The Press Information Bureau is working overtime, with the handouts from different central ministries on the achievements of the UPA government?s one year in office. The media is revving up for the deluge of comments and analysis of its performance. And the majority of comments, so far, have had the tenor of ?quite good, but…?
Certainly, there is good news, mostly from the economy. Exports, at $80 billion, grew by 24.4% against 21.3% last year. Imports went up to $106 billion, marking a growth of 35.6%, over 30% in the previous year. Non-oil imports grew 33.6%, over 31.7%, impressive by any standards. FDI caps have been relaxed in several sectors, including real estate and retail. The manufacturing sector grew by 8.3% and non-food credit has increased substantively. Most important, many more airlines are flying to many more destinations.
The most impressive achievement was the implementation of Vat and the clear statement about the abolition of CST within two years. Once initial glitches are over, this would streamline trade within the country, providing efficiency and transparency in the value chain.
Significant global opportunities have opened. There is a possibility of partnership with the US in strategic areas; with China, of further trade liberalisation; and with Japan, an increased interest in infrastructure investment. There are significant gains in the diplomatic sphere as well, and India has become an important destination for serious business travelers.
Altogether, a performance that is certainly creditworthy. Why then, the ?buts??
? Vat, FDI cap relaxation and new global strategic partnerships are pluses ? Trade policy is a missed opportunity, infrastructure lags; and what of CMP? ? Issues in administration and implementation are crucial, as we move forward |
First, the trade deficit, at $26.5 billion, is nearly twice that a year ago. Imports have grown much faster than exports. Going forward, the trade deficit will be driven by relative performance of non-oil exports and global oil price behaviour. This is a matter of concern, especially as there is no indication that the surge in FDI investments are anywhere close to China?s, and that FII inflows are accounting for the bulk of the accretion in external resources.
The foreign trade policy could have addressed these issues, but has missed an opportunity by focusing on processes, rather than fundamental strategy changes. Interestingly, in the first quarter after the lifting of the textile quotas in January 2005, China shipped out a whopping 800% increase in garments to the US and Europe, to the extent that anti-dumping measures are being contemplated. This reveals the level of planning, preparedness and anticipatory production in thousands of locally managed factories across that country. The increases in textile exports from India over the same period pale into insignificance by comparison. Certainly, there has been lack of vision and strategy. DEPB lingers on, ad hoc subsidies continue, SEZ legislation is still to be completed, export credit remains inadequate and customs procedures highly cumbersome.
There is worry over infrastructure, as well. Why is there no clear indication when the National Highways four-laning programme, initiated by the previous government, would be completed? It should have been ready now and new roads taken up. Apart from privatisation of container-handling in a couple of ports, there has been little action and the waiting lines at ports are horrendous. As also the lines at airports, and indeed, in the sky, for landing. Output from mining has grown 4% this year, as against 10% the previous year and growth in power is 5.3%, over last year?s 12.9%. And capital goods production, a signal for investment, grew only 11.8% this year, against 27.8%. In short, infrastructure growth, instead of accelerating, is actually slowing. Everyone, on every occasion, talks about the importance of infrastructure development, but performance has been far below exhortations.
Third, the worry over fiscal deficit continues. Tax realisation was less than revised estimates by about Rs 1,500 crore. Against the budgeted figures, the shortfall exceeds Rs 12,000 crore. Interestingly, there are no official figures for the fiscal deficit last year as yet. The tax to GDP ratio has not increased and it is unlikely that this year?s targets will be met.
Energy is the next cause for anxiety. It is heartening to see the initiatives being taken by the petroleum minister for equity oil overseas. Initiatives in coal, thermal power and, indeed, nuclear power, are yet to emerge. The Maharashtra crisis demonstrated the helplessness of governance?the inability to implement and deliver. Energy policy, more than ever before, requires holistic strategies.
And finally, where, in all this, is the CMP? Has a non-lapsable fund for the education cess been created? School teachers in position? Mid-day meals started? Irrigation projects announced with fanfare under implementation? Is the second green revolution in agriculture sprouting? The Employment Guarantee Act in position? Or is it that, after one year, all this is no longer important? It is important to know.
As we move forward, it is clear that issues of administration and implementation are becoming critical. The Prime Minister has rightly focused on this, but the solution, of administrative reforms, would once again be buried in red tape. It is perhaps time to look at a different paradigm, to move away from Curzon, to a different way of doing business. It has been done before. During the ?60s and ?70s, several people, in the steel power and coal industries, in railways and irrigation, built the backbone of India?s infrastructure. One of these, Mr V Krishnamurthy, is still at the helm of affairs, evaluating the competitiveness of Indian industry. These people exist and it is time to find a set of them within the current human resources of government, to give them tasks, authority and responsibility. Per-haps things will start happening then.
The writer is a former finance secretary and economic advisor to the PM
