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The new UPA govt: Hope for a new agenda?

By Subir Roy
May 27, 2009 16:02 IST
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Manmohan Singh's second five-year term begins with four pluses.

There is now the certainty of stability and continuity; a grain mountain ensures food security; the monsoon shows every sign of beginning well; and the worst of the economic slowdown that hit last year appears to be over. Hence expectations from the government will be high.

The verdict, in the broadest sense, is for inclusive growth. There is also some irony in recent history. In 2004, when the economy was set to clock 8 per cent plus growth and the urban middle class felt that India was shining, the electorate ruled otherwise.

In 2009, when urban India was in the throes of a slowdown, with growth likely down to 6 per cent and shopping malls going empty, the electorate gave a clear thumbs up.

Inclusive growth stands on two legs; there can be no inclusion unless growth creates the resources to redistribute. For sustainable growth it is clearly not enough to have demand, there must also be the infrastructure to carry the demand on its shoulders without which bottlenecks will slow down the momentum and likely create inflation.

Currently, when stimulus packages have been initiated to revive demand, it is vital to spend on and build infrastructure.

The government has already decided to raise the quantum of grant for roads to be built under the national highway development programme through the public-private partnership model.

It must now follow up by raising the budgetary allocation for capital projects of the railways.

It is worth reiterating that China first builds infrastructure then waits for economic activity to pick up to use the capacities.

At the end of the day this does not create serious inflationary pressures. In the case of India, the rating agencies and analysts have already discounted a sharp rise in the fiscal deficit.

So the government can boldly push and fund infrastructure projects, by printing money if need be, in order not to borrow and send interest rates up in a counterproductive way. If there are minimal infrastructure bottlenecks, enough food stocks and stability in global commodity prices, chances of inflationary pressures building up are likely to be low.

Growth will also be dependent on a whole host of reform measures in areas like insurance, banking and civil aviation which have been well enumerated and which have been holding fire because of adverse parliamentary arithmetic. It should now be possible to quickly see these policy changes through.

As global investor confidence in India is returning, 'growth' should be easier to achieve than 'inclusion' with any degree of efficiency and without colossal leakage and waste.

The real challenge before the government is therefore to take forward its social agenda.

This is three-fold -- put on the statute books legislative measures that have already been initiated, follow up with the states measures which have already been enacted and devise new programmes which will address India's massive human development deficit.

In the first category come measures like right to education, resettlement and rehabilitation, land acquisition and social security for unorganised workers.

In the second category (measures already enacted) comes the Forest Dwellers Rights Act which will stand or fall on how individual state governments carry out the task.

Here the government faces a systemic challenge. Traditionally the central government has left action on social subjects in the hands of the states. But this has not worked.

The solution is not for the centre to take on direct action, which in any case is not constitutionally mandated and will be resisted by the states, but to evolve, in consultation with the states, a system of monitoring and cajoling to get things done.

The good news is that the last parliamentary and assembly elections have clearly rewarded performing state governments. The post poll actions taken by Ms Mayawati in UP clearly indicate that she has seen the writing on the wall and wants to deliver in a hurry.

It is imperative to study why Kerala and Tamil Nadu deliver public goods so much better than most other states.

There are also two specific areas which require urgent attention. One is the urban crisis brewing because of the substantial migration from the countryside leading to a rapid decline in urban areas without exception.

The measures initiated under the Jawaharlal Nehru National Urban Renewal Mission are at best palliatives and at worst counter-productive. Marginal improvements encourage further migration which makes things worse. The governance system of urban bodies needs drastic overhaul.

Large urban capacities, effectively dozens of new cities, need to be created. The country neither knows nor do different stakeholders agree on how to go about the task. A new agenda on this needs to be evolved.

The second area requiring urgent attention is on mitigating climate change, reducing greenhouse gas emissions and promoting energy efficiency.

The way in which US policy has changed, there will be tremendous pressure on India and China to accept emission reduction targets in the successor agreement to the Kyoto protocol.

While the actual outcome will be a matter of diplomatic give and take, India should in its own interest unilaterally take a range of measures to promote energy efficiency and reduce carbon dioxide emissions. Urgent action is needed foremost in making power generation by burning coal a cleaner process.

The government has announced a national action plan on climate change but little has till now happened on the ground. Thus, there is lots to do and the good news is that conditions exist for some of it to be done.

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Subir Roy
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