Friday, May 8, 2015

Political Economy of Expectations & Performance Evaluation

      How do observers analyze the performance of the Modi Government, after completing one year in office? That depends on their expectations. An added complication this time is that expectations have changed sharply during the last two years. The evaluation of the Modi Government depends on whether the observer measures performance against his expectations one year ago or his expectations two years ago.  This note however discerns a pattern, that may help readers evaluate the evaluators and thus indirectly do a better job of evaluating the actual performance of the Modi Government.

     If we go back in time to the middle of 2013 (May-June), most observers of the economy and economic policy fell into two categories: Very negative and moderately positive. The first category(I) were extremely apprehensive about the future of the Indian polity and economy.  In political terms this group consisted primarily of anti-BJP, ant-Modi persuasion. The second category(II) were mildly positive, in the hope that any change from the previous dispensation would be in a positive direction, even though the change may be incremental and slow.  This group largely consisted of all those who were positive towards candidate Modi’s economic agenda or economic management style or both.

    By the middle of 2014, each of these groups had subdivided into two (A & B), depending on their political inclinations and attitudes to the NDA government. What is most interesting is that sub-groups IB and IIBs expectation converged after the formation of the NDA government in 2014, so that there were really three views/ sets of expectations in mid-2014. One part of the original negative group’s attitude changed little- they (IA) remained negative about the Modi Government’s performance, perhaps even a little more negative than before, expecting no improvement and giving no quarter.  The second sub-group in this category (IIB) went from negative expectations to Very high expectations of what the Modi Government should accomplish. This change took time to brew below the surface, but then changed suddenly on record.

      The original positive group (II) also separated into two sub-groups in mid -2014. One sub-group (IIA) remained positive but with a greater confidence and faith that the direction of the economy and economic policy would indeed be changed in positive direction.  It therefore began to sketch out a range policy & institutional reform possibilities that had a realistic chance of being adopted and implemented.  The second sub-group(IIB) was euphoric about the Lok Sabha majority attained by the NDA and its expectations, about what the Modi government could or would do, sky rocketed. Members of both this sub-group (IIB) and the other sub-group (IB) developed a must do agenda/reform lists based on long standing views, which each member of the group felt he had a right to expect from this government. Some of these ,verged on the miraculous when viewed in the light of harsh political reality and dynamics of the political economy of vested interests. 

      Not surprisingly both these sub-groups (IB & IIB) have, in mid-2015,  expressed severe disappointment in the performance of the Modi government. Both groups have written off the Modi Government (perhaps in different ways). The difference between the two is, that the dis-appointment of sub-group IB is tinged with  quiet satisfaction that its original expectations in 2013, that “no good can come from the rise of Modi”, may yet come true. In contrast sub-group IIB is genuinely dis-appointed with what they thought were easily achievable goals for a Govt. with a LS majority, unaware of forgetting that, a Rajya Sabha majority is needed to pass all legislation (except the budget and the finance bills). 

    Sub-group IIA which had mildly positive expectations in both 2013 and 2014,  continues to have such expectations of the Modi government. The Government’s performance balance sheet from its perspective has some good positive achievements, a smaller but still significant number of negatives (boo boos or slow progress) but is mildly positive on a net basis.  Members of this “realist” sub groups may differ on specifics of the positive & negative items and of the net benefits and impact, but they remain hopeful of steady progress on economic policy, institutional (governance) reforms and economic growth and welfare improvement.


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