Indian economy by all accounts has entered self-limiting bind. That the specter of slowdown is looming with cascading effect on unemployment is sharply visible. Economy isn't panting for breath all of a sudden. That the journey down the hill began from policy mishaps since 2008 is told to death. The Narendra Modi government took to "curing" ills of the economy with a number of eventful interventions, which had mighty side effects. Now, the Modi government must look inwardly to kick-start engines of the economy.
THE North block mandarins are searching for clues to steer economy to eight per cent GDP growth trajectory. Flurry of outreach has come on the back of the growth knocking five per cent figure in the last quarter of the current fiscal. Essentially, the North Block policy wizards are asking for clues from those who're tired and fatigued, largely on account of excesses of the government. Nirmala Sitharaman and Anurag Thakur, ministers with principal mandate to steady the economy, with bureaucrats in tow, should, therefore, stay put in their respective holes and indulge in genuine economic crisis-management.
The golden decade of the economic growth (1999-2009) was left on auto-pilot mode somewhere along the journey. The golden touch of former Prime Minister Atal Bihari Vajpayee and his aides spurted the economy to glorious highs. The mantra was simple -- structural reforms along with aggressive disinvestment programme to spur the consumption demands, which in turn put industries on expansionist path. The Congress, true to its nature of a status quoist outfit, led the UPA, with Left parties keeping hawks' eye in the first term, squandered the opportunity offered by the firm ground work done by the Vajpayee government. The second term of the Manmohan Singh government was comatose.
The Modi government should revisit the Vajpayee mantra. Besides structural reforms and aggressive disinvestment programme, Modi should work with state governments to not just fix economy's self-limiting glitches, but also lay ground for the next golden decade of growth.
Barring western and a few southern regions, finances of majority of the states are in shambles. They are barely surviving, struggling to pay salaries and pensions to their employees. Their scopes of fiscal expansions are limited. Consequently, law and order, education and health have, arguably, taken sever blows in such states.
The Centre should work with states to fix their finances and work within a timeline to expand fiscal strength by 50 per cent with the help of disinvestment programme. The enhanced fiscal capacity must be put to work to spurt the economy.
United Nations mandate 222 police personnel for 1,00,000 population. If all the police vacancies in India are filled, the country would come to the ratio of 185 per lakh population.
Gujarat, Rajasthan, Uttar Pradesh, Bihar, West Bengal, Odishra, Andhra Pradesh are among the states with police-population ratio in 65-123 range. The police personnel are overworked and stressed. Various police reform recommendations are gathering dusts. That the decades' old weaponry of the state police requires immediate overhauling needs no further arguments.
One year timeline to fill all police vacancies in states could add muscles to the consumption demands.
Ironically, public employment was turned into a policy curse at a time when India under the instructions of IMF (International Monetary Fund) charted on the path of reforms in early 1990s under the stewardship of P V Narsimha Rao and Manmohan Singh. This has outlived its utility. Public employments essential to meet basic norms must be revived.
A developing nation can leave education and health infrastructure space to individual enterprises at its own peril. A large number of states have taken recourse to recruiting contractual teachers, with some of them even sub-letting such employments. That the education sector should firmly remain in the public funded domain is, indeed, basic requirement for a developing nation. And, hence, the expanded fiscal strength of states should fuel expansion of teachers' strength along with expanded schools' networks.
Additionally, Panchayati Raj unveiled in 1980s has become infested with unbridled corruption, exhibited by SUV riding Sarpanch and local bodies' representatives. Institutionalizing, financial and performance audits by Comptroller and Auditor General (CAG) is crying need of the hour. This along with institutional capacity building of local bodies, with men and machines, could put India on the path of faster and sustainable growth pedestal.
The three booster doses would require financial infusions of high scales beyond fiscal capacities of state governments. Here, the Centre should deploy resources gained from aggressive disinvestment programme to fund the public employment and curing fiscal health of states.
But the Centre, sadly, has no institutional framework currently to work with state governments to guide them to sound fiscal health. NITI Aayog is beset with policy dwarfs to rise to the occasion. This gaping hole in sound fiscal policy architecture is, indeed, worrisome.
The Modi government has sought to pump prime the economy with infrastructure spending in the first term. The public employment to meet basic minimum strength in various spheres could give fresh legs to the economy for the next decade. This could be the lasting legacy of the Modi government in the second term.
