Monday, October 8, 2012

REFORMS IN INDIA ONLY SCRATCHING THE TIP OF THE ICEBERG Of GROWTH POTENTIAL

Of late government of India has initiated some reforms like the Foreign Direct Investment (FDI) in retail, insurance and pension along with a small attack on the subsidy bill which are likely to have positive effect on the fiscal health of the country. No doubt the country needs funds to control high current account deficit and investments by way of FDI and Foreign Institution investments (FII) which results in perking up Indian rupee visa a vis dollar. Rupee has appreciated about 8% as a result and this will reduce country's oil import bill by the same amount. The feel good factor about the Indian economy brought about by this and likely to be strengthened further through continuing of the reform process only can at best help in changing the course of GDP growth trajectory but cannot take it to the highs of a good double digit growth which is there for the asking in the light of global turmoil and the opportunity window that has come India's way because of low cost skilled manpower, right demography and a huge insatiable internal market.
The next gen drivers of  Indian economy i.e. infrastructure and human resource development, corruption mitigation and good governance, and Indian energy security have been actually left unattended and unaddressed. It is hard to understand the logic and wisdom of trying to develop India through service industry alone rather than through the hard core manufacturing and industrialization approach. No country on this globe has achieved prosperity through this route, least of all a country of the size and population density of 650 per square kilometer.Though a meaningful reform process is needed in all the sectors mentioned above, the following need attention on topmost priority basis if the intentions of the government are to make a sincere whole hearted effort to make India a prosperous country and catapult it to the status of an economic superpower in the foreseeable future.

  • Corruption mitigation and bringing out black money whether stashed in banks abroad or packed in gunny bags and lockers in the country itself or invested in real estate or other asset classes  or businesses generating and thriving on black money is the first and foremost reform that is needed in the country. A concerted effort on a war footing in administrative, judicial and legislative reforms/measures  to achieve this goal is required. This can come through only when " Loyalty to the nation is the motto" rather than loyalty to the chair or party as is professed in power corridors now a days.
  • Austerity in all government spending and cutting down all infructuous expenditures.
  • Rationalization of subsidies (already existing and likely to be provided in the near future) and defining a clear road map for doing away with them. No doubt subsidies are a must in a poor country with a large population living below subsistence level but the country cannot afford to have them for eternity and it is the responsibility of the government to come out out with ways and means so that the number of beneficiaries decreases by at least 10 % each year. Subsidy in no case can be an open ended scheme. Simultaneously it is the responsibility of the government to see that there is no pilferage/ theft of subsidized goods and subsidy going into undeserving hands.
  • Doing away with all discretionary powers vested with executive and legislative executive particularly for doling out favours of real estate, promotions and postings, post retirement jobs/extensions which are generally used for obtaining favourable decisions/rulings by who's who of the power corridors. After all there is no dearth of talent and experience in this country and people remain in the power corridors by virtue of their manipulative skills and ability to fit in the jig saw puzzle of the government.