Economic Highlights

New Delhi, 15 May 2009

Regenerating Economy

NEW GOVT’S DAUNTING CHALLENGES 

By Shivaji Sarkar

The new government should be prepared to take over amid difficult times. News is that there will be an additional dip of 2.3 per cent in industrial production cent and about 3.3 per cent in the manufacturing sector. However, pepping up the industry will not be its only challenge.  

The government needs to complete the semi-finished budgetary process, take measures to add to growth without levying taxes (rather it has to cut taxes), create jobs, protect the rights of working class, boost agricultural and rural growth, reduce the number of poor, bring down prices, make living comfortable and ensure that the country’s current investment grade rating, which is risked by large deficits is maintained.

Indeed, the tasks are too daunting. In all probability, it shall be forced to have a re-look at the globalisation process. It has to study how to remain integrated by insulating the domestic economy from the ills of reckless process of the US and western economies, which have always been protectionist and, would be more so now.

In addition, the developments in the neighbourhood - Pakistan, Sri Lanka, Bangladesh and Nepal - are not just diplomatically intriguing, but will have a severe fall-out on both the economy and polity. The issues are sensitive and need to be tackled separately and deftly with an integrated approach.

Besides, the recession is to stay for quite a few years. Piloting the country through turbulent waters is not easy. Economic concerns have to be addressed without compromising on either humanitarian issues or principles of good governance. These difficult times are also opportunities for the corrupt. The government has to devise ways to effectively chuck them out.

The process for regeneration of the economy has to start with the presentation of the budget. That would lay down the fundamentals of resuscitation. The February budget has exposed the myth of the   economy being in a good shape. The finances, the budget reveals, had started tottering long before the global meltdown - post-August 2008 Lehman Brother scam.

It is known that the government has to complete the process post-haste to complete its constitutional obligation. Would the government be able to include its concerns in such a short period? It also has to contend with political, regional and counter pulls as well. Different allies would have different concerns and amid such diversities, finalizing a process would have its own pitfalls.

The growth projections are continuously coming down. If the Reserve Bank and the Planning Commission are to be believed it may hover around 5 per cent. While international estimates push it down, the government’s concern by all means would be to push it up.

To start with, it has to look for a peg. A government that would come up with support of various lobbies would find it difficult to ignore their interests. After all there are always expectations of a quid pro quo. Yes, it has to take care of them. But it must not forget that welfare of lobbies is not necessarily the welfare of the common masses. It has to prove to the people that it is their government. And whether it likes it or not the government has to start thinking about the welfare of the last and the poorest.

The breakdown in 1991 had provided a unique opportunity of shedding the burden of past notions and ideals. It ushered in a reform, where the poor unfortunately took the back seat. Growth was seemingly there but not many jobs. Social welfare was not a concern. In the name of pension reforms, whatever little was available is being robbed off. Labour has been robbed of its minimum protection at a time when corporate profits may have come down, but not enough to make losses.

The 2009 elections have provided the government with opportunities to integrate the labour into the policy-making phenomenon. It needs support and not reforms. The government has to ensure that workers’ interests are protected and they are not robbed of what was promised to them. If corporate profits are sacrosanct so are the minimum wages and benefits of the workers. The government must realize that a weakened labour force would lead to a weaker economy.

The fundamentals of 1991 have to be reset in 2009. The new government has to give a new meaning to the economy. It has to reorient around villages, agriculture, small-scale and cottage units, coprorates and rural and urban work force.

A strong agriculture policy based on land procedures, marketing, bank credit and innovation has to be introduced. During the past two decades, prime agricultural land use has been changed to industrial SEZs, urbanization, housing and road projects. This must stop. The country cannot afford to lose farm lands, which are as it less than the requirement. Farmers have to be encouraged to retain their land holdings and not sell to the land sharks.

A policy for the farm sector is needed on a priority basis as it employs 60 crore people. Neither the government nor the corporate sectors have the capacity to employ such large numbers. Schemes such as the Jawahar Rojgar Yojana and NREGA are there but the whole concept is based on giving out doles. Clearly, rural and semi-urban people need respect and sustenance, not doles. They have to be integrated into the new economy, which unfortunately they are not.

The trickle-down theory has not worked either. An independent policy is needed for two-thirds of the rural Indians and 70 per cent of the urban workers, who unfortunately are not even getting the officially stipulated minimum intake of 2700 calories.

Standard & Poor has recently downgraded the investment rating. There are apprehensions it may be downgraded further because of the rising deficits. Undoubtedly, the government has to ensure a fast-paced growth by increasing the purchasing capacity. This will be possible only by empowering the working class. The 1991 policy started an urban-centric policy, whereas 2009 has to have a holistic view by including the forgotten and forsaken sectors. It has to pin for an inclusive growth.

India has the advantage of a young population that is to last till 2050. Even China is to lose the advantage from 2015 owing to its one-child policy. The youth are spread all over. If they are taken care of no recession can stop the growth of this mighty nation. It does not need an investment. Prudent inclusive thinking can help achieve the goal. -- INFA    

(Copyright, India News and Feature Alliance)