Open Forum
New Delhi, 27 May
2020
Reform Agenda
IS IT RIGHT STRATEGY?
By Dhurjati Mukherjee
The stimulus package
announced by Finance Minister Nirmala Sitharaman has triggered a discussion
whether it outlines the government’s broader agenda on reforms. Some economists
have been clamouring for reforms, which in effect means, meting out
opportunities for business houses and not the micro and small sector. Whether
these were necessary to be announced now, when the country is facing an
unprecedented crisis, is under question.
Importantly, 22
like-minded Opposition parties have called the package a “cruel joke on the
country” and demanded the Centre come out with a revised stimulus that would
generate demand. Further, their leaders issued an 11-point charter of demands, prominent
being payment of a monthly amount of Rs 7500 for six months to families outside
the income tax bracket, distribution of 10 kg of foodgrains for a similar
period to needy families and “reversal of all unilateral policy decisions,
particularly annulment of labour laws’.
Apparently, there is dismay
around the announcements, among the corporate as well as the poor and struggling
workers fighting for basic survival. However, what is worse is Sitharaman’s ‘false
estimate’ of the stimulus package accounting for 10 per cent of GDP. It has been
repudiated by one and all, whether a research organisation or an economist.
Fitch Solutions
Country Risk & Industry Research has estimated the fiscal impact of the
stimulus stands at 1 per cent of GDP. Even the SBI said the fiscal cost would
be 1 per cent of GDP. Other research organisations have given their estimates
of which mention may be made of Goldman Sachs – 1.3%, HSBC – 1%, Edelweiss –
0.84% and CLSA 0.8%.
Therefore, it was distressing
to hear even Prime Minister Modi remark these bulk reforms would boost
entrepreneurship, help public sector units, boost entrepreneurship and revitalise
village economy, besides having a transformative effect on health and education
sectors. Such jargons are often aired by politicians, but when looked deeply it
becomes amply clear that these reforms will not have much effect, except for
transferring resources to the private sector, most of which are profit-oriented
and don’t have the ability to being competitive on a global scale.
These so-called
reforms are primarily being seen as a bid to attract foreign firms, which may
be leaving China and could be a stimulus for the short term. Be that as it may,
their implementation, in a judicious manner, without any favour and from a
professional perspective would be vital. This means that monitoring of the
private sector to ensure its smooth functioning is necessary.
Let us first take the
example of the present state of the village economy. The so-called transfer of
an additional amount of Rs 40,000 crore to MGNREGA scheme may appear big but in
reality this amount is below Rs 30,000 crore because in the current Budget
allocation it was less than last year’s, plus the 7-8 per cent cost escalation
was not taken into account. Moreover, migrant labourers’ have returned to their
respective homes, mainly in Bihar, Uttar Pradesh, Jharkhand, Chhattisgarh and,
to a lesser extent, in West Bengal and Odisha, and they have to be given
employment, at least for the next two-three months before they can return to
their place of work.
Insofar as conditions
prevailing in rural India are concerned, the less said the better. While
profitability is prominent factor in big private sector companies, farmers are
struggling for adequate returns to meet basic essentials of life. Also due to
fragmented land holdings, the profitability of small plots of land has further
come down. Unlike China, the panchayats here have not taken the initiative to
form cooperatives so that modern methods of farming could increase yield -- at
least twice or thrice a year – and give adequate returns to small farmers.
As always, the grant
of Rs 2 lakh crore concessionary credit for farmers, holding Kisan Credit Cards
and earmarking an additional Rs 30,000 crore as an emergency working capital
may benefit mostly marginal and big landholders to ensure uninterrupted farming
operations during the kharif sowing season beginning June. According to
expectations, 2.5 crore farmer would benefit from the flow of cheap credit.
However, the Rs 6700-crore working capital for States for procurement of
agricultural produce may help in giving more cash to the farming
community.
Remember Vinoba
Bhave’s Gramdan Bhoodan movement,
where the Gandhian walked through villages and collected thousands of acres of
land but subsequent governments did nothing to form cooperatives and help
sharecroppers to farm land or take up horticulture or floriculture projects.
Vinoba’s vision of transforming rural India or even that of APJ Abdul Kalam of
proving urban facilities in rural areas (PURA) has yet to become a reality as
the focus of planning has been on the urban sector.
Rural rejuvenation
should now focus on horticulture, floriculture and agro-based industries, which
the government is now considering. Moreover after years, the government has
just decided to allocate Rs 6000 crore fund for giving an employment push under
the Compensatory Afforestation & Planning Authority (CAMPA). Activities
under this plan are expected to include afforestation, forest management, soil
and moisture conservation work and wildlife related infrastructure work to help
tribal people and adivasis.
Regarding public
sector units, it cannot be ascertained what help would be extended. Framing a
broad PSU policy or merging some of these is welcome but privatisation of all
PSUs in non-strategic sectors is difficult to fathom. Also experts have rightly
pointed out that such policy has to be framed in consultation with States since
there are a large number of state-level PSUs. Self-reliance has nothing to do
with privatisation. Rather the government should try to make PSUs profitable
through induction of technology and mergers, wherever necessary.
The decision of
privatisation of coal mining and also of power distribution raises a few
questions. Handing over some mines to private parties may be considered but it
must not be forgotten that in the coal sector private operators’ have been
involved in huge scams. Also questions arise whether domestic companies have
the technology and expertise to manufacture defence equipment. As regards the
decision for privatisation of power distribution, it is inevitable that
electricity charges would rise and the EWS and lower income groups may not have
the capacity to pay.
Regarding developing
health infrastructure across the country and specially in villages is
imperative, if the government has real concern for the poor and the EWS. These
include backward blocks and sub-divisions of the northern and eastern parts of
the country where the population density is high and the per capita income
rather poor. Privatising district hospitals is not quite prudent but in
congested areas one additional hospital in PPP mode may be considered with
regulations on charges the poor would have to pay for treatment.
Finally, the reason
for not making available more funds in hands of the State is indeed intriguing
and most States have opposed the move and questioned the government’s sincerity
of following cooperative federalism. There is need to seriously ponder over
this vital matter as resources in the hands of the States would only help in
real development, benefitting the poor, the tribals and other weaker sections.
The government needs to reorient its strategy but it appears the top leadership
is not interested in following a pro-poor, pro-rural geared to strengthen the
rural economy. ---INFA
(Copyright, India News
& Feature Alliance)
|