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To face up to China, we need to grow our economy

Mulraj | Updated on July 31, 2020 Published on July 31, 2020

China, for look its Socialist policies, is 10 years ahead of India and the economic growth encouraged by sensible economic policies of Deng Xiaoping laid the foundation of its current strength. This economic growth has led to certain achievements, and has provided the funds to modernise its military in a way that it can impose on neighbours.

So, if India wants to be ready for the next Chinese incursion, we must concentrate on economic reforms and on governance.

To do that we must acknowledge the achievements of the adversary.

China has laid 38,000 kms of high speed rail (bullet trains) the longest network in the world. It has the three highest dams in the world, though one of which, the Three Gorges Dam, is believed to be in danger of collapse due to excessive rain flooding the Yangtse River. It generates 22,500 MW of electricity. It has developed a capacity to build ports, which has helped it in a geopolitical strategic decision to develop Pakistan’s Gwadar port, giving it an alternative trade route (via road across China, through Aksai Chin/Pakistan) to the sea route which depends on South China Sea and Malacca Strait.

China used a debt trap to get a 99 year lease on the Hambantota port in Sri Lanka, on India’s doorstep, on our Southern border and, with Gwadar on our Western border, threatens to encircle us. China has a 53 per cent share in global steel production, a 58 per cent share in cement, 60 per cent in solar panels etc.

So what does India need to do in a second wave of economic reforms? The problems of non-performing loans of banks, in which Government owned banks have a 70 per cent market share, are well known. Many of them were given to cronies, based upon a phone call from Delhi. Some of the defaulting borrowers have fled Indian shores, and a lot of effort and expense is used to bring them back to face justice. If a fraction of this effort and expense had been used before granting loans, we would not have been in this situation.

Even now, the attachment and subsequent sale, of assets of defaulters is inexplicably slow, and, one may add, criminally casual. It is only now that the PMC Bank has put on sale two planes and a yacht belonging to defaulting Wadhawans!. Why should it take over a year to do this?

At the same time, the Government treats retail investors with disdain. Action is taken against defaulters of banks, but is lackadaisical against ponzi scams where retail investors have been duped. Why such double standards?

So the first thing India needs to do is to get its act together against white collar crime.

If we are not willing to do this, accept that India will never become a global power, and will always be a victim of bullying by others.

Another crying need is the insane complexity of our laws. Our polity believes that they are doing their duty simply by passing a law (often terribly drafted and subject to interpretation and litigation).

A small and medium enterprise (MSME) has 364 compliances, or one a day, from 194 labour laws. Of course, each of these m requires grease and dissuades entrepreneurs. A compliance a day keeps entrepreneurship away. The pernicious effect of Rent control is witnessed every monsoon, when buildings collapse; a building in Fort, Mumbai, killed 10. Policy makers need to understand that unless rents are unfrozen, there is no incentive to keep buildings in good condition. The easiest way to bite the bullet is to raise contracted rent in phases. The real estate industry provides a large number of jobs, and the houses needed for a young population, and Rent Act, which was a temporary measure introduced 80 years ago, is an impediment. The stock markets are riding on easy money, in a handful of stocks. Simply look at the top 10 industries globally to realise that almost all of them are badly hit by the Covid epidemic and the lockdown. Caution is advocated

The writer is India Head-Finance,Asia, Haymarket.The views are personal

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Published on July 31, 2020
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