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Video Editor: Mohd Ibrahim
Video Producer: Sonal Gupta
Cameraperson: Abhishek Ranjan
I: Ladies and gentlemen, PM Modi was Napoleon’s proverbial “lucky general”, the first to enjoy a single-party majority after India freed its economy in 1991. His fortune was compounded when Brent crude collapsed from $108 per barrel in 2014 to $30 per barrel in 2016. His government got a windfall gain of nearly $ 100 billion over three years.
Just imagine if it had gifted this largesse to consumers by cutting fuel prices at the pump? What a tax stimulus it would have been for private demand and corporate investment.
TARP, to refresh your memory, was the “Troubled Asset Relief Programme” launched by President George Bush and Federal Reserve Chief Ben Bernanke to handle the sub-prime crisis in America in 2008.
Instead, Modi doubled, even trebled, the taxes on oil to soak up the bonanza; and made the problem worse by spending it on grand welfare programmes that are notoriously inefficient and leaky. Today, this “original sin” has trapped Modi in a pincer, as the dollar has strengthened, and Brent crude leapt has back to $80 per barrel.
Investors: Fine, we agree that he messed up India’s oil economy. But how can you call him a statist on just one bad call?
I: Okay then, here’s another egregious instance of oppressing minority shareholders and capturing the regulator. Early this year, the Modi government was woefully short of its disinvestment target. It needed emergency cash. So, it thought up this awful fix for its failure. The public sector oil exploration behemoth, ONGC, was coerced to pay nearly $6 billion to buy the government’s shares in HPCL. Under the law, ONGC was required to make an open offer for 26 percent additional shares, providing an exit to HPCL’s shareholders who wanted out of this transaction.
Investors: Alright, those are two bad instances. This government has really done much better on several other scores. How can you ignore that?
I: Aha, you want more evidence, right? Here you go:
But is there any policy at all that I find a bit of a game changer? Yes, to be fair, the Insolvency and Bankruptcy Code, or IBC, is a bold move to use a free market auction mechanism to sell stressed industrial assets. Unfortunately, other than this exception (which actually proves the rule), the government has been deeply suspicious and mistrustful of market forces.
The Economist has described Prime Minister Modi as a “tinkerer”. I marginally disagree. In my view, it’s a government of voluble, aggressive incremental-ists.
(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)