Part 3: Revival of Indian Economy
Revival of Indian economy is vital. If it is not done, India will be losing the demographic dividend which it has in hand. In accordance with the World Economic Forum (WEF) survey there is widespread despondency in the population. People opting out of the labour force corroborates this feeling. This outlook has to be changed and a large number of other things need to be done. As stated earlier, politics cannot be delinked from economics. In Part 3 we have suggested the treatment for India’s ailing economy and it includes the vital aspects of politics as well as economics.
End to Government of 4 Men
Democratic decision making has to be instituted at the earliest. India cannot afford the price of “Tughlaqi” decisions like demonetization and 4-hour notice lockdown, the two biggest causes of the economic ruin. The federal structure of governance needs to be restored.
Alienation of Muslims
Alienation of Muslims needs to be ended. Muslims should be suitably represented in governance.
False Creation of Internal Enemies
India should start functioning like a genuine and transparent democracy. The creation of fictitious enemies for political gains should be ended. India cannot afford more deaths like those of Stan Swami or locking up of journalists like Kappan.
Role of Women in Governance and Economy
Actions have to be taken to increase the state of education, participation in economic activity and governance for women.
Indian government needs to start generating authentic data and stop fudging it and place it in public domain. This is a right of Indian citizens. It is essential for policy making.
Respect for Merit
The government should hire the best available talent to guide economic policy making. Indian government should learn from Stalin, CM of Tamil Nadu by hiring a “dream team” of economists to formulate policy.
Preference to Sycophants and Political Affiliation Above Merit
This policy of rating political affiliation above merit must end.
Disrespect for Scientific Knowledge and Analysis
Disrespect for scientific knowledge should be terminated straightaway.
Poverty Reduction, Healthcare and Education
To ensure that poverty does not kill a large number and to support the poor with healthcare and education India needs to start a policy like the Direct Benefit Transfer Scheme proposed by Congress in the 2019 election manifesto. There is a need to enhance the healthcare and education budget. Use of insurance as a tool to improve healthcare will not work. This fact was proven in the Pandemic second wave. These actions will save people, make them more productive and increase domestic demand and hence make economic sense.
Unemployment problem cannot be resolved by mere public expenditure on infrastructure. There is no quick fix solution. The following need to be done:
- Filling up of existing vacancies in center and state jobs.
- Improving domestic demand, as suggested earlier, to incentivize private investment which would create a large number of jobs.
- Enhance public jobs in the education and healthcare sectors.
- Promote trade by lowering import duties and promoting exports. India should do what Bangladesh has done for the Textile Sector.
- The present focus on “Atmanirbharta” in the manufacture of semi-conductors is a good idea. This should be done to reduce the dependence on Chinese products in a planned manner for all items, particularly in the field of electronics, solar energy and pharma.
- Through improved education the quality of jobs should also be increased.
- Support to MSMEs will increase jobs.
It is the right time to institute the concept of progressive taxation to get money from the ultra-rich to give it to the poor. The policy should be applied for direct as well as indirect taxes. This Robinhood act is in accordance with India’s commitment to inclusive growth. It will increase domestic demand and raise the spirit of the masses. As stated earlier it is feasible to garner over Rs 5 lac crore from the richest few. This money can be used effectively to save people, improve their health and education as also increase the GDP.
Poor Domestic Demand
Points have been given earlier to raise domestic demand.
A special plan has to be made to revive MSMEs after deliberation. Tax benefits, easier loan conditions and promotion in public buying of goods and services should be considered. This will give a major boost to job creation, increase domestic demand and increase the GDP.
The problems of the agriculture sector are grim. The following need to be done:
- Increase the budget for MGNREGA and ensure the promised aspects in the act and increase the number of working days to 150 per person.
- Create non-farm jobs as suggested earlier.
- Provide legalized MSP for a wider range of products.
- Formulate agriculture policies after deliberation with all the stake holders to resolve the problems.
Cleaning Up of Banks and Financial Institutions
The banks and financial institutions need to be cleaned up in a systematic and clean manner with minimum loss of public money.
Social security pension should be made more comprehensive after deliberation.
Focus Only Elections and Propaganda
The over focus on elections, election expenditure and false propaganda by the government should be reduced.
Acts Like Demonetization and Lockdown Should Never be Repeated
Policy measures and judicial actions must ensure that irrational acts like demonetization and the 4-hour notice lockdown are not repeated. Both these undemocratic actions should be judicially investigated and the guilty punished. In my view both these decisions were taken by PM Modi alone based on his “raw wisdom”.
Corruption will not end but it can be reduced by undertaking the following actions:
- The Supreme Court should show spine and terminate corrupt policies like, “Electoral Bonds” and “PM CARES Fund”.
- Election expenditure should be made transparent.
- Strict laws should be made to prevent buying of MPs and MLAs.
Misuse of National Agencies to Promote Modi’s Agenda
India should function like a democracy and the subversion of institutions should end.
Fleecing of Masses through Tax on Petroleum Products
The fleecing of the masses through excessive taxes on petroleum products should end. This will increase the disposable incomes of the masses and control inflation.
Poor Handling of Coal and Telecom Sectors
India should improve the handling of the coal sector to reduce imports. The telecom sector should be handled better to prevent the creation of near monopolies.
Our Current Account Deficit (CAD) in the coming financial year may be around 3-4 % of GDP considering the expenditure on oil import. This needs to be reduced. Policies should be created to reduce petroleum imports by increased use of sugarcane made ethanol and bio-diesel. Growth of mustard and other edible oil producing crops should be promoted to reduce our import bill gradually.
Dependence on Chinese Goods
Our dependence on Chinese products is unacceptably high. We export raw materials and import finished goods. This is bad economics and should end.
Effective Functioning of Competition Commission
Even a layperson can discern that when things are going bad for the masses, it seems incredible that a select few are adding crores to their wealth every day. I am implying the Modi favourites Adani and Ambani in particular. It definitely indicates that the Competition Commission of India has not been functioning properly or the policy formulation is ineffective. This has to be rectified.
Under Utilized Public Assets
The privatization drive has not worked well. There are a large number of public assets which can be monetized to improve infrastructure and public expenditure. A team should be formed to ensure that this is implemented on ground and not remain an exercise on paper like the past policies. The income generated would be well utilized to generate growth, reduce inflation and control the fiscal deficit.
The recommended actions are difficult but doable. We are in difficult times. We need calm and rational decision makers to improve the state of India and not self-promoted “strong” populist and irrational decision makers. I end this blog with the hope that at least some of the suggestions made to revive the economy get implemented. These can be ensured through public pressure and not irrational cheering of government’s actions.
‘Dream team’ of international economists to advise Stalin for inclusive growth of TN | Latest News India – Hindustan Times