Economic Highlights

New Delhi, 16 August 2013

Nation’s Economic Woes

PM WISHES THESE AWAY

By Shivaji Sarkar

‘Inflation shoots up’, ‘Rupee at new low’, screamed newspaper headlines on Independence Day.  People expected Prime Minister Manmohan Singh to address these issues in his speech to the nation from the ramparts of the Red Fort. He let them down. He was all praise for over seven per cent growth during the past decade, which was not discernible to the common man, industry or investors.

Worse, while countrymen can’t find jobs, Singh said there would be a million jobs in a year. Should one believe him? Neither the common man, nor the industry – the primary generator of jobs, does so. At best, it may be a sincere wish of the nation’s PM but the road map is missing, in the backdrop that the total number of jobs grew by 27 lakh since 2004 against six crore in the previous decade. Add to this, falling exports, rise of expensive imports, lack of an indigenous energy policy and eluding investments.

The latest RBI move on repatriation of profits by corporate and individuals to check the falling rupee, does not go in sync with the Government’s attempt to attract more foreign investment. The RBI step is correct in many ways, but it also shows that one Government wing is not in communication with the other.

Besides, the Prime Minister took no pains to share with the nation his solution to rising prices and inflation, which is touching 5.8 per cent. Vegetables, onion and fruit inflation crosses 13 per cent mark, the rupee touches a new low of Rs 62.03 to a dollar and all projections on poverty have become redundant.

If we take Planning Commission’s figure of Rs 33 to ascertain poverty, the rupee slide has simply taken it to double that figure – or in simple terms the number of poor has doubled. This is not a matter of surmise. The Standing Committee on Finance in its 72^nd report on the number of below poverty line population states: “The committee notes with surprise that there is wide divergence between the aggregate estimates made by the Planning Commission and those submitted by the State governments. The committee is thus constrained to observe that the estimation of poverty and the consequential identification of BPL household do not seem to have worked at the ground level”.

Likewise, the Standing Committee on Rural Development has found lacunae in implementation of the rural employment guarantee scheme (MNREGA). Despite the fact that all States have not been able to allocate money from the Rs 40,000 crore a year for administrative purposes, Rs 6381 crore was spent on it. Worse, lapses including preparation of muster roll of people being engaged on a daily basis have come to light. Besides, administrative expenses shall increase to over Rs 10,000 crore a year, which will effectively reduce the number of beneficiaries. This apart, huge unspent balance has been reported in each year since 2005. In all, the question to be asked is: Why should the nation tom-tom about a programme that cannot effectively benefit the poor?

The greatest admission of failure of a Government is possibly the announcement of rising entitlements, cash benefit transfers, misdirected subsidies, food security bills and MNREGA.

It is an admission that mounting costs and rising prices have made living so expensive and difficult that the people are not finding it easy either to sustain themselves or their families. So they have to be given doles.

If the progress the Prime Minister was trying to impress on the people had been there, he wouldn’t have had to take up the unnecessary programmes that he has. People need jobs, food, better health and education, which the State must ensure. But nowhere in the world have laws been able to achieve this. It requires a benevolent forward-looking economic policy. Today, industrial growth is collapsing and there remains a bias against agriculture that sustains 70 crore of the people directly or indirectly.

The address to the nation was silent on revitalizing the prime farm sector. The country may have junked Mahatma Gandhi but his vision of “gram swaraj” that includes a vibrant farm sector manned by small farmers and entrepreneurs remains relevant even today. The Khadi sector was a vibrant medium to engage the rural populace, but it too is losing its effectiveness.

How long can programmes like MNREGA prevent rural migration? Khadi in many ways had created a dependency in the rural system and had provided additional employment to the farming families. It needed to go beyond what Gandhi had delineated, but it didn’t.

In a study, the Pew Research Centre of the US found that a whopping 92 per cent of Indians blame the Government for the country’s woes. About 49 per cent feel that the economic situation will remain or worsen in the next one year. Slow pace of reforms, huge fiscal deficit, rising inflation, corruption and falling rupee have indeed hit their confidence.

Additionally, the latest reports on Government and its departmental finances do not present a very rosy picture. Debt is mounting and expenditure remains uncontrolled. This affects the Government’s delivery system. Allocations for many people-oriented and infrastructure programmes are bound to be reduced in its move for austerity. Would it mean announcement of more doles, which may never be implemented?

People desire effective governance and dispersal of activities across the country. They do not want concentration of activities in and around the national capital and a few metros. The Government should be in a tizzy, if it already isn’t. The conflicts within – NAC, the Party and the Government – have led to policy paralysis. The corridors of power are abuzz that either the bureaucracy doesn’t know what to do or has got an alibi not to act.

Undoubtedly, it’s nice to see an optimistic Prime Minister. But his Finance Minister P Chidambaram does not exude that confidence. For why else would he have increased import duty on gold to 10 per cent, which is only a good cosmetic treatment? What he earns through duties would be lost in policing its smuggling other than closing many jewelers’ shops. Indeed, there is policy mismatch all through. The process would only lead to the ultimate – further deceleration of the economy, galloping inflation and more problems for the people. Be prepared. ---- INFA

(Copyright, India News and Feature Alliance)