An agenda for India's new coalition government: Wide-ranging reforms are the need of the hour

Without these reforms, the laudable objective of “India a Developed Nation by 2047” may remain a distant dream.

G.N.Bajpai Jun 17, 2024
India's new coalition government (Photo: Twitter)

The results of the Indian parliamentary elections have unfolded quite a surprise. The economic pain, deficiency of employment opportunities, and threat to the democratic order, with the narrative of amending the constitution inter alia seem to have influenced the results significantly, particularly in rural areas. The Indian voters do care about democracy in addition to economic well-being. This is a positive development.

The new government, now a coalition, under the leadership of Narendra Modi, has been sworn in. The agenda of the new government is being watched carefully.

I recall my pilgrimage to the national memorial of the three-storeyed Cellular Jail in the Andaman and Nicobar Islands, the site of inhumane atrocities heaped on India’s freedom fighters by the British. One inscription of the inmates written to his fellow villagers as he awaited execution, reads: “… I have done my part and now it is your turn.” It is our duty to work together to emancipate India from economic deprivation and misery, and usher in an era of prosperity.

The new five-year term of Modi 3.0, as this tenure has come to be called, should not lose sight of key messages like seeing India as a fully developed society and in fighting corruption at all levels. The message of the freedom fighters would ring true only if India’s development reaches the last mile, the weakest and the poorest. This is possible in material terms only with a minimum annual average real GDP growth rate of 7 per cemt plus for the next two decades, a task easier said than done. In traditional literature, GDP growth is predominantly influenced by the availability and productivity of three factors of production - land, labour, and capital. The current geopolitical backdrop and broader global economic environs necessitate coordinated mobilisation, sagacious deployment and optimal sweating of all three factors.

Need for wide-ranging reforms

How do we achieve that? Wide-ranging reforms are called for in all three areas. Whereas the capital efficiency of India compares favourably with most countries, the productivity of labour lags considerably. The International Labour Organisation (ILO) in the matter of labour efficiency, ranked India at 126 in 2022, based on 2017 Purchasing Power Parity (PPP).

The acquisition of land post the related legislation (The Land Acquisition Act, 2013) passed during the Manmohan Singh government requires compulsory approval of 80 per cent of the community for use by private companies and Public Private Partnerships (PPP). Along with the right to fair compensation, the purchase of land has become impassable and uneconomic. The availability of land has thus become a serious impediment to infrastructure building and industrialisation. Yet, land acquisition has often been negative, as witnessed in the manner in which parts of or whole shops and houses were reportedly demolished in Ayodhya. This is believed to have contributed to the BJP losing the Faizabad seat in this election. We will need a more humane way of acquiring land, with greater governance in terms of standards, fairness, rights of people and a commitment to return the value to the local area.

Agriculture sector efficiency is another drag in stepping up the GDP growth rate. If the agriculture sector had contributed in tandem with other sectors like manufacturing and construction, the 2024 GDP growth rate would have exceeded 10 per cent. The rural masses depend on agricultural income, in the absence of which economic gains bypass them even in the high GDP growth era.

Need to build community consensus

Needless to say, land, labour and agriculture are emotive issues. In the vibrant multiparty democracy of India, building political consensus on emotive issues is a prolonged battle that requires inexhaustible patience and accommodation of a rainbow of interests and ideas. It is understood that when the Nagaland government under the leadership of R.S. Pandey, the then chief secretary, with full blessings of the chief minister, introduced ‘communitisation’ of health, education and power, it waded through an arduous seven steps of architecting concurrence amongst various stakeholders ranging from leaders of communities, political parties, media to authorities in the institutional framework. The endeavour was recognised even by the United Nations.

In 2017, the government tried to build (which several governments in the past could not) a national consensus on implementing the Unified Tax Regime - GST through a prolonged, rigorous exercise. The then finance secretary had in a business dinner revealed to a group of six at his table how the game of understanding and patience was played by the national leadership. Yet, we must recognise that GST was and remains a bone of contention.

The national intent of ‘Developed India by 2047’ should be like a ‘Mahaygya’ of economic emancipation. The message of freedom fighters and the economic well-being of the voters should inspire leaders of all political colours to cooperate wholeheartedly in building consensus leaving narrow sectarian interests behind.

In the matter of ease of doing business, the real thorn is the enforcement of the contract. It takes an average of 1,445 days to enforce a contract and costs over 31.3 per cent of the claim value leaving people tired of judicial inefficacies. The institution of the judiciary calls for wide-ranging reforms. Further, the delay will culminate in a loss of faith in the system itself. Here too consensus for transformation must be built amongst various stakeholders viz. judges, lawyers, politicians and civic society.

Raising administrative efficiency

There is growing concern about rising economic inequality. In India, inequality is of two kinds: (a) between rich and poor and (b) between states. As per the ‘Income & Wealth Inequality Report in India 2024’ by Nitin Kumar Bharti, Lucas Chancel, Thomas Piketty and Anmol Somanchi inequality declined post-independence until the early 1980s but has skyrocketed since 2000.  High GDP growth rates did not bring cheer to the poor. The economic disparities emanate from a lack of ‘equal opportunity’. The Constitution of India in its preamble guarantees among other things ‘equality of status and of opportunities’. The civic administration charged with the responsibility of execution of policies operates at a minimum efficiency level, which spells frustration, especially amongst the deprived. The steel frame designed to run a subjugated nation must undergo comprehensive reengineering.

Further, there is a sharp gap in per capita NSDP (Net State Domestic Product) among States. In 2022-23 NSDP per capita of Goa on nominal prices was Rs.5,32,854 and that of Bihar Rs.54,111. UP and Odisha were Rs.83,664 and Rs.1,45,202 respectively. Even between Andhra Pradesh and Telangana, which were one state not long ago, there is a gap of over Rs. 90,000. This disparity, which is the consequence of lopsided economic development must be remedied. The allocation of additional resources, building trust amongst investors and modelling execution capabilities should be in sharp focus.

Without these reforms, the laudable objective of “India a Developed Nation by 2047” may remain a distant dream.

The people of India are waiting for the moves of the new government. Disappointment may transform the pain of casting votes in the scorching heat into uncontrollable anguish. Elected MPs and legislators owe it to their voters to improve the economic condition of the ordinary citizen.

(The writer is a former chairman of the Securities and Exchange Board of India and Life Insurance Corporation. Views are personal. By special arrangement with The Billion Press)

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