Economic Highlights
New
Delhi ,16 July 2012
Innovative Minds
FOR A HAPPIER INDIA
By Shivaji Sarkar
India is in a dilemma. Can it
grow without foreign direct investment (FDI)? How is the country sailing
through despite slowdown, lack of organised jobs and falling industrial
production?
Indeed, this is a mystery. But, India’s story
is complex. Some regions are growing faster than the national economy. Gujarat
is growing at 10.28 per cent annually, Bihar
and Orissa nearly match it in percentage terms. Uttar Pradesh is a laggard.
Interestingly, the rural sector is an island of
happiness though not in terms of prosperity. It is marketing innovations and
parallel power supply system. Surprisingly, the UP hinterlands have cash flows
wherein the State’s magic for sustenance is the high volume food grain and
vegetable trade. The supplies reach Maharashtra, Gujarat, West
Bengal and in some cases even Tamil Nadu.
True, UP does not have Gujarat’s
grandeur which is flush with funds from indigenous as well as foreign sources.
Industrialists shun the State due to its lack of official culture notwithstanding
young Chief Minister Akhilesh Yadav. Even industries in Noida and Ghaziabad are moving out to
safer pastures, where they would not be exploited by goons and not suffer power
shortage.
Yet States like UP and Chhattisgarh, riven with Naxal
menace, have a penchant for survival. The magic? Cash flow, naturally. Ditto Punjab, which again is not lacking in cash flow.
Questionably, is this black money? Yes and no, as all
cash flow might not be black money which poor States like Bihar,
Assam and other North Eastern
States can attest
to. Besides, the economy survives on
fast cash transactions and in some cases, credit by private sources at high
interest rates. Also, default in these economies is rare.
Pertinently, bank transactions are not unknown. Many
dealings take place directly as small businesses want to avoid the hassle of
banking procedures and the high costs imposed on them. So a central UP potato
trader is delivered money immediately through different channels by a Maharashtra trader or any other State. As this is a
foolproof system.
Do the traders pay tax? Yes, but not at the official
‘extortionist’ level. Needless to say the transaction procedures need to be simplified
and taxes decreased from the current oppressively high rates and at multiple
points to ensure more small traders trading inter-State.
Arguably, if the traders have to pay tax at all the
levels, they would be left with little money to operate. Thus, various State Governments
need to devise an honest method and simplify the tax system to ensure traders
comply with it. This would avoid double, triple or quadruple taxes which is a disincentive
for trading and would help keep prices at an affordable level for consumers.
But this has a flip side. The present system
compromises on wages. Certainly, MNREGA has made some difference whereby rural
wages have increased. But so have the costs of the rural entrepreneur which has
resulted in increased prices of goods and commodities. Clearly, the high vegetable
prices are a result of this increase.
Also, policies decided at the Central level without
considering its implications could cause an adverse impact on the economy. The
recent economic reforms proposals, mostly targeted for corporate intrusion into
hinterlands have under-estimated the capacity of small traders, entrepreneurs
and businessmen. Whereby, our policy makers need to realise that howsoever they
might have contempt for rural entrepreneurs, the economy cannot grow without
their active participation. It does not require large infusion of funds, least
of all foreign funds.
Leading to another question. How can an economy grow without funding? Small States
show the way as they have enough money flow. Provided, unrealistic rules and
penchant for taxing every activity does not come in their way and stall
progress the Indian economy could grow faster and in a much robust manner.
Moreover, the globalised economy, propagated by the
large corporate under the aegis of World Bank-IMF, is keen on creating economic
monopolies. They do not allow free growth or free functioning of individual
enterprises. In such monopolies, the individual unorganised enterprises are
disliked as they cut into profits of large corporate.
The global economy also has a tendency of routing
transactions through a more expensive banking system and makes individual
operations uncompetitive. In short, it aims at weakening the foundation of UP,
Bihar, North-East, Punjab, Himachal and Jammu
and Kashmir. Today, if these areas are not in
distress, it is thanks to the cash transactions taking place at different
levels.
Furthermore, if India has survived the Lehman
crisis, it is because of its strength in transacting in cash without credit. Large
economies are crashing owing to over-concentration of activities and offering
credits beyond the capacity of the system. Remember, the Lehman Brothers and
other financial institutions collapsed for this reason.
Undoubtedly, the strength and success of our system
needs to be made more powerful. This potency comes from decentralised
operations which the country needs to protect it at all costs. This should be
considered a safety valve. The recent efforts of the Reserve Bank and bureaucracy
at centralising all such activities are fraught with greater risks.
It also needs to be understood that these are not
black money operations. Given that the definition of black money itself is
convoluted. It needs to be made clear that any money out of centralised banking
operation is not always black money.
Additionally, the tendency to tax all operations is
also a risk as it makes transactions difficult and expensive. This can also result
in putting an end to the way smaller economies sustain themselves. If people are
sustaining themselves today they might have a happy tomorrow. The different
dynamics shown by innovative entrepreneurs should best be left unhindered.
Today, India ranks second in the Global
Innovation Efficiency Index of World Trade Organisation (WTO). It is for the
enterprises of the unsung individuals. The Planning Commission, Central and State
Governments have offered little to create this innovation.
In sum, if people are finding ways for a better
tomorrow, they need to be encouraged and protected. The State needs to stop
stifling such innovative functioning in the name of regulations. It should
realise human civilisation has evolved through freedom of innovative
activities. If some Indians have it let them thrive because in their success
lies the future of India!
---INFA
(Copyright,
India News and Feature Alliance)
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