- Posted May 5, 2014 by
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Recommended Agenda For the Next Indian Government
The 1960s, the per capita incomes of India and China were roughly similar. After 1966, under Indira Gandhi, socialist India grew tortoise-like for two decades at an annual GDP growth rate of 3%. With population rising at over 2.4% a year, real per capita income barely rose. China meanwhile galloped ahead, especially after Deng Xiaoping’s 1979 economic reforms. Today China’s per capita income is 400% higher than India’s. Its cities – not just Beijing and Shanghai but several dozen others – are modern marvels of architecture and world-class infrastructure.
Whichever government takes office next month after the Lok Sabha election will have to reverse years of economic stagnation, reform a corrupt, rent-seeking governance system and allow India’s economy to grow at its true potential: 9% a year. The IMF says India can grow at 6.5% a year if the economy is fixed. That may be true of 2014-15. But the growth target for the subsequent four years of the new government must be 9%.
To achieve this, and ensure that growth is inclusive, the new government should focus on 10 key areas. It will have six weeks to present its budget in July 2014 and it must, literally, hit the ground running.
The 10 Key Focus Sectors:
1. Urban centres: Nearly 54% of China’s population lives in cities and towns. In India only 33% does. According to a new survey in The Economist, by 2030 nearly 1 billion Chinese will live in urban areas – around 66% of its population. China has developed from scratch new cities like Foshan near the metropolis Shenzen in the southern province of Guangdon. Foshan now has a population of 7 million and modern infrastructure.
The new government must set up a task force with the objective of establishing new urban centres with high-tech facilities, infrastructure, transport and job opportunities.
If many of these new cities are located within a radius of 50-100 km from town and village clusters, the whole area will become a hub for economic growth and upward social mobility. Not only will people migrate to these cities for better job opportunities but the whole region will be boosted by the spillover effect of new roads, housing, manufacturing, information technology, software hubs and consumer spending.
2. Infrastructure: Projects with investment of nearly Rs. 10 lakh crore remain stuck due to multiple clearances. Manufacturing and industrial production are moribund. The new government must unclog the infrastructure pipeline. India needs not just new urban centres but new highways, bridges, houses, factories, airports and sea ports.
Using e-governance to monitor each infrastructure project, India must write a new paradigm – the India model – which stands for swift decision-making, transparent processes and world-class infrastructure.
3. Railways: Partnerships with Japan and China, which have the best levitated bullet train technology, can lead to a three-way tie-up: government financing through special rail bonds, Japanese bank loans at an annual interest rate of 1-2%, and Indian private sector participation. In this manner, the cost of linking India’s major cities with high-speed trains can be both practical and beneficial to passengers as well as ancillary industries in the manufacturing sector.
Meanwhile, as a parallel project, Indian Railways needs to be restructured with quarterly published audits in four areas: 1. Profitability per route; 2. Hygiene and sanitation upgradation and monitoring; 3. Recruitment transparency; 4. Targeted expenditure to ensure that modern new rakes and railway carriages as well as tracks are upgraded to the highest standards within defined timelines and budgets.
4. Education: Not a single IIT or IIM features in global top 100 rankings. The new government must allocate a higher budget for these institutions, provide more incentives for original research papers and build a deeper industry-institute interface.
The R&D divisions of the IITs could emulate the example of IIT Bombay which proactively seeks out innovative work by students and faculty and uses legal attorneys to swiftly file patent applications. India needs to create the next Google, not just low-level IT services for foreign clients.
5. Healthcare: Chronic malnutrition and hunger require a two-fold solution. The first lies in women’s empowerment. Educate the girl child, give her job opportunities when she grows up and you will empower her entire family.
The second part of the solution lies in inclusive economic growth. Once women become equal partners in a nation’s progress, half the battle is won.
The new government must increase expenditure on health and improving overall sanitation. It should also focus on Primary Health Centres (PHCs) which enable villagers to seek medical help and regular check-ups for their children.
6. Power: The new administration must cut power theft, install new equipment to reduce transmission & distribution (T&D) losses and restructure power distribution companies (discoms).
Individual consumers, farmers and industrial users are prepared to pay a reasonable price for reliable, uninterrupted power. They don’t want unsustainable subsidies. They want electicity at reasonable rates with an assurance of regular supply to ensure that productivity in farms and industries is maximized.
Renewable sources of energy today contribute around 12% to India’s total power output. The new government’s endeavour, through a combination of political will and a facilitating environment, should be to increase this to 20% by 2022.
7. Water: The Sabarmati river begins in the foothills of the Aravalli ranges near Udaipur and flows into the Gulf of Cambay after passing through Ahmedabad.
The 11-km stretch of the Sabarmati Riverfront in Ahmedabad, when complete, with its public promenade and commercial hubs, will be an example of how water-based urban renewal projects can add to the quality of life in a modern city.
8. Defence: The new government can begin by indigenising military equipment. The Defence Research & Development Organisation (DRDO) has several decades of experience but India still imports most of its military hardware.
The centre should now involve Indian corporates in public-private partnerships (PPPs) in defence manufacturing. A small beginning has been made with Tatas and Mahindras but the new government should expand the programme significantly.
India has scientific and technical knowhow but the arms lobby has prevented indigenisation of military hardware. This must change. Making the Indian military more self-reliant is an important priority.
9. Internal Security: Naxalism remains India’s greatest internal security threat. The solution lies in a dual approach. First, the centre needs to equip the state and central reserve police with modern weaponry and logistics support through drones to spot Maoist camps.
Second, it must win the trust of local villagers in Naxal-affected areas. This can be done by increasing development activity in the region. Maoists thrive when clusters of villages are neglected.
Economic development with effective policing is the only way to mitigate the scourge of Naxalism and rehabilitate affected villagers and tribals.
10. Agriculture: New technology in farming and mechanization can sharply boost agricultural productivity. This would cut logistical and transport bottlenecks, sideline middlemen and give farmers better, more transparent prices for a wide range of crops.
An agricultural growth rate of 5% a year – nearly double the historical growth rate over the past two decades – is achievable if the new government implements these measures.
This should be the base for blue print of the domestic policies that shall enable India to grow.