Let146;s not control the essentials

I usually have a trained economist8217;s clarity on issues. But sometimes I am not sure.

I usually have a trained economist8217;s clarity on issues. But sometimes I am not sure. On Mondays, Tuesdays and Wednesdays, I am in favour of strong Central governments. On Thursdays, Fridays and Saturdays, well-run coalitions are not too bad. In the last 13 years, we have had five governments. They promise everything, but what is the economics dharma of a coalition? A good question, and it is perhaps the right time to ask it since we are not doing as badly as some bring it out to be. Twenty and a half million tonnes of wheat in the bin is not a joke.

Thank you, UPA. You did better than any government since the early 8217;90s. If you give the kisan the right signals he will never let you down. Walking near Anand in the morning, I was struck by the sight of tractor trolleys. They had come to collect seeds from the agricultural university which got money after a long time from the Rajiv Gandhi Food Security Mission. But the good price of wheat was the turning point. We can do it again with rice. If we have wheat and rice in the bin, the latter selling in world markets at over Rs 40 per kg, and with foreign exchange reserves of over 300 billion, only stupidity will keep us from a 9 per cent annual inclusive growth.

The lessons for high growth are in fact quite simple. Prices are not just costs in women8217;s household budgets and numbers in the wholesale price index. They efficiently ration scarce commodities and are also somebody8217;s income. Don8217;t control the essentials: energy, construction materials and food. Once, it made some sense when we gave powerful non-price signals for these, including investing government money in them. Now you are only mortgaging the not too distant future. Our industrialists will go and produce these more cheaply in foreign lands and we will have to do with expensive imports. The logic in the present dispensation is that competition and imports will take care of the market, the former by forcing efficiency and the latter by mopping up excess profits, if any, as compared to globally efficient costs. If there is evidence of somebody fixing markets, let a trained agency fix him. But don8217;t do it at random. How much can we control anyway? A construction expert at the CEPT University, Ahmedabad, told us that the price rise in imported bathroom and other fittings, which is really high, contributes more to construction cost increases than materials. Is the imported tap to be turned off? With my personal income distribution preferences, it is a good idea, but not consistent with globalisation.

Energy has to be paid for. It is both inefficient and wasteful to subsidise imported fuel like we do. The only case is a subsidy for those living in hill areas so that they don8217;t cut trees, but that is a small burden with a big payoff. A recent assessment of India8217;s past by economic experts of the UPA looks at the 8217;70s and 8217;80s as very unfortunate periods in India8217;s economic history, but energy management was much better then and it would be wise to have a more realistic energy policy. There is also the moral hazard of pensioner shareholders of the oil companies subsidising the economy at personal cost.

As an aside, if A.P.J. Abdul Kalam, M.N. Srinivasan and Anil Kakodkar, not to mention people like me, argue for the nuclear deal to be signed 8212; we need at least a reasoned response, rather than obduracy. It is true that the government tends to side-step, if not oppose, the idea of completing the nuclear fuel cycle by following the thorium route, but the nuclear deal provides us with the means for reviving the case, which would languish otherwise in any case.

We need to withdraw wasteful purchasing power from the system to get back to a sensible interest-rate regime. Taxes, sensible prices and frugality, rather than waste, are like the mother-in-law. You can8217;t have the good things of life without them. Reducing waste will permit more investment in infrastructure for which the time is right when world markets are wobbly. Restructuring is essential if the costs of globalisation are not to hinder progress. A higher growth rate is within reach. History does not treat has-beens well. We go from being the fourth-largest economy of the world to being the third or to the dustbin. The media have to describe the fork at which we are, so that choices are not made in ignorance. Those who would push us into ignominy must do so consciously and in the full glare of public scrutiny.

The writer is a former Union minister for power, planning and science, and was vice-chancellor of JNU, Delhi

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