Reforms gain speed: But is ordinance the right way to go?

With five ordinances in five days, the Narendra Modi government has made clear it would not let parliamentary logjams disrupt its reform process.

After the Winter Session was washed out with few bills making it past the Rajya Sabha, where the ruling BJP has minority status, the Modi government has passed executive orders to make key changes in sectors or areas such as coal, insurance, medical devices, land acquisition and arbitration.

The move to create laws using executive order – in which the government, with due assent of the President, temporarily bypasses Parliamentary approval – will give plenty of stick for opposition parties, or even allies, to beat the BJP with.

But the way the government has gone about its business, it sends out one clear message. This government is serious about pushing through changes it thinks are absolutely needed to ease doing business, drive investments and kickstart growth.

And that it will not wait for the disturbance-prone Parliament to meet the three times it does in a year to transact business.

In a recent Economic Times piece, top lawyers such as Harish Salve, KK Venugopal and Shanti Bhushan dismissed criticism that the government was resorting to strong-arm tactics or even making subverting democratic processes by passing critical legislations outside Parliament.

“In any event, Parliament has overseeing powers,” Bhushan told the newspaper, pointing out that ordinances have to replaced with a bill within six weeks of the house reconvening (which it does every two-to six months).

However, as HT Media editorial director Shobhana Bhartia told CNBC-TV18 in a recent interview, till as long as the proposed amendments do not become law through Parliament, there will continue to be uncertainty over their legal validity. She wondered, for instance, how much money foreign investors would put in the insurance sector (which now allows FDI up to 49 percent) on the basis of an ordinance.

If the government fails to have a bill passed in Parliament after it reconvenes, it has the option of repromulgating it in order to extend its shelf life but there is only so far it can go without alarming purists.

“The ordinance route leaves uncertainty on the table,” HSBC India chief economist Pranjul Bhandari wrote in a recent note. “They (changes the government brought in to the land act) may not be perceived as a stable solution by investors wanting secure property rights.”

Bhandari noted that since the deadlock in Parliament is expected to continue, the government could fast-track reforms in three ways: outlining broad principles in bills, rather than specifics; incentivizing reforms at the State level, and trying to build consensus on a few, key laws.