Thursday, May 22, 2014

The Winner and the Vanquished

The Winner and the Vanquished

Decidedly the World’s greatest democracy has just finished its biggest General Elections – the fifteenth in a row. It attracted lot of attention of the western media – the Economist, the Financial Times, The Guardian, The New York Times just to name a few. Money, liquor and raining promises like never before greeted the electorate. It was however the last NDA alliance – the TDP-BJP combine with an emotional entrant into the political confabulations that has been greeted with enthusiasm from some and contempt by several. Narendra Modi the first ever PM designate to bow to the Parliament stairs before his entry, demonstrated cultural excellence unparalleled setting the tone for virtuous move forward.

The nation tired of the scam-ridden Congress is yearning for change – a change for freshness in thinking, approach and direction. The youth has upped its antenna against corruption. AAP has made the other political parties rethink on their future, even if it had failed to realize its dream of demonstrating an agenda that people longed to have. Enthusiasm could not translate into action due to immaturity. Now that the battle is over, it is time to think of a solid agenda. But what would it be?

The first obviously is governance; a clean-up of the bureaucracy; rebuilding trust in the administration and quick delivery. The policy paralysis would end. The World Bank ranked India in their ‘Doing Business’ Survey (October 2013) under various parameters that should help the new Government in pitching their goalposts indicated in column 3 of the following table. Delivery instruments have to be strengthened with transparency and accountability writ large on them. Economic reforms of a new genre and financial sector reforms preserving the autonomy of RBI are imminent.
Parameter Rank out of 189 Nations Ideal Goal Post in the next five years
Starting a Business 179 25
Ease of Doing Business 134 25
Property Registration 82 25
Trading across borders 132 35
Dealing with Construction permits 182 25
Enforcing Contracts 186 25
Getting Electricity 111 15
Tax Compliance 158 20
Resolving Insolvency 121 15
Access to Credit 28 15

Farm sector suffering neglect thus far falls next in line. In the immediate short term the loan write-off promised by the NDA partners could be in order but in the long term it would prove disaster.

The farmer is groaning under excessive private debt at high rates of interest and this has to change. Institutional credit has to improve – one, in the areas of neglect thus far, namely, the rain-fed farming zone; preventing irrational use of groundwater; introduction of new technologies with ease and speed; improving soil nutrition; rationalising input supplies to prevent spurious seed and pesticides spoiling the farmers’ investments; promoting research and innovation with appropriate incentives; most importantly, the market intervention to provide the right compensation when the market fails the farmer. The existing disaster management and insurance mechanisms are far too inadequate and need thorough revamping. Farmer Associations have to be involved in the new think tank groups sans their political affiliations for such exercise. The Rural Cooperative Credit Structure has to be brought back to health with investments in technology at PACS level and improving governance through depoliticization.
In order that employment target of 10lakhs per annum is realised, it is important that the structural transformation of the rural economy should evolve without migration of labour to the urban areas. Each District should have a Rural Industrial Estate. The Industrial plots should be 1000-2000 sq.yds with water, power and drainage facilities fully provided. Since land prices have soared to unaffordable prices, such plots should be made available to the rural entrepreneurs on leasehold basis for ten years renewable for another ten years or outright sale in easy instalments with alienable leasehold rights in favour of financial institutions in order to access credit easily. These Rural Industrial Estates should have within a radial distance of 5km multi-storeyed residential complexes under PPP mode. There should be tripartite agreement between the owners of the rural industrial enterprises and the builders and workers for allotment of flats on lease basis for workers so that recovering rent would not pose problems. These RIEs would have testing laboratories, quality certification and packaging units, labelling and branding facilities within the easy reach of enterprises and they would be linked to the logistics hubs in the nearby urban and metro centres. Goods carriers and tempo operators would also be drawn from the rural work force.

Enactment of Bankruptcy Law and Exit policy do not brook any delay.

Critical Infrastructure being power, water and transport – road, rail, sea and air – has to be brought in with heavy infusion of capital from specific development finance institutions with participation from World Bank, ADB and the like. The commercial banks mobilising short term resources cannot afford the luxury of lending for long term projects if we were to go by their experience thus far and keep their hopes on government for refurbishing capital.

Urban and metro centres will have the logistic facilities and market facilitation centres for providing easy access to both domestic and international markets. The growth of service sector can peak to 60 percent and manufacturing sector can reach 25 percent in the next five years. The farm sector would retain its share of 15 percent. This facilitates the growth of the economy at a sustained rate of 9-10 percent within five years. If these happen people would be the winners and the vanquished without mending their ways would have to sigh in despair.