Trumpet of triumph hardly convincing !
G.Srinivasan
India ended permit quota raj and
grandly embarked on the path of
liberalization twenty-five years ago.
Yet, neither the economic policy
measures nor all the hoopla over the
triumph of reforms can hide the hard
and harsh ground realities that are
visible to the naked eye, says the
author, in a cost –benefit analysis of
economic reforms.
In the bygone year India
celebrated in a muted fashion
the silver jubilee of the
country's economic and trade
policy reforms or what is
broadly hailed as the
liberalization of the domestic economy
from the clutches of thelicense-permit
regime of the post-Independent India
for more than five decades!
The ruling NDA did not make a song and
dance about the 25th anniversary of the
liberalization of the economy for the
obvious reason that the original architect
was its bête noire Congress Party! But it
was not the Nehru-Gandhi dynasty that did
the reform, although Rajiv Gandhi as the
Prime Minister succeeding his
assassinated mother the formidable Indira
Gandhi did make some baby steps on the
reform front during his tenure between 1984-89 when he enjoyed more than
absolute majority in Parliament. It was
the silent but sagacious Narasimha Rao,
who became an accidental Prime
Minister in 1991, took the giant strides
on the reform path backing his finance
minister Dr.Manmohan Singh to the hilt
in freeing the trammels of control and
licences that had been the bane of the
country's economic development
annals.
Even as India
celebrated in a muted
fashion the silver
jubilee of its tryst with
liberalization of the
domestic economy from
the clutches of licensepermit
raj , the
incontrovertible fact
remains that public
policies being framed
for the people do not
really serve them as
they should under
normal circumstances
and efficient
governance. The mantra
of minimum
government and
maximum governance
with which Narendra
Modi garnered a
relatively comfortable
victory in the 2014
General Elections has
not delivered its
message loud and clear
to a majority of the
population.
Rao, heading a minority government
albeit enjoying the tacit support of all
Opposition Parties, including the BJP,
parried off all impediments to his
straight and narrow path to lift the
Indian economy by forward- looking
economic and trade policy reforms. The
merit of this boldest move is that
succeeding governments, including the
incumbent NDA, have but little option
other than following the steps to bring in
fresh air to the stifled economic milieu
under which the stakeholders of the real
sectors of the economy had been
morbidly breathing.
In hindsight, it can be safely surmised
that as elegantly put by the 2016-17
Economic Survey that India has replaced
"its erstwhilesocialist vision with
something resembling the 'Washington
Narasimha Rao
Consensus'; open trade, open capital
and reliance on the private sectoressentially
the same development
model that has been tried and proven
successful in most countries of Eastern
Asia".
It is altogether another unedifying but
not widely bruited story that many a
nation has rejected the Washington
Consensus to take control of its destiny
as it no longer lends credence to the
conviction that 'one size fits all' model of
development.Even advanced countries
like the US now embrace protectionism,
while Britain exited itself from the
European Union (EU) by a referendum to
take control of its own affairs!
NO CLARITY YET
Manmohan Singh
For India, which originally pursued
the commanding heights of the
economy with the State controland
centralized planning to ensure even and
balanced growth in a country of
continental size and diversity, the
reforms it embraced in the 1990s still did
not lend any clarity to three basic and
fundamental issues. They include a
persistent ambivalence about property
rights and the private sector, glaring
deficiency in state capacity, particularly
in delivering essential services and
inefficient redistribution.
Shiv Pratap Shukla
This is notwithstanding the
introduction of rights-based entitlement
policies for the weaker and vulnerable
sections of society, National Food
Security Act and occasional bailout of
corporate firms having failed in areas
like steel, aviation and other vital
infrastructure industries through bridge
loans by banks or outright write-offs of
their heavy debts.
Citing RBI data, the Minister of State
for Finance Shiv Pratap Shukla said in the
Lok Sabha that the cumulative write-off
(including compromise)of schedule
commercial banks for the five- year
period ending March 2016 was Rs
2,30,287 crore. In defense, the Minister
conceded that writing off of nonperforming
assets is "a regular exercise
conducted by banks to clean up their
balance sheets and achieving taxation
efficiency". To boot, PSBs have written
off a sum of Rs 53,625 crore in the first
half of the current fiscal year (April-
September) 2017-18.
If China could follow
economic reforms for
three decades and
notch up double-digit
growth with the chirpy
consequences reflecting
in the economic and
social prosperity of its
billion plus people and
the monumental
infrastructural
expansion they brought
in their trains, why
should a country like
ours deplorably lag
behind in the provision
of basic amenities to
millions of its citizens
with physical and social
infrastructure
continuing to remain a
work in progress in a
wobbly way?
Informatively, gross non-performing
assets of PSBs rose from Rs 6,41,057 crore
during 2016-17 to Rs 6,89,806 crore in the
first half of 2017-18. No wonder, while
approving India's 2017 Financial System
Stability Assessment, the Executive Board
of the International Monetary Fund(IMF)
on December 21, 2017 in Washington
cautioned that "a group of PSBs are highly
vulnerable to further declines in asset
quality and higher provisioning needs.
