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Narendra Modi's Fourth week in Office Analysis


Narendra Modi's Fourth week in Office Analysis


The 18-hour schedule of the new PM along with the entire ministry and bureaucracy is making consecutive weeks busy as well as productive. Just like the last week, this week too witnessed developments on various important arenas. Some of the most important points in this analysis are broadly related to international relations, economic affairs, foreign investment decision, and administrative issues. Analysis is done on the basis ofissues as per importance and not on chronology.

Steps Undertaken to Contain Inflation

NarendraModi’s government undertook twin steps on June 17, 2014 (Tuesday) to contain the spiralling inflation (WPI) that touched the five-month high limit of 6.01% on Monday (June 16, 2014). Inflation rate was 5.20% in the month of April. The government not only imposed restriction of exports of some essential farm products but also cracked down on hoarding for controlling rising food prices. The wholesale price index shot up to a 5-month high mainly because of the excessive rise in the prices of onions and potatoes. This led to a massive sell-off in the financial markets, destabilising the attained equilibrium.

Analysis:

Inflation is one of the major planks, other than corruption, on which NaMo contested the 16th Lok Sabha election and got a convincing win. In fact, during his campaign he placed the issue of containing inflation as one of his priorities. Therefore, rise of inflation within four weeks of assuming office is not going to help the new PM in maintaining his public image. That’s why Modi’s government left no stone unturned in taking the twin steps, just after the day, the rising inflation figure was released. Unfortunately, weak monsoon forecast added to the fears of food and farm inflation, leading to increased incidence of hoarding.

Moreover, vegetable prices, whose prices generally remain volatile, rose by double digits. The government is also keeping a close watch on the basket of essential 22 commodities so that any adverse price movements can be checked instantly. They have also decided offloading additional rice stocks in the open market for preventing building-up of inflationary expectations. Minimum export price in case of onions has also been imposed (increased from $150 per tonne to $300 per tonne) for discouraging shipments abroad.

Arun Jaitley, the finance minister, has already asked the states to undertake proper steps to control speculative hoarding so that the supply of vegetables and fruits in the open market remain normal, even if there is weak monsoon. Therefore, it can be inferred that Narendra Modi is indeed taking inflation seriously and trying his level best to contain rate of inflation to keep his promise made during his campaign.

Deputy Prime Minister of Russia meets Indian PM and Mrs. Sushma Swaraj

Vladimir Putin, President of Russia, not only called upon NarendraModi and congratulated him after his convincing win but also sent his Deputy PM, Dmitry Rogozin, to meet India’s External Affairs Minister and Indian PM. Mr. Rogozin was on a 2-day visit to India. During the meeting on June 19, 2014, the PM treated Russia as atime tested and reliable friend’ and also intended to take the mutually beneficial relationship to the next level. He sent his greetings to the Russian President through Rogozin and desired to deepen ‘special and privileged strategic partnership’ between India and Russia. On June 18, 2014 Sushma Swaraj met Rogozin in New Delhi and discussed on multi-various issues including preparations for the upcoming annual Summit between our PM and their President, energy security, economic cooperation, and signing of deal for 3rd and 4th nuclear reactors of Kudankulam Nuclear Power Plant in Tamil Nadu, India.

Analysis:

Foreign affair experts consider the visit of Russia’s Deputy PM as significant because it comes just after the visit of China’s Foreign Minister to India. Analysts believe that Russian Deputy PM’s visit is only the beginning of a sustained mutually beneficial partnership between the two countries that will take the shape of strategic partnership during the annual Summit of NarendraModi and Vladimir Putin, scheduled to be organised this year.

The two units of Kudankulam Nuclear Plants are expected to generate 2000 MW of energy that is expected to meet some of the shortfalls in electricity generation in India. Following Fukushima Nuclear disaster and sustained nuclear leaks, there had been concerns regarding setting up of the twin reactors at Kudankulam. There had been sustained protests regarding the concerns of probable Fukushima-like leaks that could be synonymous with Bhopal Gas Tragedy. However, some of the concerns surrounding safety of the plant has already been safeguarded and proper steps undertaken on the behest of the Russian President, Vladimir Putin.

