Feeling good, continuously

Recently India has embarked on a growth path unprecedented in the past. There is criticism from some quarters about its benefits being conce...

Recently India has embarked on a growth path unprecedented in the past. There is criticism from some quarters about its benefits being concentrated to small groups. But this ‘feel good’ factor has been attributed to the policies of the present BJP-led NDA government. The main contribution comes from good governance, a clear foreign policy, the economic reform process moving in the right direction and infrastructure development. This has led to wide economic activities, creating a push in demand and development in the manufacturing and services sector. It is reflected in the stock market boom. The world looks towards a resurgent and confident India.

The main task before the government now is to build on this confidence by furthering infrastructure development and implementing policies so that this growth continues further. The emphasis must be on wider distribution of its benefits. If a section of society cannot directly benefit from this growth, they must be provided support in the form of social security measures. Roopa Purshottam, co-author of the much talked about BRIC report of Goldman Sach, argued that to realise its true potential, India requires a lot of investment in sectors yet in the nascent cycle, like power, defense, telecom, oil and gas exploration. The banking sector also calls for attention and the credit cycle should go forward. There should be a focus on sectors that are consumer-interest intensive. Positive forecasts will not hold good if labor reforms are not introduced. Anne Kreuger, first deputy managing director of International Monetary Fund (IMF), has said that while fiscal imbalance was not the only impediment to growth, its reduction was important to encourage growth and reduce poverty in developing countries.

Joseph Stiglitz advocates the need to scrutinise the term globalisation. Opening up countries to more trade is good; opening them to unbridled capital flows is bad. Tariffs must be reduced and developed countries should open their markets to developing countries. Inefficient public enterprises must be privatised, not efficient ones. Privatisation isn’t about raising revenues for government but about increasing productivity in the economy. Care must be taken not to replace public monopoly with private monopolies.

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The 10th Planning Commission document warned that the infrastructure won’t be able to provide jobs for new entrants or clear the backlog. Fiftyfour per cent of the India’s population is under the age of 25; a majority have no inclination to work in the agriculture sector.

Two sectors the government is focusing on, and which have potential to sustain growth and its proper distribution, are agriculture and small scale industries. The agricultural sector requires the following reforms: Implementing land law reforms like contract farming and allowing leasing of agricultural land; developing cottage industry to promote the village economy and stop the flow of rural population to the cities; improving water management; organising private markets; providing better storage and warehousing facilities; improving the rural road network; implementing crop insurance facilities; providing improved seeds to farmers; establishing research centers in agricultural technologies and disseminating knowledge to farmers; giving credit facilities at low interest; educating the farmer in patenting and intellectual property rights and promoting organic farming.

In the small-scale sector the proposed reforms are: Providing guidance vis a vis the induction process for the entrepreneur; conducting market survey reports for small industries; setting up laboratories for the analysis of raw material; branding the product; creating a cell in the government for legal assistance; framing taxation policies giving concessions for employment generation; requesting RBI to earmark funds for SSIs; providing an exit policy; preventing reserved items from being illegally produced by big industries; preventing industries from going to BIFR without clearing SSIs dues; making provisions for revival of SSIs under RBI guidelines; monitoring banks for credit delivery and financing.

Some steps are also required in the capital market. The sensex has become the barometer of economic progress. The current volatility must be curbed. The rally is being fuelled by FII money. Some stabilising fund is required in case of a sudden exit of FIIs.

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With all the macro economic factors pointing towards a robust Indian economy, we hope to build on the current confidence and make it a global superpower by the year 2020.

The writer is a member of the BJP’s central economic cell

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