Innovative sales can face-lift the economy

Bhanoji Rao

Reserve Bank Governor Bimal Jalan has given us a multi-pronged monetary package. If it were only reducing the cash reserve ratio (CRR), borrowing costs would have come in the way; but the bank rate has also been reduced and none can complain on any imbalance in the package.

There are critics of the new package, however. Criticism comes rather naturally in our vibrant democracy. By the way, our social studies teacher at grade eight in the early 1950s told us that we must always oppose anything the government proposes; otherwise, he felt that there was no way to ensure the smooth functioning of our democracy. If only he lived to see the opposition dynamism today, he would have probably said that things certainly “improved” since then, thanks to the growth of the number of political parties and intellectuals either part of or associated with them.

Not all criticism of the new monetary package is in fact justified. That is about all that a monetary policy can do. Yet, there are some genuine doubts on how far the package can deliver the real result it is expected to— providing momentum to the economy and hopefully hiking the growth rate. A strand of the argument runs like this: banks are already loaded with lots of funds; they have become increasingly risk averse; they invest in government paper; government spends in ways that can hardly trigger effective demand in an all round fashion; and so on.

To be sure, the economy is not in a full-scale recession. There is a good deal of investment going on in retail trade. One can see in many large and medium size towns the emergence of supermarkets with ambiance. The marts are also making efforts to be multi-product as well as product specific. Food outlets are growing and the variety is increasing. All sorts of consulting establishments are coming up. Re-construction is also on the upswing for those who care to see.
(As a digression, I wonder how and who captures such dynamics in our statistical data.) Things are happening and the economy is still on a positive slope. (I am not fully convinced that we need 100 per cent foreign private investment in retail trade unless we wish to have even more flooding of our markets with cheap goods from wherever.)

At the cost of some over-simplification, we can say that what we have is general excess capacity and the growth recession results from lack of growth in demand, most notably in the consumer durables and housing segments

At the cost of some over-simplification, we can say that what we have is general excess capacity and the growth recession is the result of lack of growth in demand, most notably in the consumer durables and housing segments of the economy. The housing market is dull in the case of small and large towns and even some of the metros. That in turn is causing a slack in demand for a whole host of consumer durables—furniture, fixtures, steel materials, consumer durables that go with new housing and so on.

The issue is how to link the monetary package with the sectors facing excess capacity. Innovative ideas are needed for stepping up sales of a wide range of consumer durables and for a substantial increase in housing investment. I came across a recent advertisement offering a television, fridge, washing machine and a mixer as a package at a relatively low price. Some one who is just establishing her separate home would like such an offer. Others who already have one or two of the advertised items may not wish to duplicate them and hence may not grab the offer. “Sale of the life time” and “grab all these at a low price” need not be the only innovations. For innovation, sky is the limit. Total innovation and innovation in many directions can help push demand, investment and growth rates. The following examples will clarify the point and all of them are in relation to the education sector.

* Scheme to sell computers to students and staff of academic institutions: Computer companies (Compaq, Dell, HCL etc.) could work with banks and educational institutions to give special packages with payments spread over one year. The opportunity can also be used to throw in the MS-Office package and instill the culture of not depending on pirated versions. Let many have the computers and one and all will go for the Internet and provide full life for the new phone lines that are coming up.

* University and college facilities air-conditioning scheme: The University Grants Commission should take this up. The government should provide exclusive funds for this and also annual grants which are earmarked exclusively for upkeep. Under the scheme, libraries, lecture theatres and staff offices should be air-conditioned. Books and journals now rotting with dust may be saved; staff and students may spend relatively more time in the library; students attend lectures in comfort; and staff may find it rewarding to be available during office hours. For once let us invest to improve the quality of life directly rather than spend on salary increases alone.

* Scheme to promote sales of books: Publishers of general as well as subject books could approach potential high segment consumers (for instance, those with credit cards) via mail order methods. The books ordered could be for school libraries of the consumer’s choice.

It is not difficult to think of similar examples in other sectors. One must note that excess capacity is a blessing and if only demand is stepped up, investment too will grow. It will be a great disservice to the RBI governor and his team if banks and businesses were to sit back with little innovation in investing and selling.

(The writer can be reached at bhanoji@vsnl.net)