As per the World Bank any person
thriving below $1.25 per day is declared as extremely poor & those less
than $2 per day as poor. Various commissions in India have made a mockery of
that recommendation; the Tendulkar committee fixed Rs 27 per day for rural
& Rs 33 per day for urban to determine poverty thresholds which showed
poverty in India at 22% of the population. Post a furore, carried intensely by the
national media the NITI Ayog recommended a fig of 40% while the Rangarajan committee
suggested Rs 32/- for rural & Rs 47/- in urban as threshold determinants of poverty.
People below poverty line (BPL) in India are 27 crores as per the Tendulkar
committee & 37 crores as per the Rangarajan committee. It must however be
remembered that the lower middle class that lives just above this threshold
could sink back into the abyss during the times of an economic upheaval caused
by either business cycles or the wrath of nature.
The World Millennium development goals, propounded in 1990, aimed at reducing poverty by 50% by 2015 but have been
achieved 5 years earlier. In 2012, 89.6 crore people were living on less than
$1.9 per day & a major chunk of those unfortunately live in South Asia
& Sub Saharan Africa. Needless to
say, India is the largest contributor with human development index figures poorer
than even neighbouring Bangladesh. Therefore, the Indian govt. is better served
by concentrating on the basic necessities – food, primary health & education,
maintenance of law & order & finally quick & effective dispensation
of justice. For details read my article
The other recommended steps
Provide safety net
Successive Indian governments
have distinguished themselves with a blithe of misplaced priorities. The
Telangana CM, KCR announced on the floor of the state assembly that during the
last 20 years the no of houses build by the state govt. was higher than the no
of households in Telangana – alluding to a deep seated builder politico nexus;
surely the same miasma would be evident in all states. If the period from
independence is considered the rot would be much higher. Would it not be a more
prudent strategy to legalize unauthorized colonies & provide facilities of
drinking water& electricity – thereby destroying the electricity &
water mafia - & establishing police stations in such area - to control the
rogue elements? The costs would be substantially less & the benefits to the
society a lot higher for basic necessities along with security provide a wide &
effective safety net.
Get out of loss making PSUs
Kingfisher airlines & Vijay
Mallya were panned by the media for siphoning off 9000 crores from banks; if
Kingfisher got funds from the banks, Air India gets funds directly from the
govt. & in each case it is the tax
payers’ money blown down the drain. While Air India is a perpetual offender in
terms of running perennially at a loss the ostensible reason cited by the govt.
for extending support is protection of jobs of the employees; the real reason
though is that the selfish motive of elected representatives to retain the
perks associated with Air India. Extending the same logic, there is no reason
whatsoever for the state running hotels or not closing loss making
organizations. In fact non-closure of defunct state sector organizations denies
the golden handshake amounts to employees who would otherwise benefit from a
quick disbursal to be used to restart their careers elsewhere. Liquidation of the land banks of such orgs can
also solve the housing problem in the country.
Reduce agricultural intermediation & raise farm productivity &
prices
While the political class claims
to represent farmers, the farm gate prices for most commodities are about one
third of what the final consumer pays. Both the consumers as well as the
farmers would gain through the elimination of intermediaries. The obvious
solution is removal of APMC ( Agricultural Prices Market Commission). Since it
is largely held by political cohorts & its abolition was indeed proposed by the Congress, before the 2014 elections, its own Chief
Ministers did not follow through; the main opposition party BJP as well as
other ruling parties in the states did nothing either indicating unanimity across
the political divide. Allowing of FDI in
retail would help create infrastructure -including cold chains - which shall help
in farmers getting better prices & the consumers lower ones.
The political class however
raises the bogey of retail trade losing out in the eventually of FDI in retail
being allowed. India has about 13
million retail outlets & assuming a family size of 5 about 6.5 crore people
are dependent on retail trade. Contrast this with about 62.5 crores (50% of the
125 crore population) dependent on farming who can potentially gain through
better remuneration for their produce & all the 125 crores – including
retailers who need to buy products they
don’t currently sell – shall gain through lower prices.
It is a fact, however, that
retail outlets near a modern trade outlet get affected. Such outlets could shift to a new area in the
city. Displacement is painful & a solution of last resort. However, if
displacement is a natural corollary for constructing irrigation, mining projects et al as per the compensation mandated under the recently proposed land acquisition act, surely similar rules should
apply to displacement of effected retailers too. The dice of public policy is
thus cast. Removal of APMC & creation of a truly free national market –
which India currently is not - & allowing FDI in retail is the surest
antidote to inflation.
Clean up the Real Estate sector to tackle the blithe of black money
With black money largely pouring
into this sector a hawk eyed management of this sector rather than passage of
black money laws in Parliament shall be more helpful. Raghuram Rajan has
advocated that reality sector should drop prices to reduce inflation thereby helping
the govt. drop interest rates further rather than arguing for interest rate
drops alone. The builder lobby along
with their political masters – many of whom are interested parties &
therefore keen to acquiesce - have succeeded in pushing through tax sops for
the sector during the last 2 budgets though it is a sub optimal solution.
Strong regulation of this sector shall stifle political funding & perhaps
lead to better governance.
Professionalise PSU Banks
The public sector banking sector
has piled up huge NPAs because of a politico – bureaucratic – promoter nexus
helped by faulty project appraisals; else how can one explain how all the road
projects got their traffic projections abysmally wrong. P Chidambaram once noted that in India companies
become bankrupt while promoters don’t. The lack of an effective law for
liquidation & the long drawn labyrinthine of court proceedings helps many
culprits to escape. Mandating a 3 year timeline from the trial court to the Supreme
Court with a cap on adjournments & postponements shall help. It
would also be prudent for the governments to bring in professional boards to man
banks. Creation of a holding company – a la Singapore model - &
acceleration of divestment & drop of govt. holding to 51% shall help. Going forward this holding company can start making acquisitions abroad.
Conclusion
Clearly, Indian governments –
belonging to any political dispensation - are getting their priorities
wrong. It is time the economic &
social thrust of govt. policy is revisited
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