The Hindu Business Line : CMP and economic reforms — Agenda for India Public Limited

The new government would do well to sustain the fiscal health of its present ventures and provide support to research and development to create a strong technological and pure science base.

THE election results are out and it is clear that hard bargaining and negotiations with alliance partners will be par for the course as the Congress-led United Progressive Alliance gets on with the task of governance.

Economic experts from constituent parties are working out a Common Minimum Programme (CMP) to shape the nation's future. The captains of industry have wisely transferred their loyalties to the new powers-that-be without missing a beat. The power pendulum has swayed from the Right to a somewhat left of centre regime. The new priorities will, avowedly, be to protect domestic interests and address the demands of the poor and the rural populace.

Issues relating to globalisation, liberalisation, the WTO and FDI, among others, it is hoped, will be addressed once the political dust settles down. An inbuilt and subtle protective mechanism should be put in place to offer some respite to industry.

The rejection of Mr Chandrababu Naidu and Mr S. M. Krishna by the electorate are pointers that successful economic policies with a largely urban and hi-tech focus cannot be a substitute for grassroots-level development.

Successive governments have failed to implement promises towards agrarian development. Industry forums and State and local governments have overlooked the vast agricultural potential of the nation and focussed on an economic model that is loaded towards the urban elite.

The shift from a proletarian economy into an egalitarian one had taken place suddenly. The gulf between the rich and the poor widened, causing turmoil and discontent. In cocktail circuits, there is talk of two Indias — one on a par with developed countries, while the other is still struggling to catch up.

The drivers of reforms did not measure their success on the basis of ground realities. Not all reforms implemented are irrelevant but few have had any visible benefits for the poor.

Post-Independence, economic policy was founded on the Nehruvian model in which the public sector formed the core. Private enterprise was not allowed to flourish. Industry operated within closed doors and lost its competitive edge.

However, this model did provide India a strong manufacturing base and the Green Revolution, which laid the foundation for self-sufficiency in foodgrains. The economy is looking up today because of the enhanced contribution from agriculture to GDP.

Meanwhile, the dilemmas facing industry and the capital market are question marks on the ruling coalition's economic reforms agenda.

It is obvious that reforms will certainly change track from an elitist mode to one with a "human face". What has been done will not be undone. But the priorities and pace will change. One can expect hiccups on the road ahead.

Reforms are a necessity. India can become a global power by leveraging its resources and become self-reliant in preferred areas. Agriculture, services and manufacturing can be the largest job creators. Objective and sustained development in these areas can trigger economic growth. Another, soil-friendlier, Green Revolution will take agriculture and farm produce to new heights.

Any form of economic policy and reforms must alleviate hunger and poverty, provide education, and create a healthy environment for private enterprise. So what should be the macro policy perspective for the new government?

Here are a few suggestions:

Continuity in external policy and the basic reform process to convey a message of stability and consistency.

Priority for primary education, health-care and social welfare schemes for the poor and needy. Involvement of private sector on a voluntary basis.

Protection of interests of all current foreign and domestic investments from financial adversities that may arise from policy changes.

Accelerated reforms in agricultural and farm produce through heavy public investments, deployment of modern processes and exports of foodgrains and agro-products. Strengthening of the PDS.

Fillip to core infrastructure, manufacturing, public mobility, rural transport and road networks, as well as to the tourism and service sectors to generate wealth and employment.

Provide power, electricity, food and water to those living in the rural areas and below the poverty line.

Provide thrust to small and medium enterprises.

Encourage public and private investments in long-term research and development programmes in specific sectors where India has the potential to become a global player.

Have principled agreements with the WTO to safeguard domestic enterprise, wealth and employment.

Privatise PSU selectively. The focus should be to strengthen the profit-making units and transform them into global players. Professional managers should run these units effectively without interference from the government and bureaucracy, with clear accountability to raise productivity and improve quality and increase profitability.

Unviable enterprises should be closed after necessary due diligence and revival efforts.

Labour reforms that provide employment avenues and a social security net for the unemployed.

Eliminate corruption from public life. This is one single area that will radically raise productivity and increase growth.

There are some areas, such as revenue and credit policy, fiscal deficit, inflation, bank rates, government expenditure, rationalisation of taxes and duties, FDI, a healthy capital market and banking sector, where policy reforms are to be effectively pursued to sustain GDP growth, regardless of the political ideology.

It is time industry leaders focus on new business plans for semi-urban and rural India. Why cannot some of the big corporations get into the water and food industry with a strong agrarian base? They will make profits and also serve the people. India Private Limited will then function as India Public Limited.

There is certainly no need for the government to create new enterprise. It would do well to sustain the fiscal health of its present ventures and provide support to research and development to create a strong technological and pure science base.

There is need to forge a new-look government-industry partnership that will work in unison to achieve these goals.

Truly, in the words of C. K. Prahalad, the mass market of India's multitudes is waiting to be embraced by the daring and innovative entrepreneur. There lies the real India's progress and also freedom from threats of global invasion.

(The author is Chairman and Principal Advisor AIRDA, industry advisor and analyst.)

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