Good economics can make good politics

REBOOT

A realisation that Government needs private capital

The opposition might be carping that the petro product duty tweakingwill result in an additional burden on the aam aadmi and prove tostoke the inflationary spike, but the overarching theme of PranabMukherjee's well articulated and well drafted speech remains the focuson private sector investment. This understanding that governmentspending alone cannot take a country with an acute capital, power andinfrastructure deficit on a higher growth trajectory is a seriousadmission of contemporary reality. A combination of stimuli packagesamounting to Rs 186,000 crore and enormous dollops of public spendingkept the economy alive and kicking. In fact, it stimulated demand tosuch an extent that several sectors like automobile, cement, steelreally began to hum.
However, what an aggressive borrowing programme of Rs 451,000 crore inthe first half of the financial year did was crowd out the privatesector from the credit market. A downer. But financial equilibriumbeing the other big operating credo in Pranab babu's budget has meantthat the market borrowings target has been curbed to Rs 345,000 crorefor the coming financial year. This clearly signifies a change inmindset. That it has dawned on the government that it needs to rope inthe private sector to be a partner in progress. So, from agricultureto storage and warehousing, from infrastructure to education, rural tourban development; it is now clear that the terms of engagement with avibrant private sector needs to be enlarged.

The new avenue for private funds in infrastructure through bondseligible for deductions is a step in this same direction. Anacceptance that it cannot do it on its own is by far the biggest gamechanger. If it also begins to slowly accept that it needs to get outof business, then the government will be leaner and more efficient. Itwill be able to focus on governance. So, with private sectorinvestment flowing back into the economy and consumption being given aleg up, a confluence of interests may just be the end product. Thisgovernment managed the economic downturn concerns adroitly, it has notbeen able to handle the inflation challenges effectively. By talkingup prices, our agriculture minister has time and again shown scantdisregard for people's aspirations.

Public delivery of food, oil and fertiliser has left a lot to bedesired in India, now the government has acknowledged that it hasfailed to strike the right note in its endeavour.

Furthermore,government realisation that it cannot plough a lonely furrow but needsto act merely as a catalyst is a great beginning at a crucial time inour economic mindset. It means that the last vestiges of economicsocialism may well be replaced by a modern approach to allow greaterprivate and foreign investment flows into areas where there is amassive chasm to bridge. A combination of private investment andpublic consumption is the only way forward. If we could also getgreater clarity on delivery schedules and outcomes on key governmentspending which comes with an inherent execution risk, theninfrastructural roll out will be that much more effective. Deliverables are vital, if we want better governance.

In the end, Pranab babu said that actions today will determine ourtomorrow. When a man like Pranab babu deeply moored in socialistideology begins to comprehend the demands of tomorrow, then it iseasier for new ideas and new reforms to bloom. Once again India standson the cusp of a public-private intent to ease our deficit problems.Speedy implementation is going to be the single biggest impedimentfrom here on.

(Afternoon Despatch & Courier)