The other day we had a spirited discussion in one of my WhatsApp group. The discussion was around the latest Indian Budget. The most simple way to categorize the discussion would be to say that the “Glass is half full” from the optimistic side and the “Glass is half empty” from the pessimistic side. But this is a very superficial observation.
The points we need to introspect on are varied and on the backdrop of the past 5 decades of budgets in India. Starting with a fully socialist approach of a centrally controlled economy with 5 year plans and a planning commission setting overarching targets and deciding how to utilize resources. People who lived through those days recollect booking a scooter and waiting for years to take delivery. Phone connections took 15 years to materialize. Black and White television sets took years to arrive. Belatedly, there as a realization that this approach was not working.
A series of liberalizing budgets unshackled the private sector and made a serious dent on the waitlist for most items. At the same time, a sector un-noticed by the government started to develop. This was the Information technology sector. Without any ministry in charge for this sector, the companies were booming. Then the government noticed and started administering this sector by introducing Export processing zones. In the early 1990’s I recollect working in SEEPZ where the inside of the complex was pristine but the moment you stepped out of the gate, it was a road filled with pot holes and general chaos. I used to wonder what our foreign clients thought about while they took a ride from the airport to SEEPZ. Cant we manage to clean at-least this stretch of the street if not for the common man, but at-least for the high value clients who are contemplating putting their trust in us and outsourcing their operations? However, despite poor infrastructure the industry continued to grow. The government in all those years withheld infrastructure investments. At the same time, there was a short-lived bid from the government to introduce reservation in the private sector. Fortunately, those days are behind us.
One of the common feature of budgets post the socialism period was populism. The way it manifested was in terms of loan melas. The budget allocated huge sums and prioritized the public sector banks to lend to the poor. I recollect that a late uncle of mine who was a branch manager used to try his best to not be at his desk because he would get calls to allocate loans. These requests would never be on paper. The reality of the loan mela was that in many cases, builders and big employers bought migrant workers to bank and loan was granted to them. Fast forward 5 years, these migrant workers could not be traced and the loans were written off. I am not sure how much of this is true, but what I heard was that only half the loan amount was going to the migrant workers.
After a few runs of this approach, a more direct approach seemed to have found favor. This was to get public sector banks to grant loans to companies promoted by people with connections. The idea being that the business would go belly up later and the loans will be written off as non performing assets. You can see evidence of this in various news paper reports.
Meanwhile, at the same time, if the common man required any service out of the government, he had to run from pillar to post, get forms attested in triplicate and by a notary. After all that he would still not be sure when the service will be delivered. There was no clear service level agreement. Case in point is application for a passport or for a gas cylinder. Survivors of ex-servicemen had to go through a similar gruelling routine to get survivor pension benefits. Given the high level of illiteracy and lack of clarity of government policies and procedures, corruption was quite widespread. In fact, many felt that thanks to corruption, at least they can have some resolution. The feeling was that instead of government servants being beholden to the citizen, the citizen was supposed to be beholden to the government servant.
We now have much choice in the political discourse. The current budget cannot and will not be the answer to everyone’s prayers. The budget cannot accomplish every thing for everyone at once. However when we look at structural reforms in conjunction with budget provisions as well as improved efficiency in government services, it lends great hope.
Having endured 50 years of the same medicine, it is time to try something new and to give it a chance to percolate through the system and see if something good comes out of it. Impatience at this stage would not help because there is no other alternative in sight. Keep in mind that the country is pretty big and the problems are varied. It will take time to fix things that took 50 years to take root. It will take time for people to get used to self-attesting their documents (being trusted by the government) and getting used to the online government that aims to reduce the influence of the middlemen.
The transition of the economy from a developing economy to a developed one will be characterized by greater emphasis on the service sector. The demographics are favorable for the next 25 years as major portion of the population is in the working age group and ready to work in the emerging service sector as educated citizens. This will expand the middle class. Greater tax code simplification along with technology driven implementation will lead to greater tax compliance. The future will see social security payments to the poorer sections of the society because capital will seek efficiency and the days of high interest fixed deposits will be over. An educated and expanded middle class will demand performance from the government on core issues and will not be side tracked by the shenanigans of politicians who divide the votes on non-issues such as caste, religion and regional pride.
It is time to introspect based on your own experiences. Set aside any bias and look at where we were and where we are going. If it can be any better, contribute by getting active in the political process. Freely share your views and most importantly be reasonable and pragmatic.