India needs a “Distributed Growth Model” – Growth Alone will not suffice

“Distributed Growth model” is the need of the hour. Growth alone will not suffice.

India’s budget preparation is in the final leg and it will be unveiled soon. Last two budgets have put the focus correctly; by giving thrust to rural development, agriculture and infrastructure, but the bureaucratic red-tape has been an impediment. We have a long way to go and we need to evolve a new model – the ‘Distributed growth model’. All these decades, we have chased the ever-elusive “double digit” growth, but we are not going to achieve that with the current approach.

“Too many economists spoil the budget”. We had a world-class economist running the country for a decade, we had the best economists running the RBI and the erstwhile Planning Commission, and we still could not achieve double digit growth, and floundered. So, it’s time to have a fresh look at our economic approach. A mere change in the interest rates have not done anything, and will not. Economy is not about tax collections, interest rates or money supply alone, it is much more. ‘Text book economists’ do not understand the country’s complexities, and neither they do good to the economy, or to economics. Also, the general perception is, that only 3 % pay taxes. Yes, 3 percent may be paying direct taxes but every citizen of India pays taxes indirectly when s/he purchases a product from the market. With GST implemented, all the more! So, to use this reason of low tax payer’s base is wrongfully placed.

It is time we considered a model that leads to growth which percolates downwards and spreads wide, that what I call as, ‘Distributed Growth model”. How do we make it happen?

Let’s look at the following data;

More money in the hands of the poor : There are about 250 million households in India and of these, about 25 % are BPL. So, we need to continue and enhance their earnings with “Mission 62.5 million households”.
Agriculture : The number of cultivators and agricultural labourers added together make up around 263 million or 22% of the population (@1.2 Bn population based on 2011 census). Investment in ‘Irrigation’, in agri-allied sectors, and in setting up forward linkages with markets in towns, and for exports is the need. Special ‘Agri-infra & Irrigation mission’ project is needed to fire the most important engine of our growth – Agriculture.
MSME : As per the annual report of the MSME Ministry (2015-16), MSME sector employs about 80 million people in about 36.1 million units. Out of these, units in rural areas are 20 million and number of women enterprises are 2.6 million. MSME needs to expand more to semi-urban and rural areas and engage youth and women entrepreneurs, and also boost MSMEs expansion in food processing, agriculture based and allied segments, high-end tooling, IOT and niche manufacturing. MSME is where massive employment and income gets generated. It will not only ensure success of ‘Make in India’, but most importantly, as the MSME employees themselves are the customers of “Make in India’, it will create ‘customers’ for such products. With such customers available, ‘Make in India’ will be a grand success. MSME is the second engine of the economy that needs to be fired up
Six states (Bihar, Uttar Pradesh, Rajasthan, Madhya Pradesh, Jharkhand and Chhattisgarh) have 42 percent of population and 56 % of the total population growth. Luckily, all these are under BJP. We need to invest more in uplifting the economy of these states. Lower growth in these states can drag down the overall growth of the country.
Retailers number 13 million and we need to carefully tread FDI in online and retail segments. 100 % Investment in Retail for daily use products might be myopic, and the policy makers need to be careful if BJP wants to run this country for another 25 years! Also, we need to create innovative models to explore, to seek investments in retail and grow the standalone stores at the same time
Tourism: India has about 10 million tourist arrivals and this can become 5 times. Imagine the number of hotels & convention centres, cabs, guides etc. that will come up and the best part, without any Government investment, as the private sector will invest seeing the business potential. Government must focus on tourism as a job creator and a foreign exchange earner. India has so much to offer to global and domestic tourists! Focus on ASEAN and expand beyond .

Health & Education

Recent study had revealed that 50 million go below poverty line due to healthcare costs. Also, it is a known fact that most of the ‘educated’ are not ‘skilled enough’ to do the jobs that the country needs as its economy evolves. Hence, education and health needs investment. If the workforce is not healthy and competent, how can the economy be strong? In fact, anecdotally (since I am not an economist by training), I would take the liberty of stating that GDP growth would be equal to the GDP spends on education, and health! Our healthcare system and education system is in shambles and it needs massive investment. For achieving ‘distributed growth model’, investment in health and education are a precondition.

Strongest thing about India’s economy is ‘1.34 billion consumers’, who run the consumption story (growth engine) for the country, and we add about 18 million new consumers every year. With more opportunities for consumers from Agriculture, MSME and Tourism; and assuring them with quality health and education; we will fire the economy to grow 10 percent a year, and that too, sustainably.

I see foreign trained economist keep warning India about the Fiscal discipline. If the investments are going in areas outlined above and not in opex, we must not worry. Even if the fiscal deficit reaches 5 percent, investments in these sectors will payback, and our economy will be amongst the 3rd largest in a decade. USA is a case in point. It is too big an economy and though its fiscal arithmetic is baffling, does it worry about its ratings or deficit!!?

