THE PRIME FINANCE MINISTER
OF
INDIA
DR.MANMOHAN SINGH
Dr.
Manmohan Singh has the reputation of being the Best Finance Minister of India.
His earlier tenure was a Grand Success as Finance Minister.
In
1991, Sri P.V.Narasimha Rao, India's Prime Minister at the time, chose Dr.Singh
to be his Finance Minister. Back then, India's fiscal deficit was around 8.5 %
of GDP; its Balance of Payments deficit
was huge and current account deficit was around 3.5 % of GDP. India's foreign
reserves were very low at around US $ 1 billion - just enough to pay for a few
weeks of imports. Compared to that situation, today, the RBI and the Government
are in a hugely comfortable situation.
The
then Prime Minister, Sri P.V.Narasimha Rao was not only an astute Politician
but himself a visionary. Except that- he was not a charismatic PM like Rajiv
Gandhi. The PM and the FM worked towards making India a vibrant, resilient
economy - and they succeeded to a large extent in doing that through
imaginative, bold, Policy Framework.
That
was then. In due course, Dr. Singh became Prime Minister in UPA I. Again, the
financial performance of his Government was very Good. The country moved
forward in many ways. GDP growth was impressive.
But,
come UPA II, somehow, things slipped. Dr. Singh was mauled by a sort of queer
Coalition Politics – in which, Dr.Singh could neither go forward nor backward –
but just remain a helpless spectator of the way things slipped out of hand.
First,
the Inflation went totally out of hand. Both food inflation and manufactured
articles Inflation went out of hand – but major factor for worry was food
Inflation.
RBI
was using its only weapon, MONETARY POLICY, religiously, in the hope that it
will bring down Inflation. And, it never worked.
More
and more monthly dosages of Interest rate hikes followed – but to no effect.
But, the High Interest rate regime was having its effect on Growth of
manufacturing sector. Even with the imperfect statistics of the ISO, it was
becoming evident that Growth in manufacturing sector was suffering seriously.
Specifically, Growth in the capital Goods sector was declining seriously.
The
reason was obvious. If Interest Rates, which is the main contributor to the
COST OF CAPITAL is too high and the RETURN ON CAPITAL is not high enough to
enthuse the entrepreneur to undertake capital building activity, Growth in
capital Goods sector is bound to come down. This will have both present and
futuristic effect on overall Growth.
But
then, RBI is unwilling to bring down the INTEREST RATES. RBI has made a telling
point of course. Government is not acting on INFLATION. Neither the Food and
Agri Ministry at Centre nor those in states ever made any serious efforts to
control FOOD INFLATION through fiscal and administrative measures.
They
should have convened periodical meetings at Minister and secretary levels – to review
the Inflation, its causes and possible remedial measures, both fiscal and
administrative. This is not happening. On the other hand, everybody is looking
to RAIN GOD for solution. This, evidently, is not PLANNING.
In
respect of Manufactured articles – the situation is slightly less worse. Consider
that IRON ORE is available in plenty in
India – but, it is not available for steel-making in India. Steel manufacturers
are forced to import Iron Ore. First it makes our Trade balance worse. Second,
it puts pressure on Rupee value, which is going down against dollar every day.
Ditto
for Coal.
And,
Policy measures which are TAKEN – are complicating matters much more than
measures not taken. The retrospective change in tax laws, as in case of
Vodafone, has sent out negative signals to Foreign Investors. The inability of
L.N.Mittal to start a huge steel Plant in Odisha is another. The spat with
CAIRN INDIA is yet another.
When
a Foreign Investor comes to invest in India, with huge Investment Plans, especially
if he is of Indian origin, all decks should be cleared on a FAST TRACK BASIS.
India must be known for such fast track clearances for FDI. But, we are gaining
the opposite reputation. And, there are accusations that obstructions pour in
especially if the Investment comes into states ruled by Non-UPA Governments.
So,
these are some of the disturbing aspects, which are holding down the economy.
Today, licences may have been done away with in many areas. But, their place
has been taken by CLEARANCES.
Each
clearance takes years! There is a huge need to disband most of the clearances
and FAST TRACK the justified clearances like environmental clearance. We must
look at what countries like US, UK and Germany are doing in such matters. Even
China.
For
instance, if Reliance or CAIRN or ONGC want to enhance production or dig new
wells in Blocks already allocated to them, there should be no need for
clearances. Periodical REPORTS must be enough. These companies may need clearances
– only if they want to produce LESS!
Why
is RUPEE VALUE coming down? Because, people of other countries find Rupee not
getting them anything valuable from India. As simple as that. This is the plain, long term reason, why rupee is
less valuable and is slipping down in value further. India must promote High
Quality goods manufacture even at cottage Industry level.
Innovation
must be given pride of place. Innovation must be seen everywhere. You do not
find a single TV Channel, which promotes innovation and suggests methods of
making things better. You do not have a single organization – exclusively devoted
to making THINGS BETTER – than say,
the Chinese and Koreans – and teaching such things in schools, colleges,
Industries and so on.
It is fine to attempt entrance Exam reform into IITs. But, are there IDEAS also, to make IITs more innovative, more research oriented, and rolling out engineering products which India can be proud of. There is no doubt about their capability. But, their spending on R&D is abysmally LOW. The spending of other Engineering Colleges on R&D is close to NIL. So is the spending of all Governments – centre and states – in India.
It is fine to attempt entrance Exam reform into IITs. But, are there IDEAS also, to make IITs more innovative, more research oriented, and rolling out engineering products which India can be proud of. There is no doubt about their capability. But, their spending on R&D is abysmally LOW. The spending of other Engineering Colleges on R&D is close to NIL. So is the spending of all Governments – centre and states – in India.
These
are the problems that are holding the Economy down.
Now,
the turn of events in the Presidential Elections has again brought the Prime
Minister Dr. Manmohan Singh into the Finance Minister’s Chair. This is a hugely
welcome development.
He
was and perhaps, is the Best Finance Minister of India. Now, he is also the
Prime Minister.
He will start performing from Day one.
He has started identifying the
Problems and solutions already.
Reforms
will flow in quickly. I would not call them reforms. They are the needed
measures. We may differ from him on a few. But, overall, the direction will be
straight forward and intentions will be very clear. No Politics will play in development,
if Dr. Singh has his way.
In
addition to his individual performance as Finance Minister, one looks forward
to him to lead his Food and Agri Ministry, Industry Ministry, commerce Ministry
– in fact, all economic Ministries – more aggressively than before and ensure
that appropriate Policy Actions come from them too, quickly.
He must also carry the RBI with him – and convince them TO BAT FOR GROWTH – by reducing the Interest Rates sufficiently – not just in token. But simultaneously, he must get his Food and Agri Ministry to convene at least one Meeting at Minister/secretary level with all states – to manifestly tackle the FOOD INFLATION PROBLEM.
He must also carry the RBI with him – and convince them TO BAT FOR GROWTH – by reducing the Interest Rates sufficiently – not just in token. But simultaneously, he must get his Food and Agri Ministry to convene at least one Meeting at Minister/secretary level with all states – to manifestly tackle the FOOD INFLATION PROBLEM.
Good
Luck, Prime Finance Minister!
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