Plan to Allow 100% FDI in Railways

DV SadanandaGowda, Railways Minister, announced on June 19, 2014 (Thursday) that Foreign Direct Investment is in the cards of the government for meeting resource crunch in the quest of modernising railway sector. He is expected to have meetings and discussions with Nirmala Seetharaman, the commerce minister, to chalk out the entire plan. FDI will be allowed for creating high-end infrastructure for making high-speed trains in India a success.

Analysis:

Currently, except for mass rapid transport systems there is a total ban on FDI in Raiways. Narendra Modi’s government has ambitious plans of creating a fool-proof infrastructure, including freight corridor network and high-speed trains in the coming few years. This is one of the major plans already declared through the President’s speech before the Parliament two weeks back. As these projects need large scale capital investment along with advanced infrastructural know-how, the government believes 100% FDI in this sector is essential. In fact, the government is also mooting the idea of allowing FDI in sub-urban corridors as well as freight lines that connect power installations, mines, and ports. Experts in infrastructural sector are upbeat about this possibility because it will, they believe, boost infrastructure in India, especially faster freight and public transport, which will create conducive environment for the country to take the great leap forward.

Allowing Foreign Investment in Gas and Oil Sector is on the Cards

Dharmendra Pradhan, the Petroleum Minister, has promised overhauling of policies of the petroleum sector so that they become fair, transparent, and predictable for investors. The minister announced on June 17, 2014 (Tuesday) at World Petroleum Congress in Moscow that regulatory policy uncertainty and policy paralysis in the last 3 years of UPA 2 government has created an environment of uncertainty in the petroleum sector, especially regarding issues like natural gas pricing. This lack of transparency has barred companies from investing in this sector, leading to sustained stagnation of domestic petroleum production. NELP or New Exploration Licensing Policy is expected to be amended.

Analysis:

Selecting Moscow’s World Petroleum Congress for announcing amendment of New Exploration Licensing Policy is considered by the analysts to be significant because that will allure foreign investment in gas and oil sector, especially for capacity expansion.  Policy overhaul in petroleum sector, especially regarding oil and natural gas, will boost confidence of the foreign investors, which will pave way to increase foreign investment in the sector. Under the 10th round of NELP, for auction over 1,48,000 square kilometers of exploration acreage has already being identified. This reform will help the 4th largest consumer of energy, India, will help make energy available to every single person of the country, leading to inclusive growth.

Seven Governors are asked to Quit 

Governors of seven states, who were appointed by UPA2 government have been asked by federal home secretary, Anil Goswami to quit. Plan has been chalked out for terminating the tenure of 12 governors. Presently, those asked to quit are the governors of Kerala (Ms. Sheila Dixit), Gujarat (Kamla Beniwal), West Bengal (Narayanan), Rajasthan (Margaret Alva), Maharashtra (K. Sankaranarayanan), Tripura (Devendra Konwar) and Uttar Pradesh (BL Joshi).

Analysis:

Two governors, Shekhar Dutt of Chhattisgarh and BL Joshi of Uttar Pradesh, have already submitted their resignation. But many other governors have not submitted resignation, leading to a sort of constitutional crisis. One of the major issues raised is that there is no constitutional right of the home secretary to ask such a thing from the governors of states. Secondly, many governors have asked for written instructions for leaving the ceremonial post. According to May 2010 judgement of Supreme Court, a new government cannot truncate the tenure of a governor until and unless there are solid grounds (compelling as well as valid) of removing him or her.

Therefore, the analysts believe the Narendra Modi government is clearly under pressure now, solely because they believed these were political appointments by the erstwhile Congress-led UPA2 government and hence could be removed. Sources also reveal that BJP-led NDA government at the Centre wants to place some of the senior leaders as well as confidantes of the party as governors of these seven states, that is, Lalji Tandon, Kalyan Singh, Murli Manohar Joshi, Kesri NathTripathi, VK Malhotra, BC Khanduri and Shanta Kumar.

Congress has already called this move as dictatorial and arbitrary. JD(U), on the other hand, has asked for a debate on the need of governors in the first place. KC Tyagi of Janata Dal (United) has also pointed out that appointments of governors done by both UPA 2 and NDA governments are all political in nature. Now, it needs to be seen how far this stalemate continues. Many political analysts believe that the only solution to this controversy is through political consensus between different political parties regarding selection of governors.

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Last Updated on June 21, 2014, 10:12 am