Thursday, 17 November 2011

Agenda for Renewal:Policy Puzzles:Bibek Debroy's blog-The Economic Times

An Agenda for Renewal has been drafted by Deepak Parekh, N.R. Narayana Murthy, Sunil Mittal, Ashok Ganguly, Zia Mody and K.V. Kamath.  This will be debated on 26th November with some Cabinet Ministers, including FM.  The headline grabbing items on the agenda are ten in number –

 

(1) Everyone needs to move to dispel gloom and doom (this urges opposition not to be negative);

 

(2) Take fast decisions to restore investor confidence;

 

(3) Woo foreign investment and investors with small and big measures (this mentions FDI in retail and cold storage);

 

(4) Revive energy and power sectors;

 

(5) Introduce big reforms in agriculture (this mentions repeal of APMC);

 

(6) Build new cities and make existing ones smarter and better;

 

(7) Devise a land acquisition policy that is fair and resolves conflicts;

 

(8) Ensure better inter-Ministerial co-ordination;

 

(9) Allow education to function as a for-profit business; and

 

(10) Encourage transparency in political funding to weed out corruption. 

 

I have no problems with any of these.  Nor should anyone else.  There is nothing in this list that one can object to.  However, one can object to the non-inclusion of some items.  Take public expenditure as an example. Increased public expenditure has contributed to liquidity, inflation and high interest rates.  Shouldn’t fiscal consolidation be somewhere on the agenda?  This government will have high public expenditure.  That’s part of the so-called inclusion agenda.  Therefore, tax reforms and non-tax revenue, in the form of privatization/disinvestment are critical.  Also critical is the efficiency of public expenditure. 

 

For example, a recommendation that prices of all fuels must be deregulated (mentioned under the energy and power head), is unlikely to materialize until we figure out who to subsidize.  That is, until we figure out who is BPL.  There is a reference to Nandan Nilekani recommendations on PDS and that these should be implemented by April 2012.  Nandan Nilekani will recommend technological solutions.  He isn’t going to solve the BPL identification problem for us.  And without that BPL identification, we haven’t solved the subsidy issue.  I am somewhat surprised that these issues don’t figure anywhere.  Nor does the question of revamping public expenditure through pointless Central sector and Centrally sponsored schemes.  While there is corruption in these, there are also very high delivery costs. 

 

One of the Ministers who will attend the brainstorming is Jairam Ramesh, Minister for Rural Development.  I would like to know why this Ministry is necessary and what it does.  Why can’t funds for rural development directly go to States and local bodies?  In the same vein, I find no mention of local bodies and decentralized planning.

 

There is another problem with this laundry list.  It doesn’t separate the short-term from the medium or long-term.  For instance, (5) and (10) are clearly long-term.  But (8) is short-term.  There is also a difference between reforms that require legislative changes and reforms that don’t.  Given the present (and all likely future) compositions of Parliament, all legislative change is likely to be difficult.  Why should we ask opposition parties to rise above politics and support the government?  That’s not the nature of opposition.  Are we going to use the same argument when the Congress is in the opposition, say in Uttar Pradesh or Orissa?  One can interpret amendments to land acquisition and mining bills as the Congress party’s donning the mantle of the opposition, since it isn’t in power in any of the relevant States.  But to return to the point, the present policy paralysis is not really legislative.  It is executive and has little to do with the opposition.  That’s the reason I think (8) is much more important than the rest. 

 

There is also another trend that I would have liked to be flagged.  It figures under the education head, but is much more than education.  This is a general tendency of greater government control.  Opening up of FDI in retail will accomplish little as long as the stocking restrictions are what they are.

 

ET reports make a reference to the Bombay Plan of 1944-45.  Those were before the days of the Planning Commission.  I do think this “Agenda for Renewal” is better than the recent Approach Paper to the 12th Plan produced by Planning Commission.  If nothing else, it is more focused.  However, I also think the items included are ad hoc and piece-meal.  They miss out on the big picture.  But perhaps the debate will lead to the fleshing out a more comprehensive agenda.

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