Rupee is falling. Growth rate is falling. Economy is nervous and it is complete U turn from a couple of years ago when President Obama visited India. This is when there is no change of guard at the helm. Then what has gone wrong? A peek little deeper will tell us that barring exceptions of the regime of Rajiv Gandhi and Narasimha Rao, no government in India has really created stage for serious economic growth. The governments have simply been a harvester and not a cultivator. If going is good for reasons they never brought about, the government of the day is there to simply take credit. Likewise, there are thousand reasons to blame like now if the going is not good incl sad reminder of Shastri’s call for weekly fast as a means of saving food grains when PC calls on people to avoid buying gold. So, underlying character of gross incompetence of the policy makers has not changed at all. Sad for Indians who can’t even hope for colonial days to come back.
If simplicity is not obsolete yet, CAD is simply due to India’s failure to export at least as much as it imports. We also know that imports are inelastic as they basically comprise of petroleum, weapons, aircrafts and gold. India imports bulk of its fuel requirement which government says cannot help. Weapons need to be imported for sacred cow called defence, and aircrafts are required for growth of aviation sector. Gold likewise is must for Indians for reasons needless to discuss. Then what to do?
Our great policy makers don’t know but I wonder why can’t answer be found in a series of simple steps in time bound way like:
1) Exploration for petroleum and gas on war footing for reducing imports - (I understand lot of reserves on western border are unexplored for over 50 years while Pakistan is reaping full benefits just a few kilometers away. Surely, experts/scientists will know that lot of reserves must be lying within Indian territory waiting to be explored.)
2) Change in government policy towards exploration – currently Indian policy is consistently spreading red carpet to invite foreign investor and once he is in, to sharpen our cutlery for a feast. Enron, Cairn etc are live examples. Govt must grow from its mean mentality and honour the commitments & incentives offered in spirit and not allow proxies like NTPC to hound explorers like Cairn or MSEB to hound Enron once they are in. Killing chicken for all the golden eggs now rather than a golden egg a day did not succeed then, and will not succeed now. Likewise, sell out to Reliance for maximizing their profits by increase in gas price will hurt the economy but no argument against corruption which is simply inevitable as God gift to us.
3) Serious policy incentive for electric and hybrid cars & to disincentives petrol/diesel vehicles– a serious time bound programme to boost production of electric and hybrid vehicles can seriously reduce our demand for petroleum products. Technology is already available. Only tariff policy and economies of scale need to be managed.
4) Serious boost to railway network for freight movement to minimize road transport except for local movement – Railway network must be increased many folds to obviate national road movement which will cut demand for petroleum. Dedicated freight tracks can be built across the country and even privatized goods trains can be allowed. Even 100% FDI can be allowed for funding such investment which will pay for itself out of revenues. Aim should be to minimize road transport except for local freight.
5) 100%FDI in nuclear power projects to boost power production – Since massive expansion of railways will need massive power generation, 100% FDI can be allowed into nuclear power plants and government can invite massive installation of capacity to deal with entire demand within 5 years across the country. FDI will take care of entire investment and government can simply invest in Grid to handle the power. Revenue from sale of electricity will pay for such investments automatically.
6) Allow 100% FDI in weapons sector – and insist our conventional weapon suppliers to move their factories in India so that it generates employment, taxes and exports besides cutting down imports. India being one of the largest importers of weapons, is easily in a position to insist on such factories being shifted to India. As regards 100% FDI, it is still better than buying weapons from 100% foreign owned foreign company.
7) Bring Boeing/Airbus factories in India with 100% FDI – for similar reasons, they can be insisted to set up factories in India and we reduce imports, generate exports and get higher GDP growth as well.
8) Be a member of Nuclear Supplier Group by becoming major producer of equipments/parts – It is really no big deal to encourage Indian companies to seek joint ventures and even permit 100% FDI by bringing nuclear equipment suppliers to set up factories in India. Our immediate plans to set up large number of nuclear power plants (conventional fuel plants are out of question when existing plants are running at 50% capacity for want of fuel), can be a decisive factor in brining such investment in India which will make India an exporter of such items and automatically get it membership of NSG. This will also deal with our long term defence strategies.
9) Open mining sector and oil exploration sector – in the guise of uncertainty of yields, private explorers demand hefty margins/premiums for the findings like RIL/BP. Govt must explore possibilities of setting up funds for cost of exploration, and separate the same from production which can again be subcontracted on cost of extraction basis. Govt to pay for all cost of exploration from a central fund. Govt to pay cost of extraction on per ton basis to lowest bidder for each well/mine and apportion a share of exploration cost like a central duty, and concentrate on trading of these vital natural resources.
10) Boost dairy sector with 100% FDI and aim for India to be major milk exporter – Indian milk yield is about 800 ltrs/cattle whereas the same is about 4500 ltrs in China and 8500 ltrs in USA. We can simply allow 100% FDI and invite investments from Israel, USA, Newzealand etc countries, appoint an export foreigner as State Minister of Agriculture (Dairy) to ensure that our yields improve to competitive level in time bound manner. This way, India can expect to become a major milk and milk products exporter in short time.
11) Agricultural reforms for competitive farm yields for boosting exports – Likewise, Indian farm yields are about a third of world averages and about one fifth of world’s best in most crops. Similar efforts to appoint a foreign export as State Minister of Agriculture (Farms) to ensure that yields improve in time bound manner can help India become a major exporter of food grains, oil seeds, oils etc. Meanwhile, government of India can concentrate on massive expansion of irrigation facilities.
12) And so on.
The point is very simple. Concentrate on ways of producing domestically everything that we import and become an exporter instead. This is how a businessman will handle his business problems. Can’t see why country cannot follow same methodology.