Prime Minister Narendra Modi expanded on his economic, social and political vision on 16 January at a business summit organised by a pink newspaper. Here's decoding what he meant, and the gaps he left open in the vision

Yesterday (16 January) we got a clear idea of the complete Narendra Modi vision for India. I would like to urge everyone to read his speech at The Economic Times Global Business Summit 2015 for the simple reason that it explains - in an unambiguous way - what the Modi government is doing, what is it trying to do, and what it will continue doing in the days, months and years ahead. Personally, I must admit, I was simply blown away by the near completeness - to the extent anyone human being can ever be complete - of the vision.

The Modi speech (the full text can be accessed here) is remarkable for three reasons: one, it integrates the political with the social and economic vision that India needs; two, it takes the idea of reforms away from being something that only moneyed businessmen hanker after and converts it to something that should concern every Indian; and three, it expresses a modern, forward-looking view entirely in an Indian idiom.

In short, it seeks to reunite an estranged Bharat with India – which is what brought Modi to power in Delhi anyway. It seeks to prise the Idea of India away from being the private property of the Lutyens elite and restore it to all Indians. The speech is about reinvigorating India's tryst with destiny. It brings the idea of development down from the lofty towers of academe to something everyone can understand.

Two caveats are also in order. Between vision and implementation there will always be an implementation gap. So far, the gaps have predominated in our history. Maybe, Modi is just the man to narrow the gap. Secondly, closing the gap is not just Modi’s job, but everybody’s. In a political climate where every other opposition party thinks Modi is a threat to its survival, implementing the vision will need Modi to reach out to his enemies. Not easy.

Moreover, it would be foolish to pretend that Modi wrote the speech all by himself or that many of these ideas did not come from others. But that is exactly what a modern mind should be doing anyway: listening to everybody, and picking the best ideas. It would also be Gandhi’s approach where we keep our windows and doors open to ideas from all over the world, but refuse to be blown off our feet. At heart, the speech had Modi written all over it. It is rooted in his Idea of India and its place in the world.

Below, I have picked some of the key parts of the speech and followed them up with my comments on why they are significant and game-changing. Modi’s words are followed by my comments in itals.

Modi’s economic and developmental vision in his own words

We (have deviated from the dream of India as a land of opportunity. No longer can we afford the flight of capital and labour, for lack of opportunity….Elimination of poverty is fundamental to me. This is at the core of my understanding of cohesive growth. To translate this vision into the reality of a New Age India, we must be clear about our economic goals and objectives.

The government must nurture an eco-system where the economy is primed for growth; and growth promotes all-round development; where development is employment-generating; and employment is enabled by skills; where skills are synced with production; and production is benchmarked to quality; where quality meets global standards; and meeting global standards drives prosperity. Most importantly, this prosperity is for the welfare of all.

My comment: This is an over-arching vision that ties India to the world without losing sight of what needs to be done back home on skills, jobs, and welfare.

Modi on minimum government, maximum governance

Government systems suffer from two weaknesses. They are complex. And they are slow. In life, people go on a chaar dham yatra to get moksha. In government, a file has to go to chattees dham, and yet not get moksha!

We need to change this. Our systems need to be made sharp, effective, fast and flexible. This requires simplification of processes and having trust in citizens. This needs a policy-driven state.

What is Maximum Governance, Minimum Government? It means government has no business to be in business. There are many parts of the economy where the private sector will do better and deliver better. In 20 years of liberalisation, we have not changed a command and control mindset. We think it is okay for government to meddle in the working of firms. This must change. But this is not a call for anarchy.

My comment: There is a small inconsistency here. While the need for simplifying government processes is paramount, the statement that government has no business to be in business contradicts Modi’s reluctance to privatise many parts of the public sector. Does government need to run an airline, and so many banks? This inconsistency must be seen in the context of what Modi does indeed define as role of government below.

On what government should do

Why do we need the state? There are five main components:

The first is public goods such as defence, police, and judiciary.

The second is externalities which hurt others, such as pollution. For this, we need a regulatory system.

The third is market power; where monopolies need controls

The fourth is information gaps; where you need someone to ensure that medicines are genuine and so on.

Last, we need a well designed welfare and subsidy mechanism to ensure that the bottom of society is protected from deprivation. This specially includes education and healthcare.

In the five areas where we need government, we require competent, efficient and non-corrupt arms of government. We in government must constantly ask the question: How much money am I spending, and what outcomes am I getting in return? For this, government agencies have to be improved to become competent. This requires rewriting some laws. Laws are the DNA of government. They must evolve with time.

My comment: This is a brilliant exposition of the key role of government in a market economy. It is also a statement of accountability for the taxpayer’s money. The Indian state has failed because it focused on the delivery of private goods (freebies, subsidies, etc) instead of public goods. There can be space for subsidies to the poor, but these can’t be main focus of government. The UPA had reduced the state’s role as one of doles. Modi is correcting this imbalance.

Modi on how he will deliver good governance

I recently assured Public Sector Banks they will have total autonomy in taking business decisions, without any interference from Government on loans and their operations.