In oil rich Gulf countries, GDP and GDP per capita appears fantastic as statistics, but since the oil fields are in the hands of a few royal families, the wealth gets concentrated in a few hands. Recently, the annual Oxfam survey has found that the wealthiest 1 % Indians garnered 73 % of the wealth created in 2017. This is due to the ‘Concentrated Growth model’. So growth alone with not suffice , and we need ‘distributed growth’. In the “Distributed Growth” model lies the answer. India should move to this model before the gap between ‘have’s’ and ‘have nots’ increases more!

What the policy makers must aim is on enhancing the income and money in the hands of consumers by creating more avenues to work, earn and spend. This will happen if we invest in agriculture and value addition in allied agro based industries, MSME, tourism, infra, health & education.

Lastly, let us not forget, electorate will evaluate Modi government’s performance on health, education, employment, electricity and inflation. These hold the key to a massive win in 2019.

Good economics is long term politics!

Rajendra Pratap Gupta is a leading public policy expert. Views are personal

De-bureaucratization, the next big move

http://businessworld.in/article/De-Bureaucratisation-Next-Surgical-Strike-An-Open-Letter-To-PM-Modi/20-01-2017-111803/#.WIRQb4rRa8c.facebook

Hon’ble Prime Minister Modi,

Namaste Sir,

Your time is very valuable and hence instead of seeking a personal appointment, I am writing this letter to you.

Peter Huntsman, CEO, Huntsman Corporation, US, said at the recently concluded ‘Vibrant Gujarat’ summit, which was inaugurated by prime minister Narendra Modi, that “Mr. PM, you visited our country in June and there are many of us who wished you would have stayed and taken over leadership of our country”.

This is the first time in history that any head of state would have received such a compliment and it is not easy to come by, and that too, for a developing country! This speaks volumes of how much the world believes in your exemplary leadership and seeks your guidance as a Vishwa Guru! I have always said that you have brought a lot of trust and respect to our country in the short span that you have been at the helm, and I am sure, what we have seen till now, is just 10 per cent of what you can do, and that you will totally transform the country over the next 10 years.

The earlier governments kept singing the slogan of ‘Garibi Hatao’ for decades, but, actually, they neither had the will nor the vision to do so. You have clearly shown that your focus is clear and you have clearly articulated the path to Garibi Hatao by your vision to provide water, electricity, house (with toilet) and access to every Indian by 2022. Moreover, the last budget set the direction for empowered citizens and developed India by focusing on rural development, agriculture and infrastructure. Rather than promising to people, you have decided to work hard and deliver, and this had been missing in the country and because of which, the people have lost confidence in politics and politicians both. You have a big responsibility of not just running the country as our most revered Prime Minister but a bigger goal to bring back the trust in politics and politicians

We have recently seen that you stand for your principles. Demonetization and the surgical strikes have proven that you will not hesitate to take tough decisions in the interest of the poor and to safeguard the nation. A few in the opposition have talked against demonetization. Post demonetization, we are clear about where the money is! Else, the so called world class economists talked about double digit growth and fooled us for years without even knowing how much money was in the system and where! Now other countries are considering to implement demonetization.

While you have initiated some big changes and more are likely to follow post the budget and the assembly elections, it would be pertinent here to state that the biggest drag on Rajiv Gandhi and Dr. Manmohan Singh Government was the same bureaucracy that we have inherited and which failed them, and it will fail this government as well if we don’t get rid of this imperial legacy – bureaucracy. We are beholden to bureaucracy as if, without them, the government cannot function, but the history proves that bureaucracy has ensured a status quo for this nation and worked on the principle of ‘I, me and myself’. Actually, the current bureaucratic set up is a bottleneck for fostering innovation and enterprise.

Let me quote;

“Rajiv wanted to revolutionize the bureaucracy and make things more efficient”. –Mark Tully in an interview

“You have sought a change in the manner in which this country is run and reform of administration to improve the quality of services will be our immediate priority”. Dr. Manmohan Singh, June 2004

Some of these leaders identified the real problem in India for implementing reforms as the failure of the bureaucracy to implement, and which let them down. I have written about the need and the path to transform the bureaucracy.

Also, am submitting the following for your kind consideration;

* ACR system be changed to CPR (Comprehensive Performance Review, wherein, 50 % of the appraisal depends on the individual performance, 25 % on the department’s / Ministry’s performance and 25% on the overall government’s performance).

* All posts, starting with the Joint Secretary, to be on a 5-year contract, based on annual comprehensive performance review, linked to implementation of the budget announcements and yearly plans. No bureaucrat be appointed as Secretary who has less than a year to retire & a bureaucrat at the level of Secretary have a fixed tenure based on yearly comprehensive assessment

* Start the lateral entry and compare the performance of career bureaucrats and professionals inducted in the government

* Sack the non-performing secretaries to send a strong message.

* This reform cannot be left to bureaucrats, as they will never let it happen. Also, if this is not done, it will be the biggest setback to the Modi Administration and will cost dearly.

In the USA, key officials come with the incoming President and are aligned to his vision. Also, the USA, U.K. and New Zealand governments have transformed bureaucracy to make their nations innovative and growth oriented.

