Pratim Ranjan Bose
Reading Economic Survey became
a pleasure these days - a marked difference from the past, when it was all
about numbers and less fun. The change is in tune with the shift in focus of
the economy from the control-era theme of managing demand, to fueling aspirations
so as to ensure wealth creation.
But the job of Survey remaining
same, i.e to set the tone of policy making in the future. It is from this
perspective, the Economic Survey of 2020 has identified key areas, where the
finance minister Nirmala Sitharaman should focus while presenting the annual Budget.
Ease
of doing business: All studies will show strong
linkage between entrepreneurship and growth. All studies might also show India
holds a negative view to business. Survey
pointed out that it takes two and a half times more approvals from Delhi police
to open a restaurant than acquiring a gun. You need more than two weeks to open
a company in India as against half a day in New Zealand.
This is not the full
picture though trying opening a company and you may have to wait for months
even to get a trade license from the local body. And, once you open a company, you
are at the mercy of host of tax and legal consultants. The average payout of a small
service sector firm only to comply the legal provisions is no less than Rs 30,000-50,000.
Then there is 30 per cent tax.
Who can take entrepreneurship in this
environment? Obviously the one with a fat money bag and connections or the so-called
unorganized sector. So-called because a
god part of them earn legitimacy by paying hafta to police and local political bosses.
The economy losses and common people concentrate in getting jobs. The biggest
sufferer in the process is innovation.
Credit penetration: With recapitalization and ongoing
restructuring, the liquidity has improved substantially in recent months. Expectedly, the trend will continue in the foreseeable future. But will it benefit
business? Yes, but mostly the big business.
The interest rate in micro-finance
sector, provided both by banks and NBFC-MFIs ranges from 19 per cent to 23 per
cent. Micro-finance serves the all
important rural economy, which is key to consumption growth.
The Survey pointed out
that Indian banking sector is operating at a sub-optimal scale, much below its
peers, in terms of credit penetration (credit flow to private sector as percentage
of GDP vis-à-vis per-capita GDP).
Efficient Logistics: In India manufacturing is limited to
only half a dozen States, and for reason. The price of coal increases by nearly
three times of the pit head price to cover a distance of 1000-1500 km, courtesy
poor logistics. Overall India spends no less than 14 per cent of GDP on
logistics. Apart from the freight tariff what hurts is the time of travel. Is
there any reason why trucks in India would cover only 300 Km a day or rail freight
would move at 25 km a day? Survey points out that imports reach faster to the
destination than the exports from India.
Employment:
Any economy in the world needs jobs, with 130 crore people India needs
that even more. As per projection we will cross China in population in next two
years and the population is getting younger. But we are simply failing to
create gainful employment. Having spent lakhs in English medium schools and
private colleges, average urban youth lands up with a sales job that fetches
him maximum Rs 20000.
How to rectify this
scene? Survey asks for going whole hogged for assembling, as China did in its
growing years. But, only assembling cannot support this huge young population, India
must pave way for creation of right skills and encourage people to take up entrepreneurship.
Free agri-economy: From a food deficit economy to a food surplus
economy, India covered a long distance. What didn’t change though is political
interventions in agri-economy. On the flip-side it created strong political
cartels which work on such interventions. It is time we take a policy decision
to stop acting whenever the price of onion moves. Because this spoils the
prospect for investment in storage. Like stock market, we may put circuit
breakers in each commodity at the start of the season. Government can intervene
once the pre-set ceiling is broken but not at its whims and fancy and not to
improve its poll prospects.
