but was not implemented,” the minister said.

“During a meeting with the PM, it was felt that due to the coronavirus situation, India needs to focus more inwards to empower agriculture and other sectors to mitigate challenges arising due to migration and unemployment,” he added. 

This view was echoed by PM Modi during his televised address to the nation on 12 May in which he had emphasised on self-reliance and raised a slogan for ‘Vocal for Local’.

PM ‘attended 12 meetings’ since Covid outbreak

According to a BJP source, the Prime Minister had attended 12 meetings since the Covid outbreak in India to come up with the changes required in the post-Covid scenario, and these meetings were attended by Defence Minister Rajnath Singh, Labour Minister Santosh Gangwar, Agriculture Minister Narendra Singh Tomar, Finance Minister Nirmala Sitharama and Civil Aviation Minister Hardeep Singh Puri, among others.

The last such meeting took place on 3 May, days before the announcement of the stimulus package.

“During the 3 May meeting, the Prime Minister made it quite clear that agricultural reforms were required and should be made part of the policy changes whether it was APMC (agricultural produce market committee) or contract-farming. It was felt that there should be no delay in announcing the agricultural reforms,” said the source.

Also read: How India can buck the trend of global recession caused by coronavirus

Labour reforms need of the hour

According to a third senior BJP leader, who attended the meetings that took place before the package was announced, it was felt the announcement of certain immediate relief measures should be done soon as lockdown restrictions started easing.

The political messaging of the government has to be seen in terms of the way it targeted the MSME sector, vendors, traders and migrant labourers through the stimulus package, the leader said.

“Due to Covid-19 and the international outrage against China over its suspected role, the risk divergence strategies are being looked into by the global manufacturing companies to shift their manufacturing base to other countries, including India. So India realises this potential and has tried to remove procedural hurdles to facilitate that,” he said.

“All the bottlenecks that existed in terms of land and labour reforms have now been removed by the government to make India an attractive investment destination for the world. At the same time, the government also doesn’t have too many resources and hence, wants to focus on structural reforms to facilitate easy trade,” said the leader. 

As far as labour reforms are concerned, it was felt that rather than waiting for a law from the central government, the states should take the lead and it was reflected in the decisions taken by the BJP-ruled states, Madhya Pradesh and Uttar Pradesh, said a fourth BJP leader.

As the state governments introduced the reforms, the Centre to a certain extent was shielded from criticism that came from the RSS-affiliated Bharatiya Mazdoor Sangh, which called for a nationwide protest against changes in labour laws. 

“During the first stint of the government in 2014, a major reform was initiated by bringing the land ordinance in December 2014. But despite bringing ordinances three times, the government was unable to pass this bill due to opposition. However, with the economy in shambles and unemployment rising, the party also conveyed to the government that labour reforms were required,” he added. 

“It was also felt that if such reforms are carried out now, the opposition would not be in a comfortable position to criticise the move of the government. So through states, labour reforms were initiated,” added the leader.

The leader also pointed out the government was clear the stimulus package won’t be just about announcing “drastic policy” reforms, but it will also be about removing procedural hurdles.

“You have to understand that a 40-day lockdown period is a long time. Every sector has been impacted. So the government decided to take suggestions not just from the bureaucrats and the industry, but also from the party as they understand the grassroots concerns,” the leader said.

“The situation demanded that a stimulus package should be announced as we need to put the economy back on track. A post-Covid world would be quite different and it was felt that India should align its policies based on that,” he added.

‘Political risk calculated’

According to a fifth party leader, a number of meetings also took place with the RSS-affiliated Swadeshi Jagran Manch, various state governments and other stakeholders.

“It was clear from the beginning that the poor section of the society had to be given a major relief. With new circumstances emerging, especially with regard to the migrant workers, certain changes were incorporated,” he added.

The leader pointed out the government initially had also announced a Rs 1.76-lakh crore package that included cash transfers and free food grains to help the needy during the lockdown.

“Contrary to what the opposition has been propagating, the government has been announcing several measures at the right time. The recent announcements have to be seen in relation to that and not individually,” he said.

The leader also said a major factor that worked in favour of the government was the lack of any political opposition due to the Covid crisis.

“Political risk was calculated and a decision was made to move ahead with the reforms,” he added.

Also read: India’s 50-day lockdown has brought economic misery even as Covid cases surge