Capital needs range from 0.75 per cent of
GDP in the baseline to 1.5 per cent of GDP
in the severe adverse scenario".
It needs to be noted that the recent
Finance Ministry's announcement ofRs
2.11 trillion recapitalization plans for all
PSBs amounts to 1.3 per cent of GDP.
RBI RED FLAGS
In its Financial Stability Report, released
at the end of 2017, the Reserve Bank of
India (RBI) hoisted the red flag by noting
that "the overall risks to the banking sector
remained elevated due to asset quality
concerns" as a macro test carried out by it
signals that under the baseline scenario,
gross NPAs might rise from 10.2 per cent of
gross advances in September2017 to 10.8
per cent in March 2018 and further to 11.1
per cent by September2018.
The former Deputy Chairman of the
dismantled Planning Commission Montek
Singh Ahluwalia, in a monograph in a
leading daily, recently noted that what has
been promised by way of recapitalization
of PSBs would only help to fill the hole in
the balance sheet of banks. He said this
would not suffice to let credit expand at the
rate required to underpin 8 per cent GDP
growth.
Incidentally, the advance estimate of
GDP growth for the current fiscal by the
Central Statistical Office (CSO) on January 4
turned out to be a damp squib,noting that
it would slow to a four year low of 6.5 per
cent from the provisional 7.1 per cent
estimated for 2016-17, the third year of the
Modi Sarkar.
Montek Singh Ahluwalia
This prompted former Finance Minister
Palaniappan Chidambaram to lament in a
statement that "GDP growth in 2015-16,
2016-17 and 2017-18(est.) is 8.0, 7.1 and
6.5 per cent. These numbers prove there is
a slowdown". The demonetization of high
value notes peremptorily announced on
November 8, 2016 and the shoddy
implementation of the pan-India Goods and Services Tax (GST) from July 1, 2017
were partly ascribable to the growth
slowdown in the deteriorating
performance of the economy during the
last two years.
Palaniappan Chidambaram
Though obsession with growth figures
does not bode good as it puts under the
carpet the widening inequalities and
unequal distribution mechanism to
partake of the growth benefits to the
greatest number of people in a
democracy, the incontrovertible fact
remains that public policies being
framed for the people do not really serve
them as they should under normal
circumstances and efficient governance.
Xi Jinping
The mantra of minimum government
and maximum governance with which
Narendra Modi garnered a relatively
comfortable victory in the 2014 General
Elections has not delivered its message
loud and clear to a majority of the
population who still find eking out
existence a formidable challenge.
CHINA MODEL
Zhang Jun
In China, things are decisively
changing. Though political liberty
remains a pipedream, economic
empowerment seems to be inching up
when the Chinese Premier Xi Jinping,
while addressing the 19th Party
Congress in November 2017, declared
that "because China can largely deliver
basic necessities to its people, the goal
now should be to improve their quality
of life".
As the 19th Party Congress
acknowledged, honouring these
commitments would require China to
protect private property rights and
entrepreneurship. The importance of
this is highlighted, according to Prof.
Zhang Jun, Director of the China Center
for Economic Studies at Fudan
University, Shanghai, by the fact that "the
private sector contributes more than 60
per cent of China's GDP, 50 of its taxes,
70 per cent of its technological and
product innovations and 80 of its jobs,
despite accounting for less than 40 per
cent of inputs".
If China could follow economic
reforms for three decades and notch up
double-digit economic growth with the
chirpy consequences reflecting in the
economic and social prosperity of its
billion plus people and the monumental
One crucial segment
that remains utterly
bypassed by economic
reform in India is the
farm sector where rural
stress and agrarian
distress have become
the dominant tropes of
the times. The UPA
government made the
first blunder of loan
waivers in the first
decade of this century
for farmers without
addressing the
structural stumblingblocs
to sustainable
farming. The present
dispensation is no wiser
in sticking to this
fallacious remedy.
infrastructural expansion they brought in
their trains, why should a country like ours
deplorably and dismally lag behind in the
provision of basic amenities to millions of
its citizens with physical and social
infrastructure continuing to remain a work
in progress in a wobbly way?
What all the economic and trade policy
reforms had accomplished other than
noticeable eyesores like scams and
shenanigans– whether they relate to
allocation of state resources such as coal,
spectrum or building infrastructure
projects through public-private
partnerships (PPP) where the private
parties not finding the going smooth after
the completion of the project with tolls and
other issues remaining unresolved or
getting contentious due to political
interference.
The domain regulators whether in the
power or telecom sector continue to be
strong in theoretical underpinnings sans
practical resolutions of issues because they
lack the weight of power to enforce orders
or failing to ensure competition by leveling
the playing fields for all those who qualify
to enter and exit by following the rulebooks
codified in rules and regulations that
are pragmatic enough to be adhered to.
