Turning around the Economy is time consuming like effect of Ayurvedic / Yoga treatment

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It  is nearly 17 months since the Narendra Modi government has been voted  to power yet no major reforms were undertaken is a commonly heard  statement. Is that really the case?

Whilst  the need for major reforms is not in doubt, the question is the pace  at which reforms are to be effected.

Fast  versus spaced out reforms is akin to allopathic versus ayurvedic  treatment. The former is good for handling infections and inherently  provides instant relief. However, it "never really uproot the  disease because essentially, it is about symptomatic treatment".

Subtly,  it reduces your ability to bear pain, makes you expect instant  results and become impatient by nature.

Conversely,  "Ayurveda comes from a different dimension and understanding of  life. It goes deep into your system and takes an integrated view of  your entire body, including the mind." When followed with Yoga  its effect is gradual and is geared towards making you a healthy  person from within having long-term benefits.

From  a management perspective, effecting change in a company or country  are quite similar. Both require a clear vision, effective  communication and buy in from stakeholders. Big change makes people  insecure, faces opposition from vested interests and protests, as we  are currently seeing. A leader can effect big change to risk failure  or effect gradual change.

As  a nation we accept change only when there is a crisis as there was in  1991. Keeping this in mind, NDA 2 has effected change that created  least conflict. Since effects of many changes are not immediately  visible, hence the disquiet.

This  article, first gives key changes effected so far and then enumerates  reforms that need to be implemented to put the economy on a  sustainable high growth path.

Here  are some examples of changes effected since May 2014.

One,  changing mindsets through Mann  ki Baat.  A government can effect change by involving ordinary people. When the  man on the street feels confident, has higher self-esteem he/she will  be more productive and receptive to change.


Two,  "efficient inflation management has driven households to move  from physical to financial assets. This has led domestic investments  to consistently outpace foreign inflows over the past 12 months."  (CLSA  Report on Indian Strategy dated 11 September 2015)

Three,  continue to focus on development expenditure in roads and railways.  According to this report in Mint 'government spending in the first six months of this fiscal by  Ministry of Roads and Highways was Rs 31,529 crore as against Rs  12,876 crore in 2013-14'. The effects of the Golden Quadrilateral and  Mumbai Pune Expressway are still being felt.

Note  that factors like low inflation, weak commodity prices and a  development-oriented government, was earlier seen in 2000s under NDA  1, laid the foundations for the FY04-07 boom. A similar approach is  being followed now.

Four,  completion of coal auctions created faith that the government could  manage a complex auction process and "has reduced black money  circulation".

Five,  "The YoY increase in coal production during FY15 (48mt) was more  than that seen over the past four years combined (37.2mt)," says  CLSA. Earlier State Electricity Boards blamed coal shortage for power  outages. Now focus has rightly shifted to financially mismanaged  SEB's.

Indians  must realise that the Centre has a limited role in providing 24 by 7  power. It is essentially the state government's responsibility to do  so.

Six,  raise the performance bar through schemes like Pradhan Mantri Jan  Dhan Yojana (PMJDY). Deposits by the unbanked under PMJDY crossed Rs  25,000 crore. When poor receive payments into their bank accounts  under government schemes leakages will fall means more money in their  hands. The poor are motivated to save and bank since they earn  interest now.

Seven,  deregulation of petrol and diesel prices.

Eight,  direct benefit transfers for LPG. Besides financial savings, receipt  of subsidy electronically has shown that subsidy actually reaches  your bank account.

Those  who are impatient for a surge in growth rates must remember that NDA  1 took about four years to get the economy back on track.

Having  said the above, the government needs to be pro-active when there is a  sudden surge in prices of food items. Raids on hoarders, be it pulses  or onions, could have happened earlier.

When  the public sees government is on top of a problem they will trust it  to create an environment i.e., conducive for major reforms.

Change  in India must be a combination of low hanging fruits and major  reforms. Results of all reforms will be visible over time just like  ayurveda /yoga treatment does.

Some  key reforms that must be implemented in the next 12-18 months are —

One,  even though agriculture comes essentially within the domain of state  governments, they should work with the Central government to increase  area under irrigation, productivity and improve delivery of subsidy.

Two,  state governments of Punjab and Maharashtra must be convinced, by all  political parties, of the need to motivate their farmers to reduce  production of rice and sugar-cane because of declining water tables.

Three,  restructuring of Food Corporation of India (Shanta  Kumar Committee Report).

Four,  a plan to substantially increase domestic production of pulses.

Five, Mann  Ki Baat programme needs to make Indians think big and motivate them to travel  within India. The program must ask public to demand maximum value for  every rupee spent by the Government.

Can  the program have Prime Minister Modi in conversation with say  Arundhati Bhattacharya, Chairman of State Bank of India, on the  pitfalls of excessive borrowing (corporate and individual) and rural  women about their success stories. Nothing like two way  communication.

Six,  get at least one big FDI project like the $5 billion Foxconn to  actually start operations in the next 12-15 months.

Seven,  single-minded focus on making the people of Uttar Pradesh and Bihar  prosper. India cannot progress if these two populous states are left  behind.

Speak  to any Mumbai based taxi driver from power crippled eastern Uttar  Pradesh and he will tell how availability of bijli will generate employment, enhance incomes and give him a reason to  return home.

Eight,  charge consumers an extra say 50 paisa per litre and transfer amount  to a Oil Price Stabilization Fund. When crude prices surge beyond say  $75, as against $48 currently, increase for consumer would be  disproportionately lower. The move will also reduce inflationary  impact of higher prices then.

Nine,  national roll-out of direct benefits transfer for food and kerosene  subsidy.

Ten,  promote North-East India by showcasing its music and dance globally  and improving its transportation links with South East Asia.

Eleven,  weak public sector banks to be merged or not allowed to grow till  they become profitable.

Twelve,  rationalisation of Central labour laws and motivate states to reform  their laws.

Lastly  and importantly any Leader who spearheads change needs to regularly  communicate with all stakeholders, update them with progress and  problems. This would keep up the momentum, manage perceptions, make  Team India feel involved and prevent opponents from spreading  negativity.

If  successful, the next generation would thank NDA 2 for putting the  economy on a sustainable long-term growth path.

India  is run by the states. However, there is excessive media focus on the  performance and policies of the Central government. By regularly  reviewing their performance it could bring non-performing states  under public glare.

In  1998, NDA 1 inherited the after effects of P Chidambaram's 1997  'Dream Budget'. In 2014, UPA 2 left the economy in the ICU. Steering  the economy through difficult times and rebuilding it is part of  NDA's Karma.

The  author is an independent columnist, chartered accountant and founder  www.esamskriti.com. He tweets @sanjeev1927

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