Jairam Ramesh was bang on when he said, ‘the responsibility for bringing in reforms and change cannot be outsourced to bureaucrats and technocrats, as reforms, in essence, is a political enterprise”.
In the past, the political leadership could never deliver on getting rid of bureaucracy, despite the identification of the problem and only made statements from time to time to reform the bureaucracy. We are hopeful that, with a leader like Modi at the helm, we can now see this major reform becoming a reality, which will unlock the true potential of every Indian, and if this happens, in 2019, you can plan the mission of 400 plus for Lok Sabha.

Rajendra Pratap Gupta

Disclaimer: The views expressed are based on facts and experience and personal

Bureaucracy Mukt Bharat

Time to change ?

http://blogs.economictimes.indiatimes.com/et-commentary/steel-frame-of-bureaucracy-is-an-obstacle-to-development-its-time-to-rehaul-it/

Last year at the Economic Times Global Business Summit, finance minister Arun Jaitley had said that “the creeping acquisition of Rajya Sabha is on”. The thumping victory in Assam and an increased vote share across states show that the BJP government at the Centre is marching towards its goal. Also, the party seems closer to the goal of ‘Congress-Mukt Bharat’ after the latest assembly polls.

However, these results need introspection from all political parties. While the results have led to comments from party veterans like Digvijaya Singh’s observation that Congress needs “a major surgery” and Satyavrat Chaturvedi’s similar prognosis involving “a cardiac surgery”, the Narendra Modi government needs to conduct an open heart surgery for a ‘Bureaucrat-Mukt Bharat’. In 2014, India had voted in Modi to spearhead radical change, end corruption, execute citizen-friendly policies and administration, provide development with jobs, and lower prices.

The prime minister started well by meeting the secretaries and not his ministers. But somehow, the bureaucracy, after a while, started ignoring the ministers, as they had direct access to the PMO. I know of a minister who lost his portfolio because the secretary of the department made repeated complaints against this honest man who took a tough stand on irregularities happening in the ministry. Finally, the bureaucrat succeeded in ousting the minister.

I had a meeting with an additional secretary in the presence of a Cabinet minister. We discussed a few programmes that could be implemented on a priority basis. The additional secretary had a problem for every solution we proposed. He provided reasons as to why a major programme could not be implemented. And when we provided a workable solution for each one of his ‘problems’, he finally agreed on a timeline — without ever delivering. During the meeting, he kept flaunting that he had just returned from a meeting at the PMO.

Dragging the Nation Down
Then there was a senior technocrat in a ministry whom I met last month. He immediately told me to send him an email and promised that he would get the job done. The email was forwarded to his junior for action only after nine days! And this, despite clear instructions from the Cabinet minister a few days before. Most bureaucrats don’t seem to be bothered with the job at hand.

When people single out politicians for corruption and non-performance, I beg to differ. The bureaucracy runs the government. If the bureaucrats did their jobs well without fear or favour, we would not have straggled so far behind China. We have been terribly let down by the bureaucracy. There are always exceptions, of course. But they are far and few between.

Bureaucracy has still not got out of the officer culture that they have been used to for about 60 years of Congress rule. The role and orientation of the civil services has to change. Bureaucrats need to give up their role of ‘administrators’ and work on becoming ‘developers’.

I keep hearing that bureaucrats are afraid of taking decisions due to the fear of being hauled up by the Comptroller and Auditor General (CAG), the Central Vigilance Commission (CVC) and the Central Bureau of Investigation. But aren’t these institutions also in the hands of their fellow officers? Why on earth are bureaucrats afraid of bureaucrats?

It is time for the officer to learn a few lessons from the armed forces. Soldiers join the army knowing well that while working for the country, they can lose their lives. The working conditions for soldiers are not as comfortable as that of bureaucrats and neither do most of their pay scales match those of bureaucrats. And, bureaucrats are also soldiers for development and they should not worry about action against if they discharge their duty impartially and without fear or favour.

If people don’t have the passion and commitment for the country, or if they join the civil services for a job that gives them only authority as an administrator — or only for a safe job with a good retirement plan — don’t join the administrative services. Modi has a grand vision and is a man of action. So, either the bureaucrats rally behind the prime minister’s vision and implement his government’s idea of India by focusing on development with passion. Or we get rid of them.

Goodbye to Bureaucrats
Union road transportation minister Nitin Gadkari has got rid of bureaucrats in his ministry in key positions while having achieved a lot in a ministry considered tough to handle. Could Gadkari’s prowess as a minister have anything to do with the fact that his private secretary and key members of staff are from outside the Indian Administrative Service (IAS)?

So, we need to get rid of the British Raj-era kind of bureaucracy and its officer culture. Otherwise, the bureaucracy will be the biggest bottleneck for implementing the vision of the Modi government with the country paying a price it cannot afford. Fortunately, the prime minister has three years left in his current tenure. So, the next goal for the government should be a ‘Bureaucrat-Mukt Bharat’.

The writer is a public policy expert

DISCLAIMER : Views expressed above are the author’s own.

Published in The Economic Times on 28th May, 2016