Looking Beyond Elections

by April 22, 2019 0 comments

Elections

Complacency is unacceptable regardless of which party forms the Government at the Centre. It will have to hit the ground running and focus on the economy’s growth. By the end of May, a newly-elected Government, constituting the 17th Lok Sabha, will firmly be in place. While it’s a challenge to predict the electoral outcomes of India’s heterogeneous democracy, taking an average of the recently-declared, pre-electoral opinion polls makes it clear that the BJP still retains some momentum. The most significant takeaway from Phase-I of the elections was the absence of anti-incumbency undercurrents, which is what differentiates 2019 from 2004.

According to survey projections, Prime Minister Modi appears to be the front-runner for a next term with an average of 272 seats for the NDA versus 141 for the Congress +. The only speculation is about the margin of victory. The pro-incumbency calculus is broadly based on expectations of a less than anticipated loss for the BJP in Uttar Pradesh, despite the Samajwadi Party-Bahujan Samaj Party’s (SP-BSP) overwhelming arithmetic; a pro-Modi popularity ratings bias in the recently lost Hindi heartland States of Madhya Pradesh, Chhattisgarh and Rajasthan as also in Bihar, Delhi and the stronghold of Gujarat. The BJP is also expected to increase its footprint a bit in the eastern bastions of Mamata Banerjee’s West Bengal and Naveen Patnaik’s Odisha.

As momentum for the elections picks pace, what is increasingly evident is that of the 31 per cent of the middle class, who were disillusioned due to demonetisation and who voted for the BJP in 2014, a sizeable section of the aspirational and burgeoning lot seems to be coming back to the incumbent yet again — a pattern discernible across caste barriers. Perhaps because of a lack of a leadership alternative. Further, the BJP has strategised on energising three key demographics it hopes to gain from: First-time voters, the start-up universe and women. Although women do not vote en bloc, on-ground delivery of the Government’s welfare schemes has found resounding resonance among them.

Regardless of which dispensation comes to power, for the first 100 days, the next Government will not have the luxury of the fable “honeymoon period” and will have to hit the ground running. This because of the World Economic Outlook’s forecast of a slowdown in economic activity in 2019 for 70 per cent of the world economy, which includes India. Consequently, the global slowdown as also the revival of growth within the country needs recalibration in order to expand the economy and use the resources sustainably for poverty alleviation.

So what would a new government prioritise?  Some of the big themes include continuing the impetus for infrastructure and housing, both of which are the biggest job aggregators; facilitating an entrepreneurial workforce that fosters self-employment and is a proxy for formal job creation; and ensuring targeted delivery of social sector schemes like Ayushman Bharat and the farm income support scheme, PM-KISAN, by funding in a fiscally responsible manner, without burdening the middle classes with high taxes.

A quasi-universal income support scheme necessitates setting aside one per cent of the Gross Domestic Product (GDP) for a few years. This will also speed up rural consumer demand as 60 per cent of the households account for over 25 per cent of the consumption. As 12 crore farmer families are expected to benefit from the expanded coverage of the PM-KISAN scheme — which in the next phase will include tenant farmers — it requires the creation of a database to identify the beneficiaries as also better digital mapping and titling of land records.

Essentially, India needs economic growth which is “organic”, one that can only happen by enlarging the economic pie, as compared to interim measures that artificially boost incomes at the bottom of the social pyramid through expansive welfarism. Organic growth can happen broadly through:

Maintaining fiscal prudence.

Continuing efforts at increasing the taxpayer base, which will yield revenue for nation-building, yet lowering corporate tax to facilitate Capex spend and job creation.

Boosting the share of the manufacturing sector in the economy to 25 per cent by 2022 from the current 17 per cent .

Improving access to reasonably priced capital in order to service the credit requirements of MSMEs.

Continuing with the ambitious investment target of Rs 100 lakh crore to expand the highways, railways and airports. This is expected to create 25-30 lakh crore jobs.

Accentuating the pace of structural and market-based reforms, including trade liberalisation, digitisation of land records, lowering the cost of land acquisition to hasten infrastructural development.

Hastening the process of privatisation, especially of Air India and MTNL.

Reducing the debt load of 34 power plants amounting to Rs 1,80,000 crore as 40 per cent of their output is not paid for. This has increased State utility losses and has become part of the banks’ bad loan portfolio.

Streamlining bureaucracy, reinforcing the Reserve Bank of India’s autonomy.

Restoring the credibility of Central institutions like the Economic Offences Wing, the Central Bureau of Investigation and the Enforcement Directorate should be another priority. Investigative efficiency of economic offences by Central agencies is vital for higher conviction rate to punish wilful offenders.

Further, in the next leg of the “Housing for all by 2022” scheme, there is a need to ease funding for low-cost housing for both builders and buyers. This will allow for greater access to institutional finance and relax the eligibility criteria for loans to consumers on lines of the proposed “rental-cum-ownership basis.” This because as the Government targets to build 29 million housing units in rural areas and 12 million units in urban areas, most buyers lack collateral. The construction sector needs acceleration as it holds the potential of the highest job-creating coefficient after the unremunerative agricultural sector.

There’s little room for complacency despite the International Monetary Fund and the World Bank certifying that India is the fastest growing economy, averaging at 7.5 per cent. We need a “job-full” growth of 10 per cent year-on-year successively in order to avert a demographic disaster. In order to achieve the UN’s Sustainable Development Goals (SDGs) of bridging inequality and mainstreaming the disadvantaged communities by 2030, the Government as well as the private sector will have to work closely to infuse resources on projects that pose the biggest investment opportunities to modernise India and accelerate the growth of human development.

“Jobs are human capital” and the creation of better paying jobs is the only way to avert a demographic disaster. The self-employed are a fall-back segment of job seekers, those who mostly opt to begin their career by running small street stalls as a second-option to earn a livelihood. Entrepreneurs and self-employed are now a sizeable base who have grown since the last three years to 48 million. Promoting mass entrepreneurship needs policy improvement to ease seed capital funding, providing collateral-free loans and erasing regulatory requirements.

Further, as improved human capital stems from higher literacy, there is an urgent need to double outlays in education and improve the human capital quotient if India has to grow in double digits. India’s mobile data is the cheapest in the world and had an estimated 566 million internet users as of December 2018, out of which rural users comprised 250 million. Here in lies the biggest opportunity for transformation in education through distant-learning and e-commerce job-creation. Another avenue for job-creation that has lagged behind is the export sector. India has an opportunity to plug the vacuum created by relocation of production sites outside China by eliminating superfluous regulations that lower competitiveness and make India a more attractive investment destination for producing goods for exports.

India is currently a $2.5 trillion economy and by 2030, it is anticipated that its national income will touch $7 trillion. As a key driver of growth and jobs, urbanisation holds another vital key for expanding the economy. “Given India’s commitment to the 2030 development agenda, we will need to build 700 to 900 million square metres of urban space annually. This will mean 70 per cent new jobs will be created in and around cities.”

While Modi has firmly laid the groundwork on strong foundations for an anticipated re-run of office, huge challenges lies ahead. If handled with surgical precision, a prosperous India @75 could be well within striking range.

(The writer is an author, columnist and Chairperson for the National Committee of Financial Inclusion at Niti Aayog)

Writer: Bindu Dalmia

Courtesy: The Pioneer

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