A Glitch In The Model

Reservation agitation points to the deficiencies in Gujarat’s development policy.

Written by Yoginder K. Alagh | Updated: September 21, 2015 12:15:38 am
Hardik Patel, Patidar agitation, Patidar reservation, Patel community, Hardik arrest, Patel agitation, RBI, RBI interest rates, RBI debt management, Arvind Panagariya, India GDP, India GDP growth, Indian Census, Hardik Patel, Patidars agitation, Indian express, express column Patidaar Anamat Anandolan Samiti (PAAS) convener Hardik Patel. (Source: PTI photo)

Friends from all over the world had been sending messages, asking if it was true that the finance ministry was taking away the central bank’s power to use the bank rate as an instrument of monetary policy. The RBI governor, whom we expected would take a firm stand since interest rates and debt management are not just prosaic activities in macro policymaking but the heart of monetary policy, was correctly appreciative of the need for a monetary policy committee, but was willing, apparently, to give up the present role of his office in it. He did, however, make the point that the final say would be of the governor since he would have a casting vote.

Arvind Panagariya has raised the level of the policy debate by laying on the table the issue of the growth rate and land-use policies. It is correct to state that an annual growth rate of 8 per cent-plus is feasible. The question is how? Investment levels have been falling since 2012, as also in each quarter this year. Yes, GDP growth is robust according to the new numbers, but we are not sure why. We do know that the manufacturing sector is not flying as the latest releases show. The handling of labour-related issues will be this government’s acid test. Finally, as we showed with a small model in our book, The Future of Indian Agriculture, trade shares will have to rise to 4 per cent of GDP. This has already happened, although there could possibly be some slippage this year.

India needs a land-use plan to temper the present chaos and corruption in land markets. The government has wisely given up the attempt to go back to the bad old colonial ways. Corporates will have to pay the price for land. It makes sense to insist on this in a liberalising regime.

Spatial planning may be needed since transport infrastructure leads to locational advantages and agglomeration effects. The movement of millions of Indians to Census Towns has been a preoccupation, but this project hasn’t been mirrored in policy. The 100 smart cities are not going to be smart enough to connect with the kisan as he moves to sell his wares in a growing economy. Companies will want land close to centres of demand or resource requirements, even if it is good agricultural land. A land-use plan would send these companies to barren land with good transport links. Also, powerful corporations may not like them, for land-use plans take time to yield market benefits, and land is, after all, also an asset in the short run.

Our objective is certainly not to discourage industrial growth. A year ago, 1,000 tractors descended on Gandhinagar from an area called the Chuwal, the land of 44 villages, which Kanaiyalal Munshi had immortalised in Patan ni Prabhuta. Their leader was Lalji Desai. I joined them with my friend Sanat Mehta, who recently passed away. I pleaded that we were not against industry, but that roads could be built in a manner such that the best lands were not ravaged. This isn’t a popular position, but I hope good sense will prevail.

Meanwhile, another Lalji, Lalji Patel, is the joint leader, along with Hardik Patel, of the Patidars demanding reservations. When agriculture grows as fast as it has in Gujarat, at 6, not 10 per cent, per year, you want infrastructure in market towns for marketing and agro-processing. I had pointed out this shortcoming in Gujarat’s development policy even as I extolled its high growth. But I was pilloried and abused by savvy economists. Now the chickens have come home to roost. Certain economists who argued with naysayers on the nature of Gujarat’s admittedly fast growth have much to answer for.

If in Gujarat’s Census Towns we had a hundred Amuls or producer companies and Patidar youth had jobs that gave them Rs 15,000 a month, perhaps life would have been easier. Patel leaders who built co-ops would have set up a thousand producer companies. It would be shortsighted to dismiss this as a local problem. Much the same may happen elsewhere.

The writer is professor emeritus, Sardar Patel Institute, Ahmedabad.

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