After the conclusion of the recent Haryana Assembly elections, a lot of people, including some of the senior most political analysts & observers, wondered why the Congress party lost the election, contrary to the popular perception. The ruling party was witnessing serious anti-incumbency issues. The Congress party, being the principal opposition party, had raised all the pertinent issues concerning the common people. Congress leader Rahul Gandhi carried an effective campaign. Almost every poll projected a clear lead for the Congress Party.
At a gathering last evening someone asked me “how do you explain the repeated poor performance of the Congress Party, despite the rising popularity of its main leader?” My answer was simple, “Congress leaders are telling people what problems (inflation, unemployment, nepotism etc.) they are facing, as if people are not aware of their problems. Congress leaders, however, do not offer a solution for any of the peoples’ problems. That is why they lose elections.”
Yesterday, I ended my note highlighting a potential problem for investors (see here). Some readers suggested, “it would have been better if I offered some solutions also, lest it is a meaningless exercise”.
So, here are my two cents for augmenting the government fiscal balance. Of course, as usual, some of the readers may find these utopian. Notwithstanding, in my view these are practicable, effective, and worth sharing for generating a wider discussion.
Go back to villages
Since independence the government has focused on development of industrial and urban infrastructure in the country. It has actively participated in the endeavor through a large number of public sector enterprises; besides offering a myriad of tax and other concessions to the private entrepreneurs. Now, the country has a reasonably strong industrial base. Many of our industries are globally competitive. We have a strong set of entrepreneurs and risk takers. It is therefore high time when the government should reset its priorities and turn its primary focus on agriculture. To meet this end, the government may consider:
Exiting all industrial and banking activities and actively undertaking agricultural activities. It should develop barren lands; develop water bodies and irrigation facilities; develop and use technology for enhancing productivity; give employment to landless farmers; take risk with new technologies & crops; partner with marginal farmers in consolidating their land and do farming on that land - just the way it undertook industrial activities immediately after independence.
Undertake, on mission basis, the task to re-skill the underemployed farmers and farm labor. The farmers and their family members may be trained as dairy workers, domestic help, nurses, tourist guides, artisans, etc. Expecting the construction sector to absorb all surplus farm labor is a bad idea.
Develop at least 5 very large special agri export zones in rocky and desert areas of central and western India and undertake export of farm produce as a commercial activity. These zones may be developed in public, private or joint sectors. Besides, it may acquire farm assets, especially rice farms, overseas to reduce water intensity of Indian agriculture.
Encourage various states to make bilateral or multilateral agreements for procurement, processing and trading of farm produce and movement of labor within states.
Nationalize all rivers. Develop a national water grid. Set up a national water regulator, who shall work out a water sharing formula for all states and union territories every three year and maintain adequate provisions for managing droughts. The idea should be to ensure that not a drop of river water flows into sea from India. Develop a water distribution grid on the models of roads and power grids on a mission basis.
The aim should be to grow agriculture and allied sectors to become at least 40% of the economy. This only can assure sustainable employment for Indian youth, and orderly urbanization of India to promote services, (especially tourism) and rapid industrialization.
It has taken more than seven decades for Indian industries to reach a stage where the government may consider fully exiting the industrial activities. It may take 2-3 decades for Indian agriculture to reach a stage where the government will be able to exit farming activities completely. I am definitely not suggesting nationalization of the agriculture sector. I am just saying that the government should undertake the activity on a commercial basis to provide the sector with much needed escape velocity in terms of capital, technology, and risk-taking capability.
Pragmatic business regulation
The government must substantially liberalize rules and regulations governing businesses in India. It should make the regulatory pragmatic, allowing a great deal of freedom to businesses.
For example, an autonomous sustainability commission may be set up. The commission may comprise representatives of the scientific community, civil society, and judiciary. Instead of prescribing a rigid dogmatic environment clearance regime, each business must be permitted to submit a customized sustainability plan to the commission. The plan must specify how the enterprise proposes to address the sustainability concerns arising from its business. The commission may accordingly award environment clearance.
A pragmatic, business-oriented regulatory framework would stimulate growth, encourage larger CSR activities, generate more employment and hence ease pressure on fiscal.
