India Economy

Valour is the better part of discretion

J Mulraj | Updated on January 23, 2018 Published on August 09, 2015

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Bold steps must be taken to create jobs and improve productivity



Discretion is advisedly used with caution and often needs valour in the exercise of it. The Lok Sabha Speaker displayed valour when suspending 25 MPs for the sort of billingsgate behaviour which a school kid would be punished for. Action against errant behaviour was overdue. However, it has resulted in stalling of parliamentary work.

It was abuse of discretionary power that led to the scandals of coal block and spectrum allocation and brought down a government. Several discretionary powers still vest with authorities, and, inevitably, lead to corruption.

If the government is honest about getting rid of tax evasion, then it must arrest its creation by curbing discretionary powers. A lot of these come from the real estate sector. Building permits are yet highly discretionary. Land records are poor, especially in rural areas, leaving a lot of room for discretionary abuse. Make these transparent and electronic.

That Parliament has been stalled for non issues is a criminal dereliction of duty and instead of bickering over non issues, our lawmakers ought to show valour and foresight in tackling the issue of how to provide jobs. 

India’s biggest challenge is employment creation for its young population. Look at what is happening elsewhere. China has a larger, albeit ageing, population. Its Changying Precision Technology Company has set up a plant manned almost entirely by robots. Production per worker has doubled. The defect rate has come down, from 25 per cent to under 5 per cent. And robots do not take coffee breaks, leave, or demand increments. Luckily India has a young population. This is why Foxconn, which assembles electronic products for the likes of Apple, is tying up with Adani to manufacture in India. Walmart wants to add 50 stores in five years. Nike approached the Department of Industrial Policy and Promotion again, after its request to set up its own stores plus franchisee stores was turned down earlier.

Improving productivity

Machines are replacing jobs in order to improve productivity growth. The truth is that productivity of both labour and capital has fallen. And in developed countries, populations are aging; so fewer people are entering the workforce and contributing to the pension pool while more are retiring and withdrawing from it. With very low interest rates, pension schemes are bankrupt and unable to meet commitments.

So, for economic growth, productivity gains have to come from technology, and from machines. This is the state of things to come, and investors must watch for technology changes because it can impact their investments. How?

Consider energy. New technologies have emerged to provide energy, including renewable energy.Combine this with the environmental need to reduce greenhouse gases and coal gets into disfavour.

Sumitomo of Japan sold its 50 per cent stake in an Australian coal mine for A$1, bought three years ago for A$430 million. The sensex gained 121 points last week. There is an increasing pool of domestic retail and institutional money entering the market. But for the India story to work, so must Parliamentarians.  They must talk about the future and not of the past.

Published on August 09, 2015
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