Monday, March 31, 2014
Thursday, March 06, 2014
The world is divided between optimists and pessimists. Optimists believe that if the government invests in infrastructure, removes barriers facing entrepreneurs, jobs will multiply, the economy will grow, and the country will gradually turn middle class. Pessimists worry about problems— inequality, crony capitalism, degrading environment, etc. The problems are real but optimists focus on opportunities and lead nations to success. Let’s hope an optimist is elected in 2014 after a decade of UPA’s pessimism, and here are eight big ideas to help him/her restore India to health.
First, bring urgency to growth, rubbishing the false trade-off between growth and equity, which is the destructive legacy of the Left under UPA-I and of the national advisory council under UPA-II. To this end, give priority to investment in power and roads. Second, eliminate the nearly 70 clearances (yes 70, according to planning commission’s new manufacturing policy!) for starting a business, and fuse them into a 'single window clearance' achieved by our competitor nations. India’s notorious red tape is mainly responsible for our 134th rank in World Bank’s ‘Doing Business’ report. Every country protects its environment but none stops hundreds of projects in the process.
Third, complete the good work already done to make the Goods and Services Tax (GST) a reality and India a national market. GST will replace the present nightmare of indirect taxes—state sales taxes, central sales tax, excise duty, service tax, entry tax, etc. Since it will tax only the added value at each stage, it will discourage cash transactions as no one wants to lose credit for taxes already paid. Compliance will rise, tax revenues will swell, black market will diminish, and peoples’ morals will improve.
Fourth, create masses of formal jobs by reforming senseless labour laws while creating a labour welfare fund (with contributions from employers and government) to finance transitory unemployment and re-training. Companies have to survive in a downturn. When orders decline, either one cuts workers or goes bankrupt. Successful nations allow employers to ‘hire and fire’ but protect the laid off with a safety net. India’s labour laws insist on lifetime jobs. Hence, Indian companies avoid hiring ‘permanents’ and 90% workers have ended up as ‘informals’ without a safety net. Protect workers, not jobs.
More than half our people are stuck in agriculture and the fifth imperative is to create a second green revolution. To this end: A) Scrap ‘agricultural produce marketing committees’ (APMC) which function as wholesaler cartels in mandis. Opening markets will allow traders and farmers to buy and sell freely, making India into a national market. When large retailers buy from farmers, they will save food from rotting through cold-chains, raising returns to farmers and lowering prices to consumers. B) Discard the minimum support price system, which has created massive distortions—growing rice in water scarce Punjab!— and destroyed the entrepreneurial dynamism of the Indian farmer. C) Reverse UPA government’s damaging decision against genetically modified crops. Recall, Bt cotton doubled India’s cotton production in five years and made us the world’s largest exporter. D) Have a predictable export-import regime for farm products. Stop the present ‘switch on, switch off’ policy which harms the farmer and brings disrepute to India. E) Remove the irrational conditions that are preventing global retailers from entering India. And BJP must get over its unreasonable opposition to FDI in retail. In those states where FDI in retail is banned, consumers will lose the opportunity for lower prices, farmers will lose prospect of higher returns, a third to half of fresh produce will continue to rot, and millions of unemployed youth will be denied jobs and careers in the modern retail economy.
Sixth, sell off hotels, airlines, and all uncompetitive public sector enterprises, including banks, which have been bleeding the country for generations. Especially, break the monopoly of Coal India, which has made India--sitting on the world’s third largest reserves--the largest coal importer in the world. Seventh, abolish all subsidies and replace them by cash transfers into the bank account of the female head of the household via mobile banking. NREGA, PDS, Food Corporation and all such leaky institutions must be phased out. As large sums are involved, employ the world’s best practices to determine who is a deserving beneficiary. Finally, get rid of license raj in education to meet the insatiable demand for good schools.
This is a big agenda but it is achievable by an optimist leader, who is also competent in execution. Such a leader will not only declare this policy agenda but will monitor progress, get into the messy details of execution, not to micro-manage but to encourage the implementers of the policy, and clear barriers. He will thus give the those who have to execute the policies—the bureaucracy--a sense of purpose and this will propel India to high growth, a demographic dividend, and to achieve its potential.
Sunday Times of India, March 2, 2014