A common Economic Program for India

A development transformation of India will be determined by the improvement in many fronts, but it is not possible without stable,steady,high and inclusive economic growth.The economic program designed by any Government or coalition to boost India’s transformation should work on the below factors.-:

Structural Shift in GDP Composition

India is heading towards middle income trap.The growth India has achieved is by catering to the demands of the top 100 million people, which is why the Bombay’s indicator of economic performance is about car sales,sales of two wheeler, sales of air conditioner, up-market housing.

The goods that are consumed by 1.2 billion of Indians do not figure at all which are-: Affordable housing,affordable clothes, nutritious food, affordable health and education. If the share of these goods do not increase in the composition of GDP growth, we are moving to Middle income trap.

These are the goods that touches the lives of every Indian and should be the leading indicators of economic program on which the Government should focus.It is not possible to increase and sustain consumption for over a billion people by providing subsidies and income support.At least half the population, should be able to earn income that enable them to buy these goods at affordable prices, so the minimum of 500 million can be subsidized to improve their welfare.

This is the key that will lead to more jobs and will lead to sustained and stable growth.

Structural Shift in growth Location

Apart from NCR Regime and few pockets of India, here and there, the growth and development mainly occurred in west and south of India. The North and east have been benefited by the remittances from the west and south .While some have been able to take advantage of it like (IT, automobile manufacturing, diamond cutting, etc.) most of them are in low,paid,risky and insecure jobs. These jobs include construction workers, domestic servant and secureity guards for the rich.

It is vital that economic Growth and jobs is fostered in North and East. Due to technological legacy disadvantages, this require economic policy to focus on existing or slowly developing capabilities .This further underlines the importance of giving priority to the basic 5 sectors of the economy as mentioned earlier.

Credible Macro-Economic Policy

In the last 30 years, the macro-economic policy has improved.However, in India the macro-economic policy is mostly defensive and short-term.For economic growth, the macro-economic policy should be medium-term.But medium-term policy will require discipline and reduce discretion, that will undermine the culture of ad-hoc short-term which our senior bureaucrats are comfortable with and are used to.

Successive Governments have promised to show fiscal discipline , but none are able to .They have the capacity to do, but casual attitude of playing accounting games when there are occasional slippages undermines everything.Tax policy should be based on forecasting for which the policy-makers are responsible and it should not be based on estimation/targets and then manipulating tax rates to achieve it, which is detrimental to the macro-economic policy.Disinvestment should only be used as a policy to cover fiscal gaps. Budgetary and Financial Sector policy should not involve manipulating public sector for short term goals.The need is to improve the monetary policy by explicitly informing the underlying theory and analytics used and also conveying the stand on inflation and the trade-offs involved.

Better Government,less discretion , more rules

The policy spending is low out of a already very strained budget.The logic of spending more on public spending is not correct as in past, we have seen that more public spending is not efficient and effective.There are steps being taken to improve the technology and bypass these issues, but the situation has not improved as root cause has not been fixed.

The Government machinery is antiquated with feudal and colonial tradition, the policy intervention leaves a scope for bureaucratic intervention.This clearly signals that motive other than public interest drives these interventions.Barring few exceptions, even the civil servants don’t act timely on these policies and often don’t correct policy failures.Media is used to cover up these loopholes and avoid accountability, but these would not solve productivity problems.

Now, Govt. needs to adopt a rule based system of Economic Governance.Overall, Governance credibility is low , and the individual retribution by a weak Govt. or a fear of an individual malevolence by the state mutes public criticism. There is no socio-economic movement that can force the Govt. to implement this.Hence, the impulse has to come from the Government itself, from the very top and therein lies the opportunity to get recognized ,as the policymaker who transformed India by transforming the economic governance by forsaking short term goals in the larger interest.

The improvement in economic Governance is the pre-requisite for overall growth.Without it nothing can happen.Government should act on it rather than giving grandiloquent statements of intention.

Finally, in order to transform India completely , the Government should act on the mentioned economic program and make them as priorities for future and simply should not focus on compensating for the mistakes done by the Govt. of other regimes in the past.