Missed Opportunities and the Way Forward

Bharat Jhunjhunwala

NDA’s win appears to be anchored on Pulwama and strong administration. The alliance has won despite many missed opportunities. The only economic achievements have been in the areas of electricity generation especially solar power and construction of highways. NDA must change course of economic policies to make India into a global economic power. Pulwamas will not make India a global economic power, and strong implementation of wrong policies will ultimately weaken the country.

The first missed opportunity has been in the relations with Sri Lanka, Nepal and Bhutan who have moved towards greater cooperation with China. NDA could not come up with an alternative to the huge funds provided by that country for development of infrastructure to these neighbours of ours. Relations with Pakistan and China have only become more strained. We had to accept the establishment of the permanent headquarters of the New Development Bank in China. In return we got only the small concession of the first head of the bank being from India. China has moved to establish the Belt Road Initiative and integrate her economy with the countries of Asia, Africa and Europe. We have opposed it because the Initiative passes through Pakistan Occupied Kashmir. Our relations with the United States have improved but only at a huge economic cost. The US has imposed punitive import duties on our exports and asked us to reduce to imports oil from Iran. The only silver lining in our foreign relations is that our relations with Maldives, Afghanistan and Bangladesh have remained positive. The way forward is to launch a massive program to subsidize supply of trained teachers and scientists to the developing countries. That will spread goodwill for India and also help solve our educated unemployment problem. We must skirt the POK problem and join China’s Belt Road Initiative and use it to open up our trade with the three continents.

The second missed opportunity was of controlling fiscal deficit and reducing government investment in order to attract foreign investment. The NDA failed to realize that the demand for manufactured goods in the developed countries has become flat and Multinational Corporations are no longer willing to invest in India. The way forward is to increase government investments, allow fiscal deficit to increase but simultaneously reduce government consumption and revenue deficit.

The third missed opportunity was that of the failure to privatize Public Sector Banks and other Public Sector Undertakings like the ailing Air India. It was necessary to make big ticket investments in emerging areas like Artificial Intelligence, large data processing and space. Instead we spent our precious revenue to prop up corrupt bureaucracies of these PSUs. The way forward is to privatize and get rid of these headaches and use the money for research and providing manpower assistance to the developing countries.

The fourth missed opportunity was in the failure to promote the services sector. The “Make in India” campaign has failed to attract foreign investments. Instead it has resulted in the transfer of the business of SMEs to large businesses without any additional production taking place. Thus the growth rate is unchanged while the Sensex is booming. The way forward is to provide deep incentives to labour-intensive production even by large companies. The SMEs should be revived by allowing cash refunds of GST paid on inputs under the compensation scheme. Two, impose high import duties on goods that hit at our employment intensive sectors such as toys and garments. Three, we have to promote exports of internet-based services such as online tuitions and medical advice.

The fifth missed opportunity was in the area of environment. The NDA has made it a mission to develop solar power. The United Nations honoured him for the same. However, the record of NDA on water, air and biodiversity have been wholly failing. We are ranked at 117 among 120 countries on the Environment Protection Index. Our carbon emissions continue to increase. Nearly one-half of the world’s worst polluted cities are in India. Our rivers are dying. Their water is being wholly extracted for irrigation for the cultivation of water-guzzling export crops like sugar and red chilies. The rivers are also dying because we are making hydropower dams and obstructing the downstream flow of sediments and upstream migration of fishes. The way forward is to reduce the consumption of electricity to reduce the coal-based generation of electricity and to remove hydropower projects. We should start volumetric pricing of water used for irrigation and compensate farmers for the resulting increase in price of their produce. Let us hope for the best.

Dr B jhunjhunwala, Formerly Professor of Economics at IIM Bengaluru

May 26, 2019

Dr B jhunjhunwala

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