Statement of intentions

The NITI Aayog’s Strategy for New India @75 lays out a checklist of priorities for economic policy-makers over the next three years. It sets out as an immediate priority, the ramping up of the investment rate to 36 per cent of the GDP by 2022, from 29 per cent at present in order to hit a growth rate of 9 per cent. An improved incremental capital-output ratio implies a generally high level of efficiency in project execution. The report implicitly lays store by technology to raise efficiency, but it is not clear whether smart technologies alone can act as a magic bullet. It recognises that, given the tepid state of private investment in a scenario of high NPAs, the government will have act as the engine of the economy — with public investment rising from 4 per cent of GDP at present to 7 per cent. This, in turn, would call for government savings moving into positive territory and “significantly higher resource mobilisation”. To this end, it relies on “demonetisation and GST” to improve tax compliance, in addition to rationalising corporate and personal income taxes. Revenue collections, however, do not bear out this optimism. It is instructive that a flexible approach to the fiscal deficit as well as a policy to “minimise volatility in the nominal exchange rate” have been recommended. The new incumbent at Mint Road would perhaps be required to reconcile inflation targeting with keeping interest rates low, while using reserves to check currency volatility. A push to disinvestment has been promised as well in order to release resources. A focus on capital expenditure is welcome, provided it is implemented; housing and physical infrastructure have been identified as potential areas that can absorb investment. However, the debate on whether certain social sector expenditures need to be capitalised for their long-term worth, needs to be revisited.

The report identifies 41 key areas, placed under four categories: drivers, infrastructure, inclusion and governance. The Modi government’s focus on improving waterways, and on digitisation as a means to enhance financial inclusion is reiterated. Emphasis has been laid on improving farm incomes, no doubt to address recent misgivings. However, there can be no escaping the feeling that the report reiterates goals that have been spelt out in the past, without taking a hard look at what’s holding back India’s socio-economic progress.

Despite the recent political reversals, the Centre appears wedded to technology fixes as the key vehicle to tone up governance — despite evidence that vested interests could use such tools to serve their interests. There has to be an equal emphasis on socio-political empowerment through education, for which governments need to put the money where their mouth is. An overarching vision, located in political economy, is sorely missing. As is a roadmap to achieving 9 per cent growth.

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