Tuesday, Nov 29, 2022

A wishlist for reform

For one,FDI in multibrand retail stands as a missed opportunity

For one,FDI in multibrand retail stands as a missed opportunity

Inertia has bogged us down for the past one year or so. Few would doubt that we have wasted our energies in this period. It’s time for us to do what we ought to be doing. It’s time for us to unlock our national energy yet again.

On the economic front we seem to be losing momentum at just the wrong time. Over the next 10 years,we need to create 10 million new jobs every year just to cater to the tsunami of expected entrants in the job market. Add to this the challenge of lifting millions of people out of poverty. We cannot afford to have an appetite for mediocre growth. We need to get back on a high-growth trajectory fast.

Before talking about turning things around,let us first understand how bad the situation is. The GDP growth rate of 5.3 per cent in the last quarter of 2011-12 is the slowest since 2003-04. The industrial output growth is down to 0.1 per cent — a figure that may add to inflationary pressures,given the constrained demand-supply situation. Rupee valuations,sentiments on Dalal Street and evaluations of rating agencies are all heading south. Externally,a deepening eurozone crisis continues to trouble us.

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However,not everything is bad on the economic front. India continues to be a high savings and investment country. Our investment rate of 35 per cent is still encouraging. The FDI inflow of $46.85 billion in 2011-12 is higher than the previous highest of $41.9 billion in 2008-09. Export to GDP ratio has grown steadily at an average of 22 per cent a year since 2004-05. UPA 1 and UPA 2 have sustained an annual growth rate of 8.2 per cent from 2004-05 to 2011-12 and survived two major global downturns,indicating a model that did work till recently. There is no reason why we can’t evolve our model to meet the challenges of the future as well.

On balance,we need to realise that the current slowdown is a challenge but one that can be met. Exactly how are we going to do it? The need of the hour is for us to act strongly and quickly. Let me outline my small wish list for starters.

One,FDI in multibrand retail stands as a missed opportunity. It was aimed at making our distribution systems more efficient and reducing the number of intermediaries in the retail chain,thereby providing better prices for farmers and cheaper goods for consumers.


Today,on the one hand,we grapple with stubborn food inflation and,on the other,we let 35-40 per cent of fruit and vegetable produce,and nearly 10 per cent of foodgrains,go to waste due to inefficiencies in the supply chain. Across the world,nations have minimised food wastage by encouraging private investment and reforms in supply chains. We have the opportunity to cherry-pick models that suit our needs,something the FDI policy was aiming to do.

Spare a thought for the Indian farmer as well,who,on an average,nets less than one-third of the total price paid at retail by consumers. A World Bank study showed that the average price a farmer receives for horticulture produce is barely 15 per cent of what is paid at retail. We need to provide a better deal for farmers. Apart from plugging wastages and helping farmers,this key policy intervention is likely to benefit local manufacturers. The end consumer will be the biggest beneficiary.

Yet,the move was a non-starter. The question is: did we,as a nation,evaluate the issue on merit? Do we want a more efficient system where everyone wins? Or do we want the farmer from Punjab and Uttar Pradesh to dump potatoes while the consumer in Kerala pays dearly for the same?


Two,the mining sector has become associated with scams and environmental hazards so we have had no hesitation in throwing the baby out with the bathwater — pushing it into a negative growth,of -2.7 per cent in 2011. In contrast,countries like South Africa,Australia and Brazil have become stronger in the midst of recession due to the growth in their mining sectors. These nations,coincidentally,are the ones that strove to achieve optimal balance between responsible mining and environmental concerns.

India has 267 billion tonnes of coal reserves — one of the highest in the world — still the demand-supply gap is likely to touch 142 MT this year,leading to power units shutting down this summer due to low coal supply,investment in power sector drying up and high imports driving up the account deficit. When the government tries to fix the situation,it is accused of causing windfalls to private and state-owned companies and the word “coalgate” finds its way into the political lexicon.

The story does not stop with coal or iron ore. In my state, Haryana,a stalemate between the courts,ministry of environment and forests and the state government has ensured a complete ban on mining of minor minerals (stone,gravel etc) since 2010 on account of the environmental clearance policy and its judicial interpretation. This means construction material costs three to four times more,leading to the delay or abandonment of critical infrastructure projects like highways and pushing up the cost of building houses. Every stalemate like this bleeds our economy bit by bit.

While it has become fashionable to criticise mining,we need to realise that we cannot have roads,power or housing without controlled mining. We need to create transparent policies that strike a balance between mining and environmental concerns. We can start by reforming our mining and environment policy framework.

Three,the law-making process has to be expedited,since many important legislations are stuck in the pipeline. Apart from letting Parliament function,the Opposition sometimes needs to take a more apolitical view of legislations in the national interest.


As parliamentarians,we can set the ball rolling by calling an unprecedented long monsoon session to clear most of our pending legislations. Imagine the kind of signal that will send out. Our people need us to act firmly at this moment. Are we ready?

Four,enact the land acquisition bill. The law was brought in to ensure that industry got land without disputes and farmers got a fair price. The delay in the passage of a balanced bill has contributed to industrial slowdown since land acquisition for many projects is held up.


Apart from these,we need to bring in FDI in civil aviation and privatise Air India so that it does not become a drain on national resources. We also need to restart the debate on the rationalisation of labour laws. And we need to do so much more.

While we can blame the government,some amount of responsibility for this pervasive negativity lies with each one of us also. The lokpal bill should be passed and the corrupt should be in jail. But we also need to ration the attention towards cynics and naysayers. Let’s get our focus back. Let’s have a good breakfast and get back to work. India needs to move on.

The writer is a Congress MP

First published on: 22-06-2012 at 03:34:04 am
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