Even the Competition Commission of
India (CCI) originally designed to be
headed by a retired High Court Judge of
India but had to be content with being
headed by a retired or serving bureaucrat
is not grounded in the sense that whatever
penalties it slaps upon violators of
competition or displaying anti-competitive
behavior or acting like monopoly or
oligopoly to corner the major chunk of the
market are incredibly large enough to drive
the players out of the field!
Justice and fair play continue to be the
guiding principle upon which
entrepreneurs would invest or stay
invested but where they find that the rules
and regulations simply militate against this
fundamental justice system, they would
cease to take part zealously in asset
building or employment- generating
activities for the overall weal of the nation.
Facilitators should not turn tormentors to
the chagrin of those who like to continue
their normal business activities with
earnestness and their endeavor should not
end in vain by a system that is myopic in
vision and whimsical in action to thwart the best laid plans of the industry.
FARM SECTOR BYPASSED
Raghuram G Rajan
One crucial segment that remains
utterly bypassed by the economic
reform in India is the farm sector where
rural stress and agrarian distress have
become the dominant tropes of the
times, particularly during the last few
years. The UPA government made the
first blunder of loan waivers in the first
decade of this century for farmers
without addressing the structural
stumbling-blocs to sustainable farming.
Arun Jaitley
The present dispensation is no wiser
in sticking to this fallacious remedy as it
shakes the faith of the people in the
banking system and puts paid to honor
loan commitments. In fact, former RBI
Governor and a distinguished economist
of global repute, Dr. Raghuram G Rajan
had railed against this practice by
describing how it distorts credit
discipline by elevating cost and making
difficult any recovery of dues.
Narendra Modi
Even as Finance Minister Arun Jaitley
told the Lok Sabha on the last day of the
winter session that "no financial
assistance for loan waiver has been
provided to States by the Union
Government during the last three years
and the current year", the fact remains
that this odious practice started by the
UPA has been revived by the Prime
Minister Narendra Modi at the height of
the polls in the Uttar Pradesh in 2017,
followed by BJP states like Maharashtra,
Madhya Pradesh, Chhattisgarh and
Rajasthan and others like Punjab and
Tamil Nadu.
Ashok Gulati
Eminent agronomist Ashok Gulati and
Siraj Hussain of ICRIER contend that in
the first four years of the Modigovernment,
agri-GDP is going to log an
average annual growth rate of two per
cent, which is well-nigh half of what was
achieved during the decade-long rule of
the UPA from 2004-2014.
Instead of politically savvy measures
like loan waivers, the time has come to
wrestle with the nitty-gritty issues that
impede the development of this vital
food basket segment of the domestic
economy.
Siraj Hussain
There is no dearth of suggestions to
give a decisive push to the farm sector,
provided there is a demonstrable
political will to accord the importance this constituency deserves and demands.
One recommendation made by the
experts cited above relates to the need to
ensure an effective monitoring and
dovetailing of agri-trade and tariff policy
with minimum support policy (MSP)
through a sub-committee of the Union
Cabinet to take a swift call.
No wonder, the
economic policy
measures and all the
hoopla over and
trumpet of the triumph
of reforms do not
convince the hard and
harsh ground realities
that are visible to the
naked eye if one roves
around the length and
breadth of this vast
country.
Off-on policy pertaining to farm goods
trade need to be shed in the interest of
long-term stability of the market and to
ensure remunerative returns to growers.
At the end of the day, what matters is
how the policy makers and the rulers
attempt to narrow down the widening gap
between rural and urban consumption
(spending on social sector) pattern. A clue
to this is provided from the figures of
National Sample Survey office (NSS Report
555: Level & Pattern of Consumer
Expenditure 2011-12).
Thus in 2011-12, in the crucial social
spending such as education, health
(institutional) and health (noninstitutional),
the consumption per person
for a period of 30 days for MPCE was Rs
39.84, Rs 23.15 and Rs 64.52 for rural
areas, against Rs 135.73, Rs 33.13 and Rs
98.85 respectively for urban areas. These
figures suggest that for both education
and health (institutional) the rural and
urban people the difference in spending is
higher, reflecting the importance of
education and health in the scheme of
urban people and the relative negligent
interest of rural people.
The latter might be due to lack of
opportunities and institutional frameworks
that had abysmally been absent in the
hinterland. Per contra, the high expenses
being borne by both rural and urban
people to non-institutional health care of
accessing private doctors, the woeful
absence of adequate and serviceable
primary health facilities or care home
(public hospitals) in both the rural and
urban areas is the villain of the piece.
No wonder, the economic policy
measures and all the hoopla over and
trumpet of the triumph of reforms do not
convince the hard and harsh ground
realities that are visible to the naked eye if
one roves around the length and breadth
of this vast country.
The author is an outstanding
economic expert.