Reforms by conviction and incentives, says PM Narendra Modi in blog post

Prime Minister Narendra Modi on Tuesday shared his blog post on reforms, center-state bhagidari, innovative policy making during Covid times. The post was posted on the LinkedIn platform. 

In a tweet the Prime Minister said, “Reforms by Conviction and Incentives…my @LinkedIn  post on innovative policy making in the time of COVID-19, powered by the spirit of Centre-State Bhagidari.”

“The Covid-19 pandemic has come with whole new set of challenges to Governments across the world in terms of policy-making. India is no exception. Raising enough resources for public welfare while ensuring sustainability is proving to be one of the biggest challenges,” Modi said today in a blog post titled “Reforms by conviction and incentives.”

He also stated that “It would perhaps pleasantly surprise you that states were able to raise an extra Rs 1.06 lakh crores in 2020-21. This significant increase in availability of resources was made possible by an approach of Centre-State bhagidari.”

“For a federal country of continental dimensions, finding policy instruments at the national level to promote reforms by State Governments is indeed challenging. But, we had faith in the robustness of our federal polity and we moved ahead in the spirit of Centre-State bhagidari,: he wrote.

Talking about Aatmanirbhar Bharat package, Modi said, “In May 2020, as part of the Aatmanirbhar Bharat package, the Government of India announced that State Governments would be allowed enhanced borrowing for 2020-21. An extra 2 per cent of GSDP was allowed, of which 1 per cent was made conditional on the implementation of certain economic reforms.

He further said that this nudge for reform is rare in Indian public finance, adding that this was a nudge, incentivising the states to adopt progressive policies to avail additional funds. The results of this exercise are not only encouraging but also run contrary to the notion that there are limited takers for sound economic policies.

PM Modi in his blog has elaborately discussed the four reforms to which additional borrowings were linked (with 0.25 per cent of GDP tied to each one) had two characteristics. These four reforms are One Nation One Ration Card, ease of doing business, floor rates of property tax and of water and sewerage charges, and Direct Benefit Transfer.