Time ripe for economy’s take-off
The return of the National Democratic Alliance (NDA) and the Bharatiya Janata Party (BJP) in particular in an electrifying electoral result that took the world by surprise has demonstrably re-established India’s firm shift to right and conservative economic policy. Since Independence, India has seldom given such a decisive say to any conservative economic ideology as mostly it had been content with joint-sector ideology or left-of-centre ones with no pronounced predilection for pure rightist tack for economic development. Not that any such tilt towards right could be politically suicidal that it was skirted by successive governments. Like the obsessive concern with secularism that invariably led to pseudo-secularism so much so that even minorities had lost faith in it, the political parties that ruled the country either alone on their strength till 1977 or much later with the dawn of coalition era governance must perforce trade in left-of-centre or centre-left or left-right mix of policies to give the façade of concern for the poorest of the poor who constitute the largest chunk of the country’s population.
This paradigm shift is summed up succinctly by the Moody’s Investor Analysis when it dubbed India’s decisive election outcome ‘credit positive’, stating that ‘the new government’s strong mandate increases the possibility of a stable central government that will pursue a shared economic agenda to address India’s macro-economic challenges’. No doubt, in the past, internecine intra-party coalition dissent and difference around economic priorities conclusively derailed substantive steps to ameliorate the country’s operating environment. As this worst of time is past, the best of time of promoting bipartisan consensus of a progressive set of policies to lift the economy out is here and now. Even the defeated and disgruntled parties owe the people of India by chipping in to join the punch bowl so that the heavy lifting entailed in the exercise of economic turnaround is eased.
But having been exposed to the guiles and wiles of parties and their practitioners across the political spectrum, the people of the country in their native gumption at long last resolved and resolved silently imperceptibly but decisively to tell the political parties that the time had come to go for development and distribution of the derivative gains of growth. They no longer like the rest of the political classes to waste away time by wallowing in extinct ideologies of pursuing charity without paying due heed to getting growth growing and ensuring that people do not remain supine and spineless by satisfying themselves with sops and freebies. It is a travesty of development that even the microscopic minority of the super-rich, the rich and the considerably rising number of middle-class populace do not have little compunction for the environmental degradation of development once they step out of the cocoons of their hearth when they encounter nothing but mounds of garbage, unclean milieu, rickety physical and social infrastructure that do not do to the glory of a member of G-20 block of developed and emerging economies as India is one in the prestigious league.
So the advent of the BJP with its avowed objectives of ensuring development and unrestricted freedom to harness entrepreneurial energy in whichever activities people choose to engage themselves in with determination and tenacity should bring and spring hope that the policy inertia and lack of verve among the bureaucrats are broken once for all. As the time to fix the roof is when the sun shines, the BJP fresh from its epochal electoral victory should find the time right now propitious to set in motion a slew of policy action, buttressed by a competent team of ministers and experts with sufficient domain knowledge to strike at crucial areas of the economy. As Modi has proclaimed that he believes in the credo of minimal government and maximum governance, the BJP should go about putting in place a team of efficient experts in the regulatory institutions in all key ministries including agriculture, industry, infrastructure, science and technology so that the players in the arena would have the comfort to play by the rules and get their competitive capacities honed well. Alongside regulatory reinforcement, productivity enhancement in every field of economic activity must get the priority attention of the authorities as the country had been using more capital to get a given output, reflecting the inadequacies of efficient utilisation of capital to wrest the optimal results. In a labour-surplus country, imprudent use of capital is inexcusable and every effort needs to be made to ensure that the capital-output ratio improves and improves distinctly too.
Inflation particularly consumer inflation shows no sign of let-up, the supply side constraints choking the system need to be unplugged so that the pressure on prices gets eased. Even as the BJP has earned its spurs in the election, it needs to take on board the disparate states to ensure that the movement of goods and services across the country is smoothened. No doubt, the government should tackle the food economy on a war-footing by aligning the activities of the various ministries of agriculture, food, irrigation, rural development, fertilisers into an integrated and holistic machinery instead of the extant silos in which each one conducts its affairs, dissipating the time and energy, besides bloating the overhead costs. If minimal government and optimal results could be the aim, here is a test care for action. In fact together with reforms to the Agriculture Produce Marketing Committee (APMC) Act and the early rollout of the goods and services tax (GST), the BJP government can kick-start the sweeping shift in free movement of goods and services pan-India. The time is ripe for persuading the States to be on board as the resultant gains to people would be too great to pay the small political price of personal pique and prestige in blocking this great unification of markets and people within the country.
The country’s banking industry being the backbone for ensuring that growth is not stunted or circumscribed for want of credit to productive and real sectors of the economy, the new government should not disturb the credibility of the apex bank, the Reserve Bank of India and its top honcho, Raghuram G Rajan. No doubt, Rajan earned several brownie points by his impeccable and impressive professional conduct in combating inflation and controlling the twin deficits of fiscal and current account in the second half of the fiscal
2013-2014. As the battle against inflation is still to be won, the nation cannot afford to suffer any setback by any peremptory action abridging the autonomy and authority of the central bank. Most of the public sector banks today stand over-exposed to dubious clients in highly leveraged segments of industry including power, telecom and infrastructure. Hence, the government should ensure that the large capital infusion to public sector banks is made before long so that there is no systemic threat to the stability of the financial system over the medium-term.
The BJP is all set to announce its council of ministers soon and all eyes are fixed on its core team of economic ministers straddling finance, commerce, industry and infrastructure, besides agriculture and science and technology.