Economic Highlights

New Delhi, 30 May, 2016

Bar Imports, Dump PMP, West Clutches

WANT ACTION-PACKED TWO YEARS

By Shivaji Sarkar

How would an Indian like to see the country two years later? A question people are asking as Prime Minister Modi completed his first two critical years in office. True, there is achievement which has raised hopes for more. But it is a crucial challenge as well.

Undeniably, India is keen on breaking from the past 70 years’ policy of PMP – Poverty Management Programme. Wherein, it was not just people doing so at the home front, but even Governments at the national level. Deficit budgeting, belt tightening, surviving on shoe-string revenues, raising taxes and trumpeting about supposed growth were the normals for most Governments.

These manifested in a vicious cycle. The US and Europe lured or forced Indian Governments since 1966 during Indira Gandhi’s Prime Ministership to devalue the Rupee in a continuous manner. From almost at par with a dollar it has now slipped to almost Rs 68 to a dollar.

Notably, India’s loss is West’s gain. A low-cost Rupee has been subsidizing their economy for decades. If the Indian Rupee falls so do most other sub-Continental economies, be it Pakistan, Sri Lanka, Bangladesh or even Iran.

Add to this, many “new” economic policies were nothing but a continuation of old ones in glittering fresh packages. However, people are reposing trust in Modi not for this alone. They see a spark in him and want Modi to give a new dynamic vision – which in many ways he is trying to give.

This is not all. People want the Prime Minister to usher in a brand new economy, which would not be a copy of Manmohanomics, Nehruvian socialism or the so-called Marxism-Leninism. Which merely did PMP – perpetuating poverty in the garb of removing it – Garibi Hatao!

True, no one has accused Modi of doing this, yet there are fears he might slip into it. As it stands, the country is in a cycle of low productivity, little job growth, severe revenue crunch, rising prices, increasing wages and Government facing constricted functioning.

Undoubtedly, people want Modi to come out of this as his first two years have raised hopes. But the next two years we need to see action to achieve these goals. Two years down the line the Prime Minister would have little time to convince the public that he wanted to do so, but was unable to live up to the peoples dreams. Consequently, Modi has to gift them a new economic concept which would spur productivity, jobs, investment and make the country a shining star in a sinking globe.

As it stands, nobody in 2018 would buy the argument that global slowdown, which in all probability would continue, failed India. The country wants an independent economic policy – free from IMF-World Bank-WTO intervention --- which would increase farm productivity, rural entrepreneurship, overall happiness and higher purchasing power.

For achieving real happiness countrymen want sidelining of global prescriptions, laws and rules, check free imports from China and other countries and create a hub of indigenous activity, innovation, manufacturing and production. They are presently not so bothered about exports. The UNESCAP has said world export markets would contract.

Pertinently, India so far has been largely exporting inexpensive goods or re-exporting gold and petroleum products. Even if the country, all of a sudden, starts producing high quality goods there is no buyer in the poverty-stricken Western world or strife-hit West Asia.

Besides, South-East Asia too is busy consuming its own products or those being flooded by China. Certainly, India might “Act & Look East” but South-East Asia has little interest in looking at its closest Western neighbour. Yes, they might need to make and sell a car or other goods but do not purchase much from India.

Look at Japan or Korea, both want to survive on India’s strength but give little in real terms, except may be some soft loan to sell their metro or bullet train. This does not strengthen India’s economy though it might create a façade of progress.

Sadly, the country has repeatedly fallen into this trap. So when petroleum prices fall, India lives in uncertainty and keep’s prices high thereby starting a chain of inflation. The Rupee falls further and farm inputs become expensive which does not help farmers or rural workers. They remain poor.

Clearly, the country has to come out of the imports syndrome. It should not bother about WTO rules as no international rule is above sovereign needs. If that means creating a curtain – bamboo or iron – for a short duration, the country must have it to create the domestic productive strength. Low-cost imports of trivial items from Shanghai or Seoul are ruining not only our economy but also entrepreneurship and indigenous manufacturing.

Additionally, the ‘Party with a Difference’ must bring in a different approach so that the concept of Deen Dayal Upadhyay or Mahatma Gandhi can take shape. The lack of this is now hitting IT giants hard as US move against outsourcing has virtually closed doors on India. Large firms like Wipro, Infosys or TCS are relying on external sub-contractors, albeit giving jobs to American nationals for their survival.

Irrefutably, global firms have created the bogey of “ease of business” and lure of investment through a weak Rupee. As this multiplies their profits several fold wherein they import their products and push them in the Indian market.

Presently, to further increase profits, they are pressurizing the Government for implementing the Goods and Service Tax (GST) which is bound to make products expensive with higher tax doses. Yet, they do not employ people as they set up automated factories.

On the obverse, there are some arguments. However, overall benefits to India have remained limited. Therefore, the Modi Government must come out of the GST trap laid by the Opposition and some large firms. It should remove income tax and free the highways of toll to spur activities.

Furthermore, Modi should rebuff the so-called anti-pollution lobbies which are hindering production on silly pretexts like diesel or environment protection. The judiciary must be told that all fuels are “polluting” and with Euro VI vehicular pollution should not be an issue. Hence, there cannot be a ban on any car or other machines just to steal headlines.

All in all, Prime Minister Modi is bold enough to call the bluff and steer the country ahead. He must change tack and bestow India on a vibrant economic path. Modi has brilliant economists in his Party, other Saffron organizations and grass-root practitioners who could suggest dynamic models. The Prime Minister should bring them to the fore and mark the necessary change by 2018. ---- INFA

(Copyright, India News and Feature Alliance)