Wednesday, November 12, 2014

My five cents - Reforms

Thought for the day
"Don't limit a child to your own learning, for he was born in another time. "
-          Rabindranath Tagore (Indian, 1861-1941)
Word for the day
Boisterous (adj)
Rough and noisy; clamorous; unrestrained
(Source: Dictionary.com)
Teaser for the day
Are "Science & Technology" and "Law & Justice" much lesser problems in India as compared to "Health" and "Railways"?
If no, how an underachiever in one is suitable for the other?

My five cents - Reforms

As stated yesterday, when faced with the task of catapulting the economic activity to a higher orbit it is imperative for the policy makers to distinguish between "administrative corrections", "systemic efficiencies" and "reforms".
The businesses, investors and consumers also need to assimilate that economic reforms do not necessarily result in more profit and convenience in the immediate term. To the contrary, economic reforms are more likely to cause pain and inconvenience in the immediate term as these involve fundamental changes in the processes and practices of doing business and consuming goods and services.
For example, consider the following:
(a)   100% FDI in insurance does not qualify as a reform, in my view. It merely enhances the capacity of insurers to take more business on a larger capital base. It may change little for a large section of consumers. Making health and accident coverage compulsory for all employees and petty service providers, including domestic helps, drivers, porters etc., compulsory would be a reform.
(b)   Transfer of de jure power to fix prices for transportation fuel to IAS officers at the helm of public sector oil marketing companies from IAS officers assisting the Prime Minister and Cabinet Committee on Economic Affairs is merely a administrative change. A 30% rise in global crude prices will most likely cause this change to reverse, as was the case in 2003-04.
       A reform in this area would be implementation of an integrated energy policy that motivates and (where necessary) forces changes in the consumption patterns. Reducing energy intensity of water, improving quality of public transport, and improving fuel efficiency of roads would provide a sustainable solution.
(c)   Cutting on some travel cost, curtailing number and place of meetings, stationary expenses etc. is a cost management exercise. Empirically, all these expenses tend to rebuild as the fiscal situation eases with the economic cycle. Labeling this as expenditure or fiscal reform might be a mistake. A small reform in this area could be to identify routine government jobs that do not involve public dealing or matters of national security; and allowing the employees to perform these jobs from their homes with use of technology.
(d)   Food security programs have been integral part of the government agenda since independence. Despite leakages and inefficiencies, the public distribution system (PDS) has helped millions. Similarly mid-day meal schemes have also worked well. Now bringing the prices of food down to Rs1 or Rs2 per kg for BPL families may not qualify as major reform to the current system, in my view.
       Defining the upper bound in terms of accumulated money and wealth (Upper Richness Line or URL) may though bring dramatic changes in the business models and CSR functions....to continue tomorrow

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