The BJP government is facing a lot of flak on state of nation’s economy. There have been some genuine assessments but a lot has been political and anti BJP rhetoric without much substance from the opposition. Data based assessment can easily be manipulated to present the state of the economy in a desired manner depending on what data is used and what is conveniently set aside. For a man on the street terms like GDP (Gross Domestic Products) or GNP (Gross National Product) have very little meaning. What matters to him is how far he can stretch his monthly earnings to sustain an acceptable way of life. Therefore any prudent government must keep both macro and micro factors in mind while pursuing its economic policies. Macro factors are responsible for nation building while micro factors ensure a minimum comfort level for the common man while the nation grows. The current government scores heavily on the macro front but drops down many notches when it comes to micro level. That in nutshell may be a fair assessment of the economic situation in the country today.
Macro initiatives as the name suggests are capital intensive in terms of resources with long gestation periods before results start impacting the common man. They need a lot of foresight, planning and a long term view of where one wants the nation to be. From 2004 to 2014 India suffered a lot on this front and the current government had a lot of catching up to do in many sectors like infrastructure, defence, manufacturing, agriculture, railways and improving investment climate. It was a daunting task as international economy was on a downtrend and our own country was riddled with corruption, nepotism and inefficiencies in every walk of life. But to government’s credit it has done remarkably well in tackling corruption at higher levels and putting in motion many initiatives to put things on right track in most sectors. Without a doubt a lot has been done and lot more needs to be done since there is no full stop when it comes to development and growth. Unfortunately macro initiatives cannot depend upon any Aladdin’s lamp to deliver instant results through the proverbial Genie. So despite its bold and proactive approach it will take a few more years before results of the government’s efforts are visible.
In their quest to address macro issues, the government does appear to have lost sight of some ‘to do’ tasks at micro level. In a large and diverse nation like India perceptions are built and destroyed in quick time. In a democracy a voter expects his government to make a positive difference to his everyday life since the government is there because of his vote. In short every vote has a price tag attached to it – more so in poor nations like India where voter expectations are high in terms of quick results. Measures to address rural economy, lowering of prices of petroleum products, effective control of prices of essential commodities and services, encouragement for smaller businesses, improvement of state run medical and educational facilities are some of the areas where immediate corrections were required but not really achieved so far. In most of these state governments too have to play their part but are invariably found wanting. In the end the blame is dumped on the central government. Ideally BJP should have moved on priority to address these issues at least in states where it was in power and ensured a visible change. That would have sent a positive signal to the common man and boosted BJP’s credibility nationwide while putting pressure on non BJP state governments to follow suit.
Demonetisation and introduction of GST have been portrayed as the two main villains responsible for woes of the common man as also for lower growth rate of the nation as a whole. This is ironical indeed. Even the sternest critics of the government agree that generation of black money and tax avoidance had become a way of life in the nation where parallel economy was as big as the official economy if not bigger. From 1947 to 2014 no government tried to curb these two maladies since political will was lacking. Demonetisation was primarily a step to jolt black money hoarders and bring most of it back in circulation through banks. It was neither meant to be nor it could be a permanent solution by itself against corruption. It had a limited objective and that has surely been achieved – sceptics notwithstanding. Without a doubt small businesses working on a cash only model have to do some rethinking and adjustments to become part of the formal economy. They had it their way for too long and there was an imperative need to bring them on the right track – short term pains notwithstanding. Demonetisation was a onetime measure that has been done and dusted – the case must rest there.
GST is an essential part of any growing economy and more so in a large nation like India. It has been talked about since 2003 but once again lack of political will made sure that this issue never saw light of the day under earlier governments. The charge that nation was not ready for such a major reform too holds no water since theoretically India would never have been fully ready for the same. For too long small businesses in India had been operating outside the tax net while many medium and large ones were paying taxes as per convenience. In addition interstate movement and sale of goods was a nightmare where authorities could harass and exploit people at will. Could GST have been implemented in a better manner? There can only be one answer to this question and that is a big YES. Fewer tax rates and lower rates on goods and services for mass consumption would certainly have gone well with the common man. A simpler and incentivised implementation for unorganised sector could have paid handsome dividends in the long run. Finally government should have ensured a quick settlement mechanism after filing of returns to avoid cash flow and other problems.
Governments must never become greedy when it comes seeking returns from facilities that they offer to their citizens. They should not see every government initiative as a profit centre that must pay for itself. In public centric sectors like transport, environment protection, health care, education, development of rural or backward areas, security the government will always need to spend more than it can possibly hope to earn. In short there will be a need to subsidise certain public facilities judiciously to ensure a minimum acceptable quality of life for the common man. To achieve this government must curb unproductive expenditure and improve its fiscal prudence continually. This has never been addressed properly in our country and present government is no exception. When a of Member of Parliament draws over Rs 70 lakhs of travelling allowances in a year despite being given scores of free air/train tickets or a Supreme Court judge spends a similar amount on meaningless foreign jaunts with family within months of his appointment – then there is something seriously wrong with the system. Government’s fiscal discipline certainly leaves a lot to be desired.
Governments however must be strict and diligent when it comes to collecting taxes and other dues from its citizens. Defaulters of public money or those involved in corrupt deals must be dealt with expeditiously. Government’s popularity would have gone up many notches if it had brought some of the high profile bank loan defaulters or those involved in other scams to book by now. Public perception would be better served by speedy and strict action on individuals even if part of the money is not realised. Whether by default or otherwise the government has missed a trick here after all the noises it made in 2014 as part of its election rhetoric. A more result oriented performance here would have gone a long way in improving the perception of nation’s economy as a whole.
The aspect of job creation has been in the news a lot of late. Any informed person would take the data dished out on job creation or jobs lost with a pinch of salt since there is no structured mechanism to monitor the same. While it may be possible to make a realistic estimate of jobs created or lost for mega government or privately promoted projects, there is no way the same could be done for the small, medium and informal sector. In reality it is the jobs in small and informal sector which really count since they are within reach of the common man and form the back bone of the economy. In mere numbers jobs in small and informal sectors would dwarf the jobs available in mega and large projects. Has the government addressed small and informal sector in a deliberate manner for growth keeping in view the short term adverse impact of demonetisation and GST? This should have been a high priority task since that is where real Indian economy starts and brings millions in its fold. The government has definitely failed on this score.
Any developing nation, particularly as diverse, underdeveloped and large as India, needs a people centric economy where maximum numbers of citizens participate and contribute towards growth and development. By implication it implies we need to focus on our micro, small and medium sectors by creating suitable infrastructure and business environment. This is what we need to strive for in India instead of aping the Western models blindly. India’s economic indicators cannot just be its GDP or GNP or overall growth rates. The sate of India’s economy is more about ensuring a minimum acceptable quality of life for every citizen and his ability to contribute, albeit in a small way, to the overall growth story of the nation.