Wednesday, September 03, 2014

India PM Modi’s 100 Days in Office: Kaizen Not Magic Wand

IndusView, Wednesday 3 September 2014 (London): A visit to Japan is perhaps the best statement of Narendra Modi’s 100 days as Prime Minister of India, a honeymoon time typically used by new governments to push symbolic and substantive changes capitalising on voter sentiment that ushered them into power.

Accompanied by some of India’s top business leaders, Modi wooed Japanese corporate investors and promised Japanese Kaizen management style, noted for rigour and efficiency, in his own bureau, the Prime Minister’s Office.

For those expecting a shimmery display of new reforms, there was little to cheer. But for those awaiting deeper structural changes, the effects of which would be felt over months and years but not necessarily within 100 days, numerous observations were to be made.

“Modi is managing expectations against a magic wand solution to India’s problems,” said IndusView Chairman Bundeep Singh Rangar. “Expect deeper structural and slower policy changes, even painfully slow involving consensus building, rather than cosmetic quick-fixes. The blue print for such Kaizen style changes were spelt out in his party’s election manifesto five months ago.

The first 100 days of the Bharatiya Janata Party (BJP) marked changes in tax policy, land acquisition, environment approvals, financial inclusion, manufacturing and labour laws.

Modi wishes to emulate Japan in terms of quality, zero defect and delivery systems while carrying out skill development. He’s outlined single window-clearances as a way to ease business, simplify procedures, quicken processes and use technology.

Kaizen, Japanese for "good change," has been applied in business to continually improve all functions across the corporate chain of command. It also applies to processes, such as purchasing and logistics. By improving standardized activities and processes, kaizen aims to eliminate waste and improve productivity.

Modi’s reputation for effective and honest administration, built over a decade running the state of Gujarat, has won support in India's business community. Some of the prominent business leaders accompanying Modi to Japan include Sunil Bharti Mittal, Chairman and Group CEO of Bharti Enterprises that owns India’s largest mobile network Airtel and is partners with Wal-Mart Stores Inc.; Kumar Managalam Birla, Chairman of the Aditya Birla Group, one of India’s largest conglomerate multinational corporations and partner of Canada’s Sun Life Financial Inc.; and Mukesh Ambani, Chairman and Managing Director of Reliance Industries Limited (RIL), ranked last year at No. 99 on the Fortune Global 500 list of the world's biggest corporations. RIL contributed about 14% of India’s $300 billion worth of exports last year.

There have been a number of key structural reforms over the past 100 days even as India announced 5.7% growth in gross domestic product (GDP) in the latest quarter, the fastest in two year. These include higher foreign direct investment (FDI) in insurance and defense; agreement on Goods and Services Tax (GST) in FY15; a number of reforms to boost manufacturing, including creating Special Economic Zones (SEZs), single window clearance, excise duty cuts for labor intensive sectors such as food processing and footwear, reforms to the Apprenticeship Act, the inclusion of 15 million people into the banking sector and an $1.65 billion venture capital fund for small and medium enterprises.

Reforms for capital markets, include allowing American Depositary Receipts (ADR) and Global Depositary Receipts (GDR) for a larger group of securities, make it easier for foreign portfolio managers to set up shop in India by taxing their gains from transactions only as capital gains, and the lower withholding tax of 5% on corporate bonds extended till mid-2017 from mid-2015. Further, Indian bonds are now allowed to be cleared internationally, which takes them a step closer to the process of including them in international bond indices. 

Since coming into office, Modi has demonstrated his commitment to restoring India’s leadership within the subcontinent and on the world stage. Aside from Tokyo, he has visited Bhutan, Nepal, and Fortaleza, Brazil for the Brazil, Russia, India, China and South Africa (BRICS) Summit. He has also invited all the South Asian Association for Regional Cooperation (SAARC) leaders to his inauguration. Modi has shown that India’s foreign relations are a priority for his government. A trip to Washington DC is also planned on September 30.

"The more integrated India is into global markets and the economic architecture of Asia, the more India’s economy will grow and benefit the entire global economic system," said Rangar. “Investors expect policy measures from the new government to put India on a high-growth path on a sustainable basis."

Modi’s silence on troubling domestic phenomena, including communal violence in Uttar Pradesh and other social issues across the country, is seen by his critics as a leader poorly suited to lead a pluralistic country. Opposition politicians have similarly alleged that since Modi’s rise to power, communal violence has spiked across India. That assertion, however, is apparently not supported by the latest data from India’s Home Ministry.

“On domestic issues, both economic and social, Modi’s approach is looking to be quieter and more gradual,” said Rangar. “It’ll take far longer than just 100 days to nurse a country of 1.2 billion people into good economic health”.

Prime Minister Narendra Modi has claimed in his speeches that he does not believe in setting 100-day goals or agendas, as his government is here to govern for its full term of five years. But his government, aware that its performance will be judged by the media and myriad experts as it nears 100 days in office, is preparing for a series of press conferences to showcase its achievements since taking charge on May 26. 

As soon as the PM took the oath of office, a website was up and running with constant updates of thoughts, speeches, and movements of the PM. The Finance Minister has been tweeting regularly about policy, as have other ministers. The greater use of technology and social media for public interaction is also one point on the Prime Minister’s 10-point agenda announced on May 30. Instead of press conferences and media events, the new government is communicating through tweets, Facebook, and websites. E-auctions for government projects has also found mention in the 10-point agenda.

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