While setting the tone for the budget to be presented by his finance minister, Modi would be better off remembering that the shock treatment does not work when the existing structures and mindsets are not mature enough to withstand such treatment.

Narendra Modi is not inclined to entertain the ‘economists in a hurry’. That’s a good sign. First they paint a scene of gloom, doom and disaster all around, then they suggest remedies which are often worse than the disease, and politically suicidal to boot. In all his utterances so far — it’s too early to talk about actions — Modi has demonstrated that politics and economics operate in different spaces and he won’t rush into decisions that would make the economist happy but leave the vast political constituency out there agitated.

Thus many of the legacies of the UPA regime stay. The so-called populist initiative such as NREGA and Food Security Act are not being done away with; the new government is only taking steps to make these more effective. It is not dumping Aadhaar; it is trying to find synergy between the functioning of the UIDAI and National Population Register. It won’t effect steep rise in fuel prices to manage fiscal deficit and it won’t cut subsidies on urea either. Given this backdrop, the Modi government’s first budget could be more about continuity than change.

By all indications available so far, the government would chose gradualism in economic reforms over adventurist action — it’s the safest and least controversial option available for it. If it makes the Modi government suspiciously close to the UPA in its approach to the economy, there’s nothing wrong about it. The economists in a hurry can wait. In countries where democracy precedes capitalism and where there’s a healthy political consciousness about generation of wealth and its equitable distribution the operating principle in economic reforms will be gradualism. This should sync well with its guiding philosophy of the present government: Sabka Saath, Sabka Vikas.

"Taking tough decisions does not mean burdening people with price hikes. The consumer is an important part of the entire economics," Petroleum Minister Dharmendra Pradhan told Business Standard in an interview. Economists will be disappointed at such utterances, but the dynamics of politics are different from that of economics. Political decisions on subsidies etc don’t happen in a vacuum and without a context. So long as the context stays valid, the idea of subsidies stay valid. Governments, products of electoral politics as they are, have to make independent assessment of their own on when to take the right call. Rash action can only be counterproductive.

While setting the tone for the budget to be presented by his finance minister, Modi would be better off remembering that the shock treatment does not work when the existing structures and mindsets are not mature enough to withstand such treatment. No government, howsoever well-meaning it could be, can afford to introduce instabilities in lives of people without risking harsh political consequences. Economists operate in a limited universe; they can afford to be irresponsible.

Economic reforms have been happening in the country since the 1980s. It took off in a big way under compelling circumstances in the early 1990s and since then, through the Vajpayee period and that of the UPA, it has been a work in progress. Those calling the UPA government anti-reforms should read what noted economist Arvind Panagariya — he is one of the sharpest critics of the UPA — writes in India Today (Fixing the economy, 7 July).

With rare exceptions, the UPA government did not reverse the reforms introduced by its predecessors, which helped the country grow at near 8 per cent annual rate for an entire decade. It carried forward trade liberalisation, lowering the top non-agricultural tariff rate to 10 percent in April 2007 from 20 percent in January 2004. It opened multibrand retail to foreign direct investment (FDI) and raised FDI caps in several sectors including single-brand retail and telecommunications. It deregulated the petroleum price and made progress in cutting the subsidy on diesel. It substantially advanced financial sector liberalisation, enacted the important pension reform and brought to life the Competition Commission. It also made impressive progress in domestic civil aviation including building world-class airports in many cities. An important but neglected achievement of UPA has been massive construction of rural roads, which has helped raise rural incomes. Aadhaar, a programme to issue biometric identity cards to all Indians, can potentially be an important means to reduced costs in both public and private transactions requiring identification. Taking advantage of increased revenues made possible by higher growth, the UPA government gave a major boost to social sector spending.

He goes on to discuss where the UPA faltered in its ‘rights’ based social programmes and how the Modi government can script an economic success story for India. However, the point here is to note that narrative of economic reforms in India has seen its periods of change and consolidation. Modi’s period could be one of consolidation. His stress on getting the institutional mechanism in working order — it had virtually collapsed under the UPA — and efficiency in governance could go a long way in the consolidation process.

He need not be in a hurry and let the politician in him dominate the reformer in the budget. And yes, he should keep economists away.