India can’t kick-start a virtuous cycle of domestic and foreign investment just by wishing it
Ravi Shanker Kapoor
The fundamental difference between gods and humans is that while the former just have to wish to cause anything, the latter have to act, and act in a particular fashion, to meet their aspirations. Economic Survey 2018-19 and Budget 2019-20, however, have ignored this simple fact.
The third verse of the Book of Genesis in the King James Bible says, “And God said, Let there be light: and there was light.” Similarly, when a Hindu god is pleased with a worshipper and wants to favour him, he just has to say “Tathastu,” and the worshipper is blessed.
But humans have to follow a certain path and adopt a specified procedure to achieve any desired result. The chief political executive of a country cannot hope his or her country to be prosperous like the United States or a west European nation – and persist with socialist policies, make sudden announcements, and introduce greater state intervention in the economy. Policy should be in tune with the targets that government sets for the economy.
So far, that has not been the case. Modi I was an essay in populism (whose benefits the ruling dispensation reaped in the recently held general poll). In its second edition, it is Modi II, a Modi I redux, not Modi 2.0. This is what Economic Survey 2018-19 and Budget 2019-20 suggest.
The Survey, prepared by chief economic adviser Krishnamurthy Subramanian, is skeptical about, if not contemptuous towards, what it calls the “traditional Anglo-Saxon view of the economy”. Call it New Economics, Hindu Economics, or Economics with Indian Characteristics, it looks like an excuse to avoid or circumvent reforms. In effect, it remains dirigisme, and dirigisme by any other name would be just as deleterious for the economy.
The defining feature of the line of thinking Economic Survey favours is ‘nudge’ – it calls for “nudge policies that lie between laissez faire and incentives”. In her maiden Budget, finance minister Nirmala Sitharaman has located herself as far from laissez faire as possible. Nothing else explains the almost complete lack of liberalising measures in the Budget. There is just a hint. “The government,” she said, “is proposing to streamline multiple labour laws into a set of four labour codes.” At best, then, it is work in progress.
Instead of privatising public sector banks to check a drain on the exchequer, boost lending, and thus galvanise the economy, the Budget proposes to further provide Rs 70,000 crore to them. “To further improve ease of living, they [PSBs] will leverage technology, offering online personal loans and doorstep banking, and enabling customers…”. We’ve been to this movie before.
The Budget shares with the Economic Survey the fascination for technology. The latter is also very upbeat about innovation – a mobile app for direct marketing by farmers, the use of big data, artificial intelligence, block chain technology, micro-irrigation, and so on.
Policy makers have failed to realise that nudge, technology, etc can be turbochargers, not engines; they can help the economy grow faster and create jobs, but not without the proper policy framework. The only proper policy framework is the one that is oriented around freedom, that lets a wealth creator – be it an industrialist or a farmer – do what they want to do so long as they don’t hurt others. Economic reforms are about shedding dirigisme and moving towards the freedom-oriented system.
Subramanian was unwilling to recommend this system; Sitharaman was reluctant to take even faltering steps towards it. Those who matter seem happy in their dreamscape which is dotted with evasions like nudge and technology; they see redemption in them; happiness persists.
But the truth is that while technology can help a person get a model-like physique, they still have to shift towards an appropriate lifestyle to reach there. A student can benefit from new educational tools, but he has to study nevertheless. An ambitious shopkeeper can take assistance of mobile apps, but he has to adopt a certain course of action to be successful. You can’t get something just by wishing it or uttering some words.
India can’t kick-start “the virtuous cycle of domestic and foreign investments” (Sitharaman) just by wishing it.
DISCLAIMER : Views expressed above are the author’s own.