Thursday, December 8, 2011

ECONOMIC REFORMS=Trade deficit with China =Land Acquisition Bill=Roll Back repo Rates to 6.5%= 2012 be Year of Tree= FDI in many areas =corruption tackling



Ø  Trade deficit with China – Make Indian Products cheaper
Ø  Pass Land Acquisition Bill Urgently
Ø  Reduce RBI repo & reverse repo rates from 8.5% to 6.5% immediately
Ø  Declare 2012 as Year of the Tree – for MGNREGS and other schemes
Ø  Permit FDI in Defence manufacture, science and Aerospace etc.
Ø  Corruption – Agree to all Demands – modify structures suitably

There is a hue and Cry in media and India Inc that Economic and business Reforms are taking a back seat. Yes. They are taking a back seat – as Politics is playing out a bigger and rather unnecessary game.

FDI in retail, which is the most talked about reform is not a REFORM but a DEFORM – in my humble opinion.

This Blog has written several articles in the Past on the subject – pointing out its dangers. Some of them are listed below :

India is committing certain long term, strategic mistakes on economic front – in the name of economic reform.

What are the major economic issues facing India and what are the possible solutions? Let us take a serious, dispassionate look.

The number one danger in my opinion, is posed by the fast expanding trade deficit with China. The dangers of this was also pointed out in the article at the second URL above and in some other articles. This is the most important aspect that should attract Government attention. We must promote local Industry vis a vis Chinese. Indian Products must become cheaper and better than Chinese – at least in India. 

The Government and the opposition must come together to ensure this. The overall National Interest, Economic progress, social progress, employment potential, our  long term national security – all of these depend on this one aspect. 

Have you seen the beautiful picture of a Frog sitting before a cobra, looking at it and admiring the beauty of its hood? Is India like that now? Perhaps, it is. We do want deep bonds of friendship with both Pakistan and China. But, that just, is not happening. So, Wake up India!

The second priority is – clearing some of the most important economic (but looking unlike that) bills. Foremost is Land acquisition Bill. I do not understand why there should be so much deliberations on both sides – Government and Opposition on this pretty simple matter. We must acquire suitable land – for our power sector companies, mining companies, large scale factories, our Roads and so on. We just can’t survive long without them. 

But then, somebody is losing his land, his livelihood. India must provide better livelihood, better compensation, better avenues than available to him – than at present. Ensure that he is happy to part with the land – and not unhappy to do so. Both are our priority. Can we sacrifice the Power Plants? Can we, on the other hand, sacrifice the Indian who owns the land needed for it and depends on it for his livelihood? Both are a No, No. 

We do understand this. Then, what is the problem? The problem is we are confused whether the power company is public or private!! What if it is private? Power is a national Priority. It is needed for agriculture. It is needed for Industry. It is needed for Government. Where is it not needed? Power is a public purpose –  even if the company producing it is private - if we see it with clear eyes. I think, given to himself, Mr. Jairam Ramesh will bring out a fine law for this. If the mind is clear – all the lands required for all power projects can be acquired within next 3 months – keeping all land givers in a happy mood. May God clear our minds urgently. I think, as a nation, we must keep a Target date of say, 31st March,2012 for this.

The next priority action rests with RBI. RBI during last 1 year has raised repo rates from 6.5 % to 8.5% - with nothing happening on Inflation front because of the Rate hike. In India, Inflation management needs heavy government intervention. But, that just did not happen. The tool in RBI’s hands – that of Bank credit Management – cannot tackle Inflation in the Indian Context. But, Governments at Centre and states can act in many ways to control Inflation. 

If Prices went up, RBI’s repo rates Policy was not at fault. If prices went down – RBI’s repo rates policy can be given NO CREDIT for that too. Government’s supply management (of products and services) is the key to Inflation management – not RBI’s credit management policies. We must all recognize this stark fact.  The raising of rates from 6.5% to 8.5% in last one year was not needed at all – and therefore – needs to be ROLLED BACK AT ONE GO now to 6.5%. No one needs to stand on any EGO in this. India needs this urgently. If credit is costly, goods become costly. If goods become costly, foreign goods become cheaper than Indian goods. This has hurt many sectors badly already. 

The proliferation of Chinese goods in preference to Indian Goods in Indian markets has a lot to do with the High Repo and reverse repo rates and consequent high loan interest rates in India. Also, demand and supply have suffered seriously  even in sectors where foreign goods are less – like Auto and Housing sectors – because of High Interest Rates. In short, Growth is suffering very Badly, while Inflation is not responding to monetary Policy changes. Therefore, Repo & reverse repo rates must be rolled back to what they were – at least one year before, and if we are more pragmatic, much further down, to stimulate Indian Industry and make it more competitive. This is one measure, which is needed

An important National Priority – that has been subject of big debate is MGNREGS and other similar schemes of the central and state Governments. We are practically doling out lakhs of crores of rupees under the schemes and don’t know where it is going and what exactly is happening. It is said – the people who matter – under the schemes -  are now having luxury cars, big houses etc. So, who is the real recipient of the moneys under these schemes? Why are we not insisting on a visible productivity for the moneys being spent? Surely, a good part of the money is going to agricultural and other workers, while the balance is probably being siphoned off into black money channels. 

Why can’t we have National schemes for planting of trees on all road sides (after identifying their correct width / planned width)? We want more forest cover and more trees in forests. This is impractical. No one will go and plant trees in forests. But, the same workers under NREGS and other schemes can plant, water and grow trees  on all roadsides all over India – as near to their villages / urban localities as possible. This is an eminently practical and highly beneficial scheme for India. 

These plants can be painted with names and numbers for identification and must be subjected to physical audit by independent authorities. A worker must be identified as responsible for a few trees for at least 2 years.

Let 2012 be declared of the YEAR OF THE TREE in India – and all NREGS and other similar funds be diverted for planting, watering, manuring and growing trees all over India. If the proper type of trees are selected, we will also have huge health benefits for all Indians – as elucidated in our own Ayurveda Science.

We need FDI. I have no doubts on it. I agree with Government on this. We need it in sectors like Defense equipment manufacture, aerospace Industry, advanced science and technology research, advanced Education, even road building, bridge building etc. You can have a branch of Harvard University here – rather than a Wal-mart! We need all this FDI very fast. There are any number of areas where we need FDI, which will create new opportunities for us without taking away our jobs.  They just need Decisions. Urgent, enabling decisions.

What about Corruption? It is a big issue. If I am the Prime Minister, I would have put a nominee of Anna Hazare – as an honorary member in the standing committee itself. All of their demands are acceptable – with different  structures than proposed by them. I have sent suggestions on all the aspects of Lok Pal to the standing Committee and they have acknowledged receipt of the same and assured consideration.

Well. If there is a will, there is a way. I just loved the way, Dr.Manmohan Singh performed in UPA I. Why the indecision now, sir? I urge the prime minister to rise above political considerations – and consider all the above suggestions – in a Nationalistic fervor.

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