The Hindu Business Line : Not everyone's feeling good

It is not enough for the urban rich alone to feel good. The good feeling must percolate down to the grassroots. For this it is vital that basic goods and services reach the marginalised and that social safety nets be put in place to ease the burden cast by the reforms.

IT has now become common to talk about the "feel-good" factor whenever one discusses the country's economic situation. Given that India was on the verge of defaulting on its foreign payments a decade or so ago, forex reserves of more than $100 billion today is no mean achievement.

However, concerns have been raised that the economy's growth rate has slowed down. This year the growth rate is respectable, but it is because the base is lower due to successive years of drought. Questions are also being raised on how good the "feel-good" factor really is.

When India liberalised its economy in the early 1990s, it was envisaged that the private sector would have a greater role in providing goods and services to the people. However, the Government cannot shirk its responsibilities of providing goods and services, especially the basic needs.

India may have achieved significant growth in GDP but employment is growing only by some 1 per cent while the population does so at around 2 per cent.

The quality of employment is also falling as whatever employment growth is taking place is in the informal or unorganised sectors. India remains home to the largest number of illiterate, poor, unemployed, diseased and hungry in the world. Not everyone is feeling good.

The urban rich, who can afford the goodies of life, and have significant money invested in the share market, are feeling "better". However the poor are only feeling "worse". India's governance record is not any better in regulation. Even in telecom, considered the best regulated sector, there have been allegations of secret deals.

The record of regulatory reforms in the power sector is worse. The Orissa model proved to be a disaster. Even in Rajasthan, despite a significant rise in electricity generation, people are paying much higher prices without any improvement in quality. After a long wait, India has adopted a competition law to create a generic market regulator. However, the law is yet to come into force. The recent observation by the Supreme Court on the appointment of Chairman of the proposed Competition Commission of India (CCI) has triggered a debate.

The Government needs to take utmost care in managing regulatory reforms. It also needs to enhance, not reduce, spending on creation and maintenance of social safety nets as well as providing basic goods and services to the marginalised.

Maybe India will require dramatic reforms in the delivery mechanisms for providing such services. This is the only way the "good feeling" can percolate down to the grassroots.

This is, however, not to discredit the ruling coalition at the Centre, as the present government did not make any significant departures from the economic policies followed by the earlier regime. In fact, recently, some social safety measures have been put in place, though they were long overdue. Unfortunately, they are still too little.

(The author is with Consumer Unity & Trust Society (CUTS), Jaipur, a leading research and advocacy group working on trade and economic issues.)