We need to use technology to deliver good governance. Whether it is a simple one like biometric-based attendance, which has improved office attendance and work culture. Or a cutting edge one, like space technology in mapping and planning.

I intend to launch a massive National Program for PDS (public distribution system) computerisation. The entire PDS supply chain, from the FCI godown to the ration shop and consumer will be computerised. Technology will drive welfare and efficient food delivery.

My comment: There is no doubt that technology, by reducing the need for regular interface between a corrupt system and the citizen, will help clean it up and deliver better governance. But giving public sector banks operational autonomy is only a half-way solution: while Modi may ensure autonomy, he has to institutionalise the process so that this autonomy is forever and not restricted to his tenure. At some point, privatisation of banks may have to be considered due to their expanding capital requirements. PDS reform is essential, but it cannot happen without looking at the system of government-supported procurement of foodgrain at above-market prices.

Modi on federalism and Niti Aayog

A major institutional reform is the move away from merely planning, to transforming India. The setting up of the National Institution for Transforming India, Niti Aayog, is a step in this direction. This will take the country forward on the path of cooperative federalism, with a competitive zeal. The Niti Aayog is our mantra for creating trust and partnership between the Centre and States.

My comment: This is a good vision or cooperative and competitive federalism, but ultimately federalism needs to be enshrined in the constitution by separating the powers of states and centre, and also by devolving more economic power to states. The centre needs to be more focused on areas in its domain – which means defence, foreign affairs, macroeconomic management, financial and environmental regulation, etc.

Modi on reforms

Reforms are not an end in itself. Reforms must have a concrete objective. The objective must be to improve the welfare of the people. Approaches may be many. But the goal is one.

Reforms may not be apparent to one and all at first sight. But small acts can drive reforms. What appears minor can actually be vital and fundamental. Further, there is no contradiction between doing big tickets items and doing small things.

One approach is to have new policies, programmes, large projects and path-breaking changes. Another approach is to focus on the small things that matter, create a people’s movement and generate mass momentum, which then drives development. We need to follow both paths.

Let me explain this a bit. Generating 20,000 mw of power attracts a lot of attention. That is important. At the same time, 20,000 mw of power can be saved through a people’s movement for energy efficiency. The end result is similar. The second is more difficult but is as important as the first. In the same way, improving a thousand primary schools is as important as opening a new university.

The new AIIMS we are setting up will improve public health in the same way as our promise of health assurance. To me, health assurance is not a scheme. It is about ensuring that every rupee spent on health is well spent; that every citizen has access to proper healthcare.

Similarly, when we do Swachh Bharat, it has multiple impacts. It is not just a fad or a slogan. It changes people’s mindsets. It changes our lifestyle. Swachhata becomes a habit. Waste management generates economic activity. It can create lakhs of Swachhata entrepreneurs. The nation gets identified with cleanliness. And of course, it has a huge impact on health. After all, diarrhoea and other diseases cannot be defeated without Swachhata!

Take the case of tourism. It is an untapped economic activity. But tapping it requires a Swachh Bharat. It needs improvement in infrastructure and telecom connectivity. It requires better education and skill development. Therefore, a simple goal can generate reforms in multiple sectors.

People must understand the Clean Ganga programme as an economic activity also. The Gangetic plains account for 40 percent of our population. They have over one hundred towns, and thousands of villages. Improving Ganga will develop new infrastructure. It will promote tourism. It will create a modern economy helping millions of people. In addition, it preserves the environment!

My comment: This is one of the most brilliant expositions of the importance of reform that connects big ticket stuff with the micro-reforms at various levels. It will need states to do their bits. But Modi is connecting the dots and demolishing the false dichotomy between big reforms (which seems to be big business-oriented) and reforms that matter to the last citizen. Changes in labour reforms for big business may be important, but Modi has acted on the reforms that impact small businesses – which create the real jobs. The Modi government has enacted the Small Factories (Regulation of Employment and Conditions of Services) Bill, 2014, which may be more useful in generating jobs than big changes elsewhere.

Modi on tax reforms, jobs, legislation and subsidies

Improvement in governance is a continuous process. We are making changes wherever acts, rules and procedures are not in tune with needs. We are cutting down on multiple clearances that choke investment. Our complex tax system is crying for reform, which we have initiated. I believe in speed. I will push through change at a fast pace. You will appreciate this in times to come.

At the same time, we need to take care of the poor, deprived and left behind sections of society. I believe that subsidies are needed for them. What we need is a well targeted system of subsidy delivery. We need to cut subsidy leakages, not subsidies themselves.

Wastage, as I said earlier, must be removed in subsidies. The target group should be clearly identified and the subsidies should be well delivered. The ultimate objective of subsidies should be to empower the poor, to break the cycle of poverty, and become foot-soldiers in our war on poverty.

At this point, I would also say that development has to result in jobs. Reforms, economic growth, progress – all are empty words if they do not translate into jobs. What we need is not just more production, but mass production and production by masses.

My comment: This part of the vision is unexceptionable but will need huge buy-in by the states, and extraordinarily enhanced governance skills at all levels, not to speak of political will. How will you target the poor better on subsidies if all parties want to woo all sections of the electorate? How will you create jobs, if the opposition blocks serious labour reforms?