There are unsaid strengths to the recent packages of reform announced by UPA-II. The acceptance in the presidents speech that the growth rate this year will be less than that last year fits in with our projections since last September that growth last year would be 7 per cent,and this year 5.5 per cent as a business-as-usual scenario,with a very legitimate allowance on the upside for a strong policy interface. This was hearsay then,but has been accepted by the central bank and by the chief economic advisor as the reference point now,the broad sweep of these numbers being confirmed in yesterdays Economic Survey. Realising this is important because corporate bodies,banks and the dynamic trading part of Indian agriculture need these profiles for their own plans.
This column expressed worry last year on the negative growth of public capital formation,as indicated in the numbers released as revised estimates in the provisional budget. Falling government investment was an amazing slip-up in a deflationary economy. The need for raising investment has been very correctly indicated as a major priority by the prime minister. We have been asking for government policies for strategic relationships with local bodies,cooperatives,producers associations and the corporate sector to kick-start investments.
Apart from statements on stronger policies by the PM and deputy chairman of the Planning Commission,useful in themselves,there are two indications of improvements in growth prospects this year. The first one is by Pranab Sen,Indias chief statistician,that larger production of crude and gas will push growth. This will be a once-and-for-all occurrence. The second is higher FDI,which needs to be watched before building it into the decision-making process.
The constraints on building rural infrastructure largely the inability of regional and local governments to mobilise resources to take advantage of the big initiatives in the Eleventh Plan need to be removed quickly. Examples of things that need much better Central,state and local coordination and more leeway at the local level: conditions on formulation of an agro-climatic plan to access Central money; project formulation for the National Rainfed Area Authority plan; the distressed districts ground water programmes. In no district that I have been to have these really got going,and all the district collectors I talk to say that while the NREGA and the Sarva Shiksha Abhiyan are on full-steam ahead no one has heard of these as operating projects.
The panchayats have also lost Mani Shanker Aiyar,at least as a minister,although he may become more effective now. Relatedly,field action required for the policies supporting market access,value-added processing and institutional reform which the FAO and the World Bank have called rural-urban continuum policies are just not seen on the ground. The problem is an unwillingness to recognise that we are not a plain rural economy,and are now rural-urban everywhere.
Hence,for example,Wal-mart was brought in on the sly and therefore there has been no strategic linking with farmer groups,local artisans and others,say as in China. Indeed,the confusion over integrating producer associations and farmers groups in policy implementation is all-encompassing and quite compelling. I know at least one large corporate which has set up producer companies in Punjab and there are no sources of giving credit and working capital to them in spite of large promises.
This linking needs to happen. International agencies have demolished the concept that India is only a rural economy still strongly believed in by some of our anti-urban Ayatollahs,and have shown with geo-informatics and satellite pictures that its villages are integrated with small towns far more than in Europe and Latin America. But we are doing nothing to accelerate the process. That is how the aam aadmi focus of the Budget should be written.
The writer,a former Union minister,is chairman,Institute of Rural Management,Anand
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