Economy
Top three reform ideas for Modi government
Strengthening the industrial base, reducing redtape and a focus on infrastructure should be the top focus areas
 
There is a sense of euphoria all around. And this is not at all ill-founded. After around 30 years, we have a government in power, which has absolute majority. A government which has all that it takes to perform and do what it wants to do for the nation. While the nation waits for delivery and looks forward to “Acche din aane wale hai”, there are certain areas in our economy, which need more attention than ever before. There is basically a need to work on structural change in the economy and also ensure that hitherto neglected areas of the economy get their due attention. While economic reforms were started in 1991 and gave the Indian economy a new shape, the government now needs to focus on a new set of reforms required to provide necessary impetus to Indian economy. So what is that needs to be worked at in terms of priority. 
 
Here is a potential list of that:
Industrial sector needs to be the backbone of the economy: In the process of economic growth in India, we have moved from being an agrarian society to the service based economy. Some industries never got the place that they should have in an economy. This is in spite of the fact that industries were looked upon as temples of modern India and as long back as in the 2nd five year plan, a robust industrial policy was laid down to improve performance of the industrial sector. Industrial sector remained broadly in control of public sector undertakings (PSUs). When our economy was opened up in 1991, the service sector started growing very fast and industry remained a laggard.
 
This is what differentiates us from China. In China, contribution of GDP in the economy is as high as 45% while in India, it is less than 20%. Much of the growth in China has come from manufacturing, which is part of industries. India also needs to provide the necessary push to industries and it would be great if small and medium industries are promoted that are largely employment intensive. There has been inertia on policy front often referred to as policy paralysis even in context of micro, small and medium enterprises (MSMEs). Government needs to formulate a completely new policy with respect to MSMEs. It needs to start with the change in the definition of MSMEs. MSMEs were defined in the 2006 Act and with increased costs and changing business dynamics the definition does not make sense in the current environment. Also, we need to move from a subsidy based approach to the creation of a business environment which provides opportunity to produce and sell products in domestic as well as international markets.
 
Manufacturing needs to be promoted for the triple benefit that it can provide i.e. employment, exports and overall economic growth. The kind of emphasis that has laid on information technology sector in India, if we can channelise same kind of efforts for our industries it will work wonders.
 
Unshackle business from red tapism: While we had a series of reforms in the past, business environment in India is still not conducive for new businesses to prosper. Red tapism is still in place. A simple yet puzzling question? There are businesses which require no pollution certificate as clearance requirement though such businesses are not even remotely connected with any activity that can cause pollution? Instances like this are just tip of the ice-berg. In terms of ease of doing business, India still lags behind in the world. The date below shows this:
 

It is time that government takes measures to ensure that business can flourish easily in India. It is important to note that the government cannot directly provide employment to a large number of people itself, it needs to create environment which will promote job growth.
 
Focus on key infrastructure projects: There is a lot that needs to be done on infrastructure front. Some of the areas that need big attention are railways, road and power sector. Let us compare ourselves with the emerging economies of the world. Here is how our railways look in comparison to China and Korea.
 
 
Time has come when a mega infrastructure development plan is drawn which focuses on power generation, railways and roads as priority areas. Most of the states in eastern part of the country are chronically power deficient and that is what is preventing prospering of business in these areas. The investments required in these areas will be huge as well as time consuming. This can be taken as public-private partnership model. 
 
While there is a lot that needs to be done, it is important we focus on areas which help long term and sustainable growth creation in the country. An employment based growth where the benefits are enjoyed by all is what government needs to focus on. In other words, economic growth won’t be sufficient we also need economic development.
 
(Vivek Sharma has worked for 17 years in the stock market, debt market and banking. He is a post graduate in Economics and MBA in Finance. He writes on personal finance and economics and is invited as an expert on personal finance shows.) 

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COMMENTS

Abhijit Gosavi

3 years ago

Research shows that towns/villages connected via good roads see a gradual increase in employment and decline in poverty. The same is true of availability of electricity, water, and sanitation. While the incremental impact of infrastructure is not very high in developed nations, for those nations lacking basic infrastructure, the impact can be tremendous.

It takes a few years to build roads, and hence that work should start immediately. High speed trains is also a great idea, but roads offer higher capacity and produce great flexibility in supply chain development.

REPLY

Dhanaji Kenjle

In Reply to Abhijit Gosavi 3 years ago

Mr Abhijit Gosavi is right in his views. In fact in most countries where autocratic, single family or a dictator ruled, one of the weapons used in such countries to keep people from mobilising was...lack of telephones, lack of roads and lack of newspapers.

Capt Kenjle

Gun violence in America
ProPublica reporter Lois Beckett examines how gun violence research has become the "political third rail" - leaving us in the dark on some of the most basic facts about gun injuries in America
 
While we have clear data on murders from gun violence, no one seems to know how many Americans are shot – and survive – every year. In fact, the government’s own numbers seem to conflict on the matter.
 
How can this be? And why has no one tried to resolve the difference?
 
ProPublica’s Lois Beckett explains that doctors and researchers have been pushing for clear numbers on gun injuries since 1989. “But what’s happened over that time is the politics of gun research, the politics of guns in America, are so divided and so fierce that even the effort to count the number of people injured by guns is incredibly political,” she says.
 

