Politics over economics — putting reforms in the backseat

Author

Posted on 4th September 2007 at 15:31:00

Mr. Bikky Khosla
(Tradeindia Expert)
CEO
Tradeindia.com
New Delhi, India

TOPIC : Politics over Economics — putting reforms in the backseat

We may praise them, we may criticize them...but it's a fact that India's eco-politics has had its share of successes and blunders on its way to where we stand now.

India has, from its post-independence days, been known for imposing high tariffs and strict import controls, restricting the introduction of foreign capital and taking other measures (some however with no reason or rationale) to protect domestic industries. The justification for these import-substituting policies is that they were necessary to promote industrialization and modernization.

On several occasions this political stand attracted bitter criticism on whether protection was in fact truly based on the goals of industrialization and long-run comparative advantage, or whether it was determined by other, more political motives.

India's political system has, from time to time, been unable to grab the given opportunities either due to lack of knowledge or because of political motivation. In the early 1990s when firms like Motorola approached us for facilities to set up manufacturing operations in India, we declined. China welcomed them and the fruits of this association is evident today.

We need to shed our protective attitude. Though many will disagree with me, farmers don't need subsidies, they need crop diversification methods. They need technology that can enhance their productivity and not subsidies on using obsolete methods of farming. By giving them subsidies we are not only crippling them, we are also making them dependent on the state.

The need of the hour is reforms, the need of the hour is innovations. There is a difference between keeping an elephant and carrying an elephant on the shoulders.

It is a fact with which I'm sure all will agree that there is great confidence in the Indian industrial class than there is in certain politicians who misguidedly think that they are saving the industry! Is it because our economic decisions are still mired in fear of rattling political equations and vote-banks? Many parties just keep repeating slogans of 30 years ago.

In a country which suffers from acute power shortage, politicians are promising free electricity to one class of the society. Yes that class of society may be the have-nots, but how long can we keep them handicapped? What's happening in Maharashtra today — where farmers are committing suicides each day — is a result of these policies.

I strongly believe that instead of subsidies and free wares, we need to engage them in sectors like biofuels, bamboo cultivation and products, and medicinal plants. Each of these can engage millions. So can organic farming and diversification into vegetables and fruits, floriculture and water harvesting. These are policies that will not hurt the economy and all the same provide them the much-needed regular flow of income.

I have no doubt in my mind that if activities like these flourish, incomes will multiply, fewer will flock to urban slums. Indeed, through them the country would register gains even in foreign exchange.

Similarly, projects that entail huge earthworks including gram sadak projects, the linking of rivers will be able to absorb millions who may be dislocated and at the same time unleash the country’s productive potential. They are the real social security that will take the nation's economy to unscaled heights.

Political parties need to rise above political equations and vote-banks. We can't defer reforms for the forthcoming elections.

Ironically, solutions lie not in the economic realm, but in political zeal and commitment. Reforms, innovation and industrialisation are a must, but schemes to rehabilitate and reposition workers or farmers who may be dislocated in the process must, of course, be devised and executed fast and systematically. No project or technology must be blocked.

Having said that however, politics is also not without economics. The government-run railways are running in profit, the navaratnas are running in profit, many other sectors too are. Why? I would say they have brought in place reforms and innovative ways to become profitable.

Recently when I was in Gujarat, I saw a new trend emerging there. With a view to attracting several overseas companies to set up base in the state and to provide job opportunities to locals, the Modi government has taken up an ambitious project called SCOPE (Society for Creation of Opportunity through Proficiency in English) to empower the masses to acquire basic communication skills. The government has understood and recognized the fact that manpower is its strongest area and for that they need to possess good communication skills. The project will go a long way to provide employment to the masses who otherwise would have been relying on state subsidies. This is innovation!

The 21st century is going to be the century of knowledge and if we do not apply our resources continuously, we will not be able to flourish. Economic strength is itself power. We need added thrust to reforms and that too without delay. The more we delay the process, the greater the lead that others will get over us.

So will our policy-makers play their old game in keeping a part of the society handicapped and play vote-bank politics or will they bring in reforms, all the same including the larger section of the society? The answers we will have to seek within ourselves!