Prime Minister Narendra Modi's guiding principle of 'Minimum Governance, Maximum Government' has been the need of the hour to resuscitate the ailing investment climate in the country. Bureaucratic hurdles and policy paralysis during the UPA regime had led to slowdown in capital investments.
In the first step, the newly-elected NDA government sought to expedite crucial projects by cutting red tapism. This was done through a reduced size of council of ministers and promotion of e-enabled governance. The Prime Minister wants to extend the scope of this maxim to the functioning of the State as well. According to him, the State should not intervene in the running of business but rather strive towards creating an enabling environment for it. In that sense, the State's role should be reserved for five critical areas. These include security of public goods, regulation of negative externalities, curbing monopolies, plugging information gaps and designing a robust welfare & subsidy mechanism for the poor. This is the step in the right direction if India wants to improve its score on the ease of doing business and attract foreign investments.
However the Prime Minister's ground-breaking philosophy remains in spirit only. In practice the government's policy has been diametrically opposite. What then explains the reason for not privatizing loss-making public sector enterprises such as Air India, Mahanagar Telephone Nigam and Bharat Sanchar Nigam Ltd.? Why are these bleeding enterprises being bailed out at the expense of the taxpayers of the country? Even the current subsidy mechanism needs to be overhauled for clearly identifying the target groups, an issue that has not been addressed till now. For example the present government provides a subsidy on 12 cooking gas cylinders a year which may be way above the actual requirement of the poor and thereby actually benefitting the well-off class. The issue of targeting the intended group will go a long way to curb subsidy leakages. Therefore while the present government has shown a serious commitment towards providing efficient governance, it still needs to work a lot to put it into practice.