A series of reforms like the three farm bills, labor reforms, bankruptcy law, and banking reforms have long replaced the question of where are the big reforms under the Modi government.
As for the economic comment by the self-appointed experts, now that the Holy Grail of Big Bang reforms has been accomplished – sale of Air India – that the shallow, rhetorical, “where are the reforms?” is becoming more substantive.
Path-Breaking Major Macro Reforms
There have been sometimes erroneous analyses, which have classified all the reforms that occurred in 1991 as the first generation, and then waited in vain for the second generation to take hold. These analyses failed to reflect the substantial changes in Indian economic policy-making over the past three decades. Also, such commentary was largely for and consumed by a few dozen or so experts. Since 1991 we have seen three generations of reforms in India. It was the 1991 period when these reforms began.
First-generation reforms under Narasimha Rao dealt with several issues, including export licensing and import norms. Politicians and policymakers of the time did it under duress, without their conviction. There is no need to argue about how the Indian economy benefited from the Industrial Policy of 1991 since it changed course from the disastrous path taken for 40 years before it. Although the course correction proved fruitful, it was to India’s flaw that neither the ruling party at that time – the Congress party – nor the finance minister in 1991, really internalized the need for reform.
When the crisis disappeared, the reforms stopped, and when Dr. Manmohan Singh returned as Prime Minister for a full decade, his government began reversing those gains. From 1999 to 2004, the Vajpayee government implemented the second generation of reforms. It is hard to find any similar policy before the New Telecom Policy of 1999. 73.97 percent and 40% respectively stood in January 2013. According to the most recent data, the national rating was 90% and the rural rating was 60%. The second pillar of India’s connectivity reforms was road construction – both of which were NCRs or rural roads.
Several factors led to the period between 2004 and 2014 being a missed opportunity, but the major one was that the man at the helm of the country was never a reformer by conviction, and having no working force in 1991 allowed him to retreat into the settled world of socialist utopia. The Modi era began in 2014, thus bringing us to the present day. For the commentariat, which never really appreciated the significance of Vajpayee’s reforms, shorn of a historic budget in 1991, many eagerly awaited the promises of a “second-generation reform”.
Modi would have implemented the third-generation reforms logically if he had followed the guidance of experts at the start of his first term. Many people were eagerly anticipating the so-called “second-generation reforms.”. Encouraged by Modi’s declaration that “Government has no business in business”, they prepared their lists of potential reforms. The problem was that they had no concept of the real India nor its actual needs, nor the nuances of reform sequence in a country like ours, nor the politics of reforms.
Reforms being implemented by Modi to fulfill the basic needs can be called the Fulfilling of Basic Needs reforms. The first few months of the Modi tenure were spent on implementing these reforms before he took on the reforms we are now witnessing – the Fourth Generation Reforms.
It appears that many of the much hallowed and so-called “second-generation reforms” are the “fourth-generation reforms”, which will be implemented commencing around 2020. The third generation was Modi’s contribution in between. How does this reform work? You can think about the economic policy-making from 2014 to 2019 as a series of breathtakingly well-planned moves aimed at the growing Aspirational class, farmers, and women.
The Third And Fourth Generation Of Reforms
Reforms were not only undertaken by Modi during the first term of his government. Some of the significant macro reforms that were implemented in the first term of the Obama Administration were GST, HBCS, and diesel price deregulation. The third generation of Modi’s reforms was able to accomplish the following. Unlike before, they have built a community of people who support policy reforms at a scale that has never been seen.
Policy reforms were earlier considered an esoteric subject best comprehended by those who didn’t have any stake in India’s well-being or, if they did, belonged to the top 2%. Even his supporters were sometimes shocked when Modi’s first few years in office spent much of his time touting neem-coated urea or Jan Dhan as solutions to make India great again. However, he was proven right again and again. In terms of sheer numbers empowered, Jan Dhan is India’s greatest economic reform in history.
Considering both the pandemic and the fact that Indians were able to reach their poor in virtually no time with cash disbursals, as well as the transformation of India into the number one country for digital payments. You can also use urea reforms coated with neem. Was their success or effectiveness comparable to Jan Dhan? Ashok Gulati has described these three reforms as the 1991 moment for agriculture.
Indians across the country, even regions that are not aligned with Modi politico-economically, have silently endorsed the reforms. Modi’s third-generation reforms building social equity infused him with the political capital to stand up for what is right despite the intense protests of a micro minority of big farmers opposed to reforms that will benefit the large majority of farmers in the country.
Therefore, Modi was allowed to implement the fourth generation of reforms by the third generation of reforms that no other Prime Minister had ever had. To do so, Modi had to put in a lot of effort and vision. Modi was therefore able to finally enact labor law reforms, introduce farm laws that fundamentally reform the agriculture sector, launch full steam ahead with privatization first, undertake defense and manufacturing reforms as well as a whole range of reforms. Tax reforms and capital market reforms are just beginning in the fourth generation.
Reforms of the fourth generation are Modi’s acts of conviction, the reforms that fulfill the promises made to New India and place us on the path in Amrit Kaal that will make our dreams a reality. This marks the first time in 40 years that a Prime Minister has been able to launch the second wave of reforms in his term. The ‘Gati’ that is expected in India’s economic trajectory is immense as PM Modi launches his ‘Gati Shakti’ masterplan on this auspicious day.