 
The CDC learned this lesson the hard way back in the mid-90s when it began funding more studies of firearm injuries – including a small study that found it was more dangerous to have a gun in the home for self-protection than it was to not have a gun at all.
 
Gun rights advocates believed this study – and other public health research on guns – was “laying the groundwork for the government to take away Americans’ second amendment rights, take away their guns. And that one study, and the fear that that was what research was doing, ended up torpedoing a lot of other CDC efforts,” Beckett says, including its early attempts to measure firearm injuries.
 
In 1996, Congress restricted the CDC from funding any research advocating gun control – an interesting measure since CDC researchers can't use their funding to advocate or lobby in general, Beckett notes.
 
Congress even tried to take $2.6 million of the CDC’s budget away – sending a clear political message to the CDC that conducting gun research comes at a high price. Gun violence research had essentially become the “political third rail.”
 
Listen to this podcast on SoundCloud, iTunes and Stitcher. You can also read more of ProPublica’s reporting on guns on our series page.
 
Courtesy: ProPublica.org

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Modi govt: Correct the unfinished business, modify and move on
The Narendra Modi government has to undo a lot of mess that is being left behind, correct those that can be mended and introduce those that they promised to perform in their manifestos
 
The unfinished story of a huge burden now shifts to the new Indian government.  The Narendra Modi government has to undo a lot of mess that is being left behind, correct those that can be mended and introduce those that they promised to perform in their manifestos.
 
The formation of a formidable cabinet and actual swearing in ceremony may take place by the end of this week or early next week.
 
To our mind, the biggest problem is that we really do not have a list of problems to surmount and prioritizing this list as to which needs the immediate attention, because everything on that list ought to have been done aeons ago!
 
The issue of one-window clearance has been discussed, debated and has failed. This itself needs to be set right.  But, for the time being, we shall list out the urgent issues that need to be handled simultaneously by competent persons, focusing on the object of getting the job done, leaving aside petty politics of apportioning blame to the former government.  Here they are:
 
a) Agriculture: to ensure farmers get power, water needs, fertilizers, quick transportation of farm produce, banking and credit facilities at the centres of production and elimination of middle men In addition to this, adequate facilities for farmer's children's education and medical needs for the village/town has to be addressed.
 
b) Banking reforms as recommended by the PJ Nayak Panel needs to be implemented by repealing the Bank Nationalization Acts and Reserve Bank of India (RBI) to function in total freedom in the best interest of the country.  It will be their time-bound responsibility of setting up banking facilities where it does not exist now.  They could do this by mergers and take overs, besides issuing new licences
 
c) Black money, both abroad and in India, needs to be collected by any means such as diplomatic efforts abroad, and by amnesty all round to ensure its return back to the country. This untold wealth needs to be systematically directed towards the listed areas of development.  The government must identify the areas, such as infrastructure, road building, irrigational canals, warehousing facilities for food, cold storages, hospitals, schools, old people's homes, sport facilities.  If within the time frame, black money in country is not declared, under the amnesty scheme, it should be confiscated and stringent punishment given to the hoarder
 
d) Currency system is getting stronger and by a great export push, and controlled imports, the Rupee can become an international currency.  Meantime, the RBI needs to appoint an A-Team solely for the purpose of ensuring replacement of paper currency through Polymer notes by taking direct action of negotiating with Australian Government, who are the pioneers in this aspect. Since fake Indian currency has been minted and smuggled into the country by Pakistan, this is the first subject that needs to be tackled with that country. Everything else goes to the back burner. Once the polymer notes are finalized, India must demonetize the Rs500 and Rs1,000 immediately. Such a move will also ensure the black money will surface in the open.
 
e) Defence preparedness has been subject of talk for sometime.  In fact, it is said "to be always prepared for war is the best means to preserve peace". At the same time, this cross-border terrorism, which emnates from Pakistan needs to be stopped and this will only happen when the Army is able to retaliate with force.  It is imperative that this should be the agenda for discussion between the Indian Defense Establishment with the Pakistani counterpart and ISI, as the latter is accepted as the sponsorer of so-called Jehadis who terrorise the innocent civilians In J & K region
 
f) Environmental issues have been the main obstacles in our progress, when it comes to mining activities in any form. Both Ministry of Environment & Forests (MoEF) and its State counterpart are both responsible for inordinate delays in work. Moneylife has raised these issues in great detail in the past and development work comes to a standstill at tremendous loss to the nation. The new government must consider a complete over hauling of this Ministry.
 
g) Foreign Direct Investment has made quite progress in the country and it has still many areas where tremendous scope exists for such investments. It is essential that the Ministry of Coal invites qualified international miners from Australia, UK, US and Poland, and others, to invest and develop Indian coal mines, bringing in their advanced technology, equipment and expertise.
 
h) Government needs to start disposing off its holdings in various industries and institutions like Banks, and in line with the Nayak Panel recommendations, why not reduce the government participation to not more than 26% and leave the rest in public hands?
 
The new government, it is hoped, will now have much closer relations with the federal states of the Union so that all issues are discussed for the benefit of every citizen. Matters such as the inter-connection of Indian rivers to ensure continuous supply of water all the year round is take care of and millions of cusecs of water which is now being discharged into the sea can be stopped to benefit the people.
 
We wish the new team success.  Jai Hind!     
 
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)

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