Given
these inflexible realities, what is it the government can
do in the short and medium term? For this, we should rise
above the din of the stock market and tax rates. Even disinvestments,
labour policies and second-generation reforms will not suffice.
We should look at the big picture. There are real and serious
concerns we need to quickly address. What is more, most
of these things cost no money. Let us focus on four issues.
First,
banking sector is flush with funds. Interest rates are at
record low levels. Inflation is under control. Manufacturing
sector is in doldrums. But the tragic irony is that many
small and medium enterprises, which are valiantly and successfully
fighting to survive both external competition and economic
slow down are denied credit. Banks are simply not responsive
to customers' credit needs. Otherwise thriving units are
either stagnating or declining for no fault of theirs. But
spurious enterprises get unlimited credit! The message is
clear: don't waste time in wealth creation and production
of goods. Speculation in capital markets, corruption and
outright cheating of the public are far more profitable
(with little risks). Obviously financial sector must be
made to move, and move quickly. Banks must be made to understand
that due diligence is different from callous indifference
and inaction, or criminal collusion. Flow of credit and
capital for wealth-creating activities is what spurs economic
growth.
Second,
the continuing crisis in power sector. 'Reform' has now
become a catch phrase devoid of all meaning. Prudent and
economic use of resources, and increase in productivity
and production are ignored. We are going through the motions
of 'regulators', independent power projects (IPPs), unbundling
of power sector etc, but most of these are without substance
and spirit. There is no tangible and realistic effort to
reduce transmission and distribution losses. And IPPs are
in a mess. Low cost generating units of SEBs are discouraged.
High costs, guaranteed rates of return, faulty fuel allocations,
bad fuel policies without regard to future energy costs,
cronyism, arbitrary decisions and corruption have brought
a bad name to private generation. The net result of this
criminal neglect and collusion is a loss of about Rs 40000
crores - nearly 2% of GDP - in SEBs in the form of subsidies
and revenue deficits! What is worse, power shortages continue
to daunt the economy. The Union should sit with the states
and resolve the crisis. There are practical solutions. But
where necessary the whip must be cracked.
Third,
the Union is talking of VRS for a million employees. If
they achieve it, well and good. But past experience shows
that the burden often continues, thanks to overly generous
VRS policies with an eye on numbers. FM more modestly announced
a token reduction of 12000 jobs. In any case, the real question
is public employment in states, and redeployment. Over 50%
of the employees in most states are unproductive, and most
of them are deployed not in service delivery, but as support
staff. We need to redeploy them and make them accountable.
Kerala's predicament today is not a local issue. All states
are in the same boat. A national approach is needed to make
employees deliver. Real labour reform is needed in government.
Finally,
there are measures that will significantly improve the climate
for investment and wealth creation. Removal of urban land
ceilings and rent controls, improving land records, and
protection of property rights are vital to curb corruption
and end artificial housing shortage and stimulate the economy.
These sensible, and pragmatic land policies will see dramatic
rejuvenation of our towns and cities. Repeal of ULC Act
by the Union had no impact on some states. Property rights
are increasingly arbitrated by criminal gangs. Some of the
reform-linked assistance should go to better land surveys
and record maintenance, as well as speedy mechanisms for
resolution of property disputes.
One
can understand, if not condone delay in addressing other
problems which need resources or major reforms - public
transport, capital formation in agriculture, marketing infrastructure,
education, speedy justice, rule of law etc. But there is
no excuse for delaying action on areas that require no monetary
inputs or vast political capital. We are suffering from
excessive lethargy and focus on irrelevant issues diverting
national attention. Between the small things we won't do
and the big things we cannot do, nothings gets done. Budgets
will come and budgets will go, but these issues need to
be addressed to rejuvenate the economy and fulfill our potential.
***