Siddharth Mazumdar

(Siddharth Mazumdar is a political analyst and an author living in Mumbai)

Prime Minster Narendra Modi is being accused of raising expectations to such levels that it is now beginning to haunt him.

In a recent article for NDTV, MK Venu has argued that in a bid to win the general elections Mr Modi, being fully aware of the limitations of the central government, made such unreasonable promises to the electorate that he now has to lower expectations or face premature discontent.

The last time a government got such a big mandate - the Congress in 1984 - it did fail to live up to people's expectations. But the 2014 election results are unprecedented. For the first time such a mandate has been secured on the promise of rapid economic transformation in the midst of highly competitive politics and not on factors like public sympathy.

And if such a political phenomenon is possible, its economic equivalent is too.

To begin with India is not a true free market economy. The state still plays an important role in defining the country's economic output. From prices of essential commodities to the management of some of the largest firms, the central government retains multiple instruments to pivot the economy in a direction it desires. Economists from either spectrum are at consensus that most of India's problems are internal, a manifestation of the governance deficit of a decade. And hence, if the government of the day desires, it can pull off a miracle, albeit not overnight.

The government's single biggest challenge is not the threat of weak monsoon or the cumulative impact of inflation, but its near empty coffers. Without adequate revenues the government cannot invest in infrastructure, which is required not only to kick start growth for job creation, but also to resolve supply-side bottlenecks needed to tame inflation. According to 2014 interim budget figures, a quarter of the government's expense is consumed by interest payments for loans, revenues have remained stagnated and even allocation for development projects has been reduced. And the best way to raise immediate revenues would be to re-examine the most unproductive, under-priced or ambiguous streams - fertiliser/fuel subsidy, railway fares and natural resource pricing.

A decade of populism has not only brought the economy to a grinding halt, but has also rendered the people poorly equipped to embrace bold and essential economic decisions. A fare hike after 11 years for a bankrupt railway - which missed all targets in the 12th plan - was one such example. While the rail fare hike was 14.2 per cent across all passenger classes, in suburban services the final amount catapulted due to a change in the formula of computation of season tickets.

The move was not well received and hence the government is likely to revert to a staggered phase of increasing fares rather than one big bang approach.

The rail fare hike could be seen as a pilot case to test such "shock therapy" prescriptions at least on people residing in metros. With learnings from this episode, the government is likely to administer all its "bitter pills" in a phased manner. This realignment in policy execution in no way should be constituted as a "lowering of expectations."

Rolling back an increase in train fare is not the same as reversing policies in quick succession; the latter is also a form of policy paralysis. India lacks a stable and objective regime for energy exploration, the previous government invested a lot of time to evolve a policy, which has been sufficiently contentious.

If a 90-day deferral means a newly elected government would evaluate thoroughly all policy options on the table and then formulate the best one, it could eventually save the country from the kind of judicial intervention we have seen in other cases of natural resource allocation, namely spectrum and coal.

It would be naive to expect that the upcoming budget will be the panacea for our ills. India would need least take one full budgetary cycle for the government to reduce flab built over ten years of redistributive policies and then raise any meaningful revenue. A broke government cannot bring Acche Din.

India's ailing sectors - such as power, agriculture - suffer from deep-rooted structural disorders. The previous government only attempted a few cosmetic and systemic interventions. Structural changes need two key inputs - a strong mandate and time. And 30 days is not "time".

It is elitist to believe that the wisdom of the electorate has been shaped by the marketing techniques of any candidate. After all Acche Din is not unknown to us. There was a time in history when we were one of the largest economies.

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