Millennium Post

Of economic priorities

Immediate action plan is required by the new government to address the country’s stark inadequacies – unemployment, farm distress, and massive NPAs

Of economic priorities

The Prime Minister's Office (PMO) has issued instructions to formulate a detailed action plan for the first one hundred days of the next government, according to some knowledgeable people. Apparently, this set of action plan is meant for the incoming new government, whichever it is. But the presumption is that the guidelines are to follow the manifesto priorities of the ruling party. The move might reflect the current dispensation's sense of confidence regarding the chances of coming back.

Although the formal frame of a general action plan in the context of the current situation in the country, if an action plan is prepared under the command of the present outgoing government, the emphasis, understandably, would be on an economic blueprint to be taken up on a basis of priorities of those in power. Obviously, there are some very pressing issues for the country.

The better approach should be to draw up an agenda on the basis of the key shortfalls of the present government over its five-year term. From this standpoint, three stark and overwhelming inadequacies stand out. First, the failure to create an adequate number of fresh employment opportunities as promised in the beginning; secondly, the question of farm distress and thirdly, a blueprint for resettling the ailing public sector banks by addressing the question of resolution of their massive portfolio of bad debts over a period of time.

Needless to say, all three are political time bombs. If not handled properly, these are enough to topple any government, let alone set in motion serious socio-political upheaval.

Since the present government had faced major criticism for its failure to create its promised number of jobs, fresh strategies will have to be worked out on an emergency basis to tackle some programmes for job creation. Jobs can be created in small and informal sector units and more efforts have to be made to encourage setting up of self-employment projects.

Not that this was not realised. The Modi government had started out promisingly with its plans for self-employment projects and also pump in aids for the smallest and informal activities for the creation of employment. However, somehow these got lost midway.

The government's efforts to beef up these activities through the so-called Mudra Bank has come unstuck and a renewed effort would have to be taken up to further enliven it. There has not been even a proper survey of the loan offers for projects facilitated by funding from Mudra Bank. The entire programme was not chiselled properly and then pursued rather half-heartedly.

The new government might just take a hard look at the operations of this programme as well and if found unsatisfactory should have the courage to fix a sunset clause for the Mudra Bank. The bane of policymaking in India has been a complete failure to make hard decisions. Projects and schemes which have proved non-starters have still been allowed to linger and continue for self-justification.

A related area is to develop a robust employment-unemployment database. The avoidable controversy over holding back some employment data takes us nowhere. That data itself is rather skimpy in nature. A fundamental re-look should be taken to construct a framework for generating updated employment figures. This is very tough, primarily because the biggest volume of employment is in really small and tiny units.

The second area of failure has been farm distress. Farmers' distress is not uniform throughout the country. While in areas farmers have lost their home and hearth following crop failure and weather misfortunes, in other areas farmers have made good returns. Therefore, the farming and agriculture policies should be tailor-made to agro-climatic areas hit by crop failure and other misfortunes. One size does not fit all farms in all regions.

It is also essential to diversify the rural economy and develop non-farm activities. More of non-farm activities could help when there are crop failures and bad weather conditions. Agro-processing units at the farm level could thus help create the cushion. For example, while there is currently a very good crop of onion in western India, the prices have crashed causing distress to farmers.

These situations could be met not just by talking of debt relief and "Karz Mukti" but by larger investments in these areas for creating storage facilities as also for onion processing units in western Maharashtra, for instance. Onion pastes in super-markets charge high premium when post-harvest onion prices have crashed.

In tackling this issue there is a need to be open-minded. Allowing corporate buyers of the crop, including advance purchases and forward contracts could be a guarantee for prices remaining above certain levels. Interesting work is being done by some private bodies, including some promoted by global foundations, in creating higher value in farms and sending out the ripple effect of development in some select areas.

Thirdly, the situation of the public sector banks has been bemoaned in the political manifestos ad nauseam. However, it is the link between the politicians and the borrowers, which have ruined our public sector banks. Witness the current drama over bankrupt groups. Politicians have drained the banks and pressurised them into giving loans to powerful groups for their unviable projects. This has been possible mainly for the public sector banks because they are owned by the governments and ruling-party politicians think PSU banks' money is for them to sequestrate.

Among many such examples, both Jet Airways and Bhusan Steels, one closed down the other's state unknown, are large scale defaulters now. Bhusan Steel's unpaid dues are reported to be close to Rs 50,000 crore to public sector banks. Yet in most cases of such defaults, it is easy to detect how these promoters have got funds from banks through their political links.

There are many other issues before the country which the next government should deal with on a priority basis. But these three are the uppermost and have been political bombshells. These are too serious to be left unattended.

(The views expressed are strictly personal)

Anjan Roy

Anjan Roy

Our contributor helps bringing the latest updates to you

Share it