Edit & Opinion

Reform Agenda: Is it right strategy?

The stimulus package announced by Finance Minister Nirmala Sitharaman has triggered a discussion whether it outlines the government’s broader agenda on reforms. Some economists have been clamouring for reforms, which in effect means, meting out opportunities for business houses and not the micro and small sector. Whether these were necessary to be announced now, when the country is facing an unprecedented crisis, is under question.

Importantly, 22 like-minded Opposition parties have called the package a “cruel joke on the country” and demanded the Centre come out with a revised stimulus that would generate demand. Further, their leaders issued an 11-point charter of demands, prominent being payment of a monthly amount of Rs 7500 for six months to families outside the income tax bracket, distribution of 10 kg of foodgrains for a similar period to needy families and “reversal of all unilateral policy decisions, particularly annulment of labour laws’.

Apparently, there is dismay around the announcements, among the corporate as well as the poor and struggling workers fighting for basic survival. However, what is worse is Sitharaman’s ‘false estimate’ of the stimulus package accounting for 10 per cent of GDP. It has been repudiated by one and all, whether a research organisation or an economist.

Fitch Solutions Country Risk & Industry Research has estimated the fiscal impact of the stimulus stands at 1 per cent of GDP. Even the SBI said the fiscal cost would be 1 per cent of GDP. Other research organisations have given their estimates of which mention may be made of Goldman Sachs – 1.3%, HSBC – 1%, Edelweiss – 0.84% and CLSA 0.8%.

Therefore, it was distressing to hear even Prime Minister Modi remark these bulk reforms would boost entrepreneurship, help public sector units, boost entrepreneurship and revitalise village economy, besides having a transformative effect on health and education sectors. Such jargons are often aired by politicians, but when looked deeply it becomes amply clear that these reforms will not have much effect, except for transferring resources to the private sector, most of which are profit-oriented and don’t have the ability to being competitive on a global scale.

These so-called reforms are primarily being seen as a bid to attract foreign firms, which may be leaving China and could be a stimulus for the short term. Be that as it may, their implementation, in a judicious manner, without any favour and from a professional perspective would be vital. This means that monitoring of the private sector to ensure its smooth functioning is necessary.

Let us first take the example of the present state of the village economy. The so-called transfer of an additional amount of Rs 40,000 crore to MGNREGA scheme may appear big but in reality this amount is below Rs 30,000 crore because in the current Budget allocation it was less than last year’s, plus the 7-8 per cent cost escalation was not taken into account. Moreover, migrant labourers’ have returned to their respective homes, mainly in Bihar, Uttar Pradesh, Jharkhand, Chhattisgarh and, to a lesser extent, in West Bengal and Odisha, and they have to be given employment, at least for the next two-three months before they can return to their place of work.

Insofar as conditions prevailing in rural India are concerned, the less said the better. While profitability is prominent factor in big private sector companies, farmers are struggling for adequate returns to meet basic essentials of life. Also due to fragmented land holdings, the profitability of small plots of land has further come down. Unlike China, the panchayats here have not taken the initiative to form cooperatives so that modern methods of farming could increase yield — at least twice or thrice a year – and give adequate returns to small farmers.

As always, the grant of Rs 2 lakh crore concessionary credit for farmers, holding Kisan Credit Cards and earmarking an additional Rs 30,000 crore as an emergency working capital may benefit mostly marginal and big landholders to ensure uninterrupted farming operations during the kharif sowing season beginning June. According to expectations, 2.5 crore farmer would benefit from the flow of cheap credit. However, the Rs 6700-crore working capital for States for procurement of agricultural produce may help in giving more cash to the farming community.

Remember Vinoba Bhave’s Gramdan Bhoodan movement, where the Gandhian walked through villages and collected thousands of acres of land but subsequent governments did nothing to form cooperatives and help sharecroppers to farm land or take up horticulture or floriculture projects. Vinoba’s vision of transforming rural India or even that of APJ Abdul Kalam of proving urban facilities in rural areas (PURA) has yet to become a reality as the focus of planning has been on the urban sector.

Rural rejuvenation should now focus on horticulture, floriculture and agro-based industries, which the government is now considering. Moreover after years, the government has just decided to allocate Rs 6000 crore fund for giving an employment push under the Compensatory Afforestation & Planning Authority (CAMPA). Activities under this plan are expected to include afforestation, forest management, soil and moisture conservation work and wildlife related infrastructure work to help tribal people and adivasis.

Regarding public sector units, it cannot be ascertained what help would be extended. Framing a broad PSU policy or merging some of these is welcome but privatisation of all PSUs in non-strategic sectors is difficult to fathom. Also experts have rightly pointed out that such policy has to be framed in consultation with States since there are a large number of state-level PSUs. Self-reliance has nothing to do with privatisation. Rather the government should try to make PSUs profitable through induction of technology and mergers, wherever necessary.

The decision of privatisation of coal mining and also of power distribution raises a few questions. Handing over some mines to private parties may be considered but it must not be forgotten that in the coal sector private operators’ have been involved in huge scams. Also questions arise whether domestic companies have the technology and expertise to manufacture defence equipment. As regards the decision for privatisation of power distribution, it is inevitable that electricity charges would rise and the EWS and lower income groups may not have the capacity to pay.

Regarding developing health infrastructure across the country and specially in villages is imperative, if the government has real concern for the poor and the EWS. These include backward blocks and sub-divisions of the northern and eastern parts of the country where the population density is high and the per capita income rather poor. Privatising district hospitals is not quite prudent but in congested areas one additional hospital in PPP mode may be considered with regulations on charges the poor would have to pay for treatment.

Finally, the reason for not making available more funds in hands of the State is indeed intriguing and most States have opposed the move and questioned the government’s sincerity of following cooperative federalism. There is need to seriously ponder over this vital matter as resources in the hands of the States would only help in real development, benefitting the poor, the tribals and other weaker sections. The government needs to reorient its strategy but it appears the top leadership is not interested in following a pro-poor, pro-rural geared to strengthen the rural economy.

….INFA

 

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