Two years of economic policy making – many questions; very few answers!
May 16, 2016 | Blog, Uncategorized
Two years of economic policy making :
The NDA government has competed two full years. While the spotlight has been on the social and the political context, it is important to look at the economy and what the government has focused on. There are two major achievements – Inflation control and FDI. Inflation has indeed come down, as crude oil prices have dropped from about 85 dollars a barrel last year to 30 this year.
On Foreign Direct Investment, India has become the favorite destination for the world. However, the numbers are still miniscule compared to what China obtained even twenty years ago.
On the reform issue, the Bankruptcy Act is surely a big step forward. However, the one measure that was taken up first, on Land acquisition, was dropped like a hot potato. There is now not even a mention of what was considered our biggest economic policy problem. The ease of doing business was a promise that the Prime Minister made and has reiterated this several times. India’s ranking should improve after the bankruptcy and liquidation code is notified. On the legal front, foreign lawyers in the country would lower the barriers of doing business in India. Why have they not been allowed so far? On education, why the delay in permitting foreign Universities in the country?
Let us take a close look at some important issues. First and foremost, there is an urgent need for clarity on some issues and promises. Where do we stand on FDI in retail e commerce? Have we succumbed to domestic pressure? Is FDI for multi brand retail kosher or not? There was so much said about privatizing sick public sector units. Air India was to have been transformed in no time, it continues to make billion dollar losses every quarter. High level committees talked about privatization of railways. Is something happening or will the government keep talking on both sides of the debate?
Secondly, the issue of jobs. The government promised 12 million jobs a year. Government data shows the figure for job growth is the lowest in several years. New jobs in eight labour-intensive industries fell to a six-year low in the first nine months of 2015 — with just 1.55 lakh new jobs being created compared to over three lakh jobs over the same period in 2013 and 2014, according to data released by the Ministry of Labour and Employment.
Thirdly, the familiar issue of GST. The excuse of not having a majority in the Rajya Sabha doesn’t hold anymore especially after the upper house passed a couple of laws during this budget session, including the long awaited bankruptcy code.
Fourthly, the promise of deregulating prices. Why are we not deregulating natural gas pricing? If diesel was done easily why the delay for natural gas? Why also the push back on deregulating kerosene prices? Why not deregulate fertilizer prices? What is holding the government back on these rather simple reform measures?
Fifthly, the 2014 manifesto had said it will place strict measures and special courts to stop hoarding and black marketing? There are nether any measures taken nor any special courts set up. What is happening to JAM – Jan Dhan, Aadhar and Mobile? The World Bank has said that India continues to be the poorest country in terms of digital connectivity. A billion Indians still have no access to the internet. The National Optical Fibre Network is horribly delayed and digital poverty is the hallmark of a nation that boasts of itself as a software giant. With such a poor state of connectivity, what can one expect of big plans on e governance, direct cash transfers and price discovery?
Sixthly, the Prime Minister’s pet slogan – Make in India. The FM has promised to simplify the Tax disputes resolution mechanism. Disputes were to be simplified, settled and retrospective taxation taken away. However, Cairn India was slapped with a demand for Rs 20495 crores this March. In February 2016, Vodafone was asked to pay 14300 crores. What is going on and who is in charge? Why are we not reforming the banking system? Vijay Mallya has defaulted publicly and fled to the UK. The BJP has always talked about privatizing banks.
On the pharmaceutical front, there is the issue of banning of 344 fixed dose combinations. Why were these 344 chosen? Where is the transparency? Why are the drug companies unhappy and why have they gone to court? Why is no action being taken against doctors prescribing these drugs? What about exports? Why have they been falling for 14 months now and what is being done there? The rupee can’t be blamed, it languishes at 66 without helping exports at all, and making imports expensive. The black money story has already become a classic comedy. Now the ruling party MPs are completely denying that any such promise was made.
There was clarity that even the staunchest critics expected of the government. One did not expect the such vagueness and confusion in economic policy that exists today. Does the government want to make it easier for industry to acquire land? Does it want to do away with retrospective taxation? Does it think that the profligate and leaking MNREGA program is a monumental failure or the best pro poor scheme ever? Does it want the rupee at 40 to a dollar or is happy at 65 and above? There are a number of simple questions but sadly no one to even answer them.
Dr. Amir Ullah Khan