Public path for economy

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.

Bullet train: Leap of faith

That the 508-km long Ahmedabad-Mumbai high speed train, which is loosely called a bullet train,  will give a negative political dividend to Prime Minister Narendra Modi is a certainty. Yet, this may be the only saving grace for the listless Modi administration on economic fronts in over three years in the office. The cost at Rs 1.10 lakh crore is jaw-dropping, but the spin-offs in a few decades will offset all the financial pain.

THE French Rail Corporation (SNC) in the business viability report had unequivocally stated that a

Shinkansen bullet train

standalone Ahmedabad-Mumbai high speed rail corridor with speed in access of 350 kmph will have to be funded by the government. That it will not make profits for years is certain, which will keep the private investment away, the report submitted to the Ministry of Railways noted, while adding that the world over such endevour has been publicly funded.

Not that the Ahmedabad-Mumbai high speed rail could ever be profitable, the report had stated, and for such a scenario to emerge the Railways would need to spread a garland of inter-connected semi-high speed rail lines to help flow strong traffic. Such garland will surely take a few decades more to become a reality.  The SNC report had set the chill in the Ministry of Railways. The enthusiasm for the ambitious project had been dulled.

Japan is battling deflation. The population is aging. The manufacturing capacity there is in access of local and offshore demands. The capital is equally in access. The Japanese industries have to set up shops abroad to stay afloat. The idle Japanese capital needs avenues to sink in and make money. That China has cheap labour with population still younger along with manufacturing base at a scale which still awes the world long put Japan in quandary. 

But India and Japan are bound by historical bond of culture, besides absence of even an iota of animosity. Indeed, the high speed rail corridor project had been lying idle since the time of the UPA headed by Manmohan Singh. The first definitive agreement between the two nations had also been inked during the times of Singh. Yet, the Congress which swore by Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) to win polls and trumpet its brand of politics could never believe in the capital intensive high speed rail corridor. The Congress knew well, the bullet train will hit with bullet speed in damaging the vote base. 

In contrast, Modi believes that the bullet train will help him get votes. And, he's not wrong either. 

THE state of economy since 2011 had slipped into a self-limiting warp. The appetite for private investment had been doused. The sword of fiscal deficit launched P Chidambaram and Arun Jaitely

afterwards into obsession for expenditure squeeze. The economy cried for a spark. This is vintage Modi, the Narendra Modi of Gujarat, that has been unveiled by the ground breaking ceremony of the high speed rail corridor project. Modi, the man who could execute expansion of Sardar Sarovar Project which lifts the flow of Narmada river by not less than 25 floor high building in a course of a few Kilometers, is promising to rediscover himself at a time when his government has to bat out the last few over in which he has to score unbelievably large runs.

Undeniably, the faith of rail travellers in the railways has been left shaken due to spare of mishaps in the last two years. Every train journey now looks suspect. Suresh Prabhu, who had been Minister for Railways for almost three years, though of taking up new projects -- new lines, capacity augmentation and fresh products. He forgot that the Kakodkar Committee in its report long back had cried for immediate modernization of at least 19,000 kms of rail tracks. No surprise, that derailments of trains constitute more than 50 per cent of the rail mishaps, which in turn most likely take place due to poor conditions of tracks. Prabhu forgot his basic mandate and lost the job.

In speed, the Railways has traveled least in the last four and a half decades. Premier trains of today -- Rajdhanis -- were launched in 1969. The inaugural Mumbai-Thane had run at a speed of 30 kmph. The average speed of the passenger trains now is just 60 kmph. The goods trains travel at much slower speed. Thus, the Railways could never gain the confidence, capacity and capability (3Cs) to break free from the status quo.   

THE Ahmedabad-Mumbai high speed rail corridor will give the Indian railways the 3Cs to give the mobility solution to more than one billion people of the country. That hundreds of high ranking railway officials have already gone leadership training is already part of the India-Japan story. The upcoming high speed rail institute in Gandhinagar should be giving India not one but hundreds of E Sreedharan. The 3Cs will help Indian Railways to compete with China for rail projects in South-east Asia and Africa is another in-built sub-text of the story. That IRCON has already executed a few of the long route rail projects in South-east Asia is well known. 

Indian economy in the short term will gain from the pump-priming effect, as Rs 80,000 crores of the total project cost would be spent within the country on civil and associated works, which will generate demands for steel, cement, labour. Unlike the Dadri-JNPT dedicated freight corridor, Indian companies could also be the lead partner for bidding the civil works. Besides, the strong mandate for Make in India will hasten technology transfer in running high speed trains which over the years will have its own spill over effect.

Japan is sinking in Rs 88,000 crores in the Ahmedabad-Mumbail high speed rail corridor. This money is going into a standalone project and it was not available for the existing demands of the Indian Railways. The Ministry of railways will roughly contribute about Rs 20,000 crores in the course of next six years. 

That the money in parts will be returned to Japan beginning 15 years later at an interest of 0.1 per cent was the most low-lying fruit that Modi had to pluck to give the spark to the economy with just about 16 months to go for him to seek votes again.