There was a catchy acronym tooFORCE, standing for financial sector growth, openness to trade, rural-urban migration, capital formation, education and environment. If mass is large, a given force doesnt lead to large acceleration. In June 2008, there was another Goldman Sachs research report on India. This had a wish-list of 10 items for India to do. (1) Improve governance; (2) Improve educational achievements; (3) Increase quality and quantity of universities; (4) Control inflation; (5) Introduce a credible fiscal policy; (6) Liberalise financial markets; (7) Increase trade with neighbours; (8) Increase agricultural productivity; (9) Improve infrastructure; and (10) Improve environmental quality. These are indeed important heads. But I have three problems with such lists. First, is something like (10) that important We arent China, at least not yet. Second, items like (1), (4), (5), (6) and (7) are too vague and generic. What do they amount to in concrete terms Third, the problem is not with the goal, such as (2), (3) or (8), but on how to get there. Unless that is explained, we havent accomplished much. Consider the problem differently. With new inflation figures, speculation about early elections because of the nuclear deal should be dispelled.
However, there will be elections in 2009. UPAs sacred book for all policy is National Common Minimum Programme (NCMP). This is a vague mishmash. It is clear about what the government cannot do, but is sketchy about what the government should do, and how. Consequently, it is a confused motherhood pronouncement. Despite it being a political, rather than economic, document, it can be precise. And in 2009, the incoming government should do better. If you ask external agencies about what should be included in the laundry-list of the new NCMP, you will get items like Industrial Disputes Act, FDI in retail, privatisation of PSUs (also banks), liberalisation of insurance and pensions, lower tariffs, corporate farming, exchange rate convertibility. Without denigrating their importance, my list is completely different. (1) Be clear about what is a public good, warranting government-provisioning. My list is water (irrigation and drinking), power (generation and transmission), rural schools, primary health centres, rural roads, law and order and security. Given scarce government resources and possibilities of private-sector provisioning, nothing else needs inclusion. If transport connectivity improves, I am not even sure that rural schools and primary health centres belong. (2) Identify and subsidise the poor. This isnt that difficult.
For rural India, there is already a self-determined identification through National Rural Employment Guarantee (NREG). Why cant we use it to issue biometric identity cards From urban India, if one adds old people and women-headed households, the identification of genuinely poor will be complete. Notice this identification has to be individual or class-based, not collective (region, religion, caste). (3) Free private sector entry and introduce credible regulation. Access by the poor is taken care of through direct subsidies (education, health, road transport, food, fertilisers, petroleum products, power), not through State-provisioning. No State-provisioning is justified unless it is in the core public good list of (1). If State-provisioning remains, that should be based on competition, commercial considerations and hard budget constraints. If one accepts this core public good list and also recognises that almost everything remaining is a State subject, most Central ministries and departments (and centrally-sponsored schemes) can be scrapped and direct funding to local bodies ensured. (4) Reform the legal regime, primarily the criminal justice system (also the police) and subordinate legislation. We dont need anything other than these 4 points to catapult us into the 10%-plus league. Though the empire will strike back, may the force be with us.
The author is a noted economist