The transformation of India

The NITI Aayog is only a means to an end, the budget is now more important, while the critical factor will be governance

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Mukul Sanwal | January 17, 2015



The scrapping of the 65 year old planning commission is an astute political recognition of the impatience of half the population, which is also below 25 years of age, with frameworks, policies and politics that have long lost their relevance.

The failure of ‘planning’, as we defined it, is apparent even to a non-economist. China has raised per capita incomes to three times our level, whereas up till the 1990’s we were richer. With more arable and irrigated land our food production is half that of China. Coal production in China is 4 times, steel production 6 times, cement 4 times, electricity generated 4 times with transmission losses a quarter and tariffs half those in India – despite being endowed with all these natural resources. 

The scale and speed of the transformation to achieve our potential requires a bold vision that Modi will have to provide to the economists in the NITI Aayog.

China doubled the per capita incomes of 1 billion citizens in 12 years, and we should be able to do so in 10 years? Arvind Panagariya should suggest the direction, policy changes and how best to generate the resources through a set of ‘Briefs’ that provide ‘strategic and technical advice’ that the chief ministers, and the public, can understand and provide their inputs.  For example, China created 130 million jobs in 2002-2012 and India half that number even in a period of high growth. The working age population will rise by 125 million in the next 10 years, half will be from Uttar Pradesh and Bihar, and skill development should be one of the backbones of ‘cooperative’ federalism, not ad-hoc grants dispensed by the planning commission.

Similarly, opening up the ‘backward’ areas to mining will contribute to employment, government revenue and avoid foreign exchange outflows.  Half of the non-agricultural employment is in construction and a massive infrastructure development programme, including linking of rivers and new towns, will be welcomed by all states more than loosely targeted central schemes.  

Equally significant will be the devolution of funds that the finance commission is soon going to suggest, to give the real boost to ‘cooperative federalism’, as defined transfers can do away with the discretionary role the planning commission played in the past.

Even more eagerly awaited by the citizens will be a transformational budget to establish the administrative paradigm of a government limited to ‘enabling legislation, policy-making and regulation’. It will give the right signals to industry to make long term investments. For example, all regulatory departments should be given adequate funds to move to digital operations as the default by the end of 2016, because transparency and a service orientation will be the preconditions for success of ‘Make in India’. New research shows that even labour reform is less important than an enabling environment.

A technological transformation of the central and state administration, as the overriding priority, is essential to remove bottlenecks. For example, the National Crime and Criminal Tracking Network and System, launched in January 2013, are still limited to pilot projects. According to the information on the website of the ministry of information technology, the computerization of all the district courts was taken up in 1997 but has not progressed “for want of interest from the district court officials”. Under the national land records modernization programme, launched by government of India in August 2008 for computerization of land records, registration computerization and digitization of cadastral maps, according to the website of the department of land resources, data centres have not been set up in any district. Three digital centres were set up during late eighties to generate digital topographical data base for the entire country for use in various planning processes and creation of a geographic information system, and according to the website of the Survey of India, district planning maps in the scale of 1: 250,000 have been prepared for less than half the districts of the country, and village level soil maps are still under preparation. The National Informatics Centre has no all-India project for computerization of district administration, municipal administration, and central and state tax administration.

A new policy framework is needed. The artificial distinction between plan, non-plan, capital and revenue expenditure was applicable to the project orientation of the earlier plans. National infrastructure projects are based on public-private partnerships where the central government will now need to leverage large amounts of investment, responding to a policy framework and spearheaded by central ministries. Central grants to states and municipalities should be in the form of budgetary support contingent on certain outcomes related to leveraging land resources, transport, housing, water and sewerage, based on digitized maps for monitoring, leaving social services to the state budget.

Acting on trends for defined outcomes will lead to new ways of organizing and operating. Manufacturing requires a better enabling environment beyond the policy focus on SEZ’s, which have not had much success. Doubling agricultural productivity will hinge on using remote sensing techniques, efficient use of water and new seed varieties, also responding to the adverse impacts of climate change, with extension services moving away from field level functionaries to mobile apps, radio and television. Urbanization, too, will need to cover 250 million in the next ten years compared with the shift of 230 million to cities in 1970-2010.  With this infrastructure yet to be built, the added advantage we have is to leapfrog into energy efficient buildings and rail transportation to reduce reliance on energy imports and deal with climate change.

At the Science Congress, Modi listed priorities and promised to remove bottlenecks instead of announcing new projects, and this was widely welcomed. A similar approach is needed in the budget at a much larger scale to double per capita incomes in the next ten years, as a first step to making India a $20 trillion economy. That is the ‘Indian Dream’. 

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