The Independence Day celebration marked our 80th anniversary, which gives us time to look at what needs to be done in the coming 5 years or so. Starting virtually from scratch in 1947, the economy moved along with different kinds of ideology-driven policies. It was in 1991-92 that there was a push which made us go for economic reforms. This was both easy and difficult. Easy, because there was nothing to come in the way, as it was virtually starting from the beginning when it came to following liberalisation. It was tough because mindsets had to change, which is always a challenge. But we, as a nation, have done well.
Going forward, all reforms will have to be calibrated and will be incremental as the basic edifice has been set in place. There is some tweaking required in areas where we have seen big reforms in the last three decades or so. But there could be scope for some big-bang reforms too, which have to be taken on to bring about acceleration in growth.
Agriculture Needs Major Reforms
Agriculture is one area that needs major reforms. The challenge is that it is a state subject, and, hence, this means that there must be a strong partnership between the Centre and states to make this happen. This will also showcase federalism and its strengths if done. One may remember the farm laws that have been held back. These were progressive, as they sought to revolutionise the sector and make it more commercially orientated. India has the strength of being one of the largest or the top 5 producers of almost all agricultural crops. This needs to be leveraged by addressing the issues of productivity and marketing. This will mean bringing back the Green Revolution across all crops so that there is an increase in production.
The farm laws spoke about allowing farmers to sell in any marketplace, which should be explored and debated so that they get higher prices and can move up the value chain. They need to be incentivised to produce enhanced-quality crops, which is needed if agriculture is to be a major export category. Next is contract farming. It is necessary to save on time to ensure that agriculture becomes more commercial. Experience with contract farming has been good, especially where retail chains have created strong backend facilities. With the necessary safeguards, buy-in from states would be required on both these counts. The nation cannot always be dependent on the monsoon for the kharif crop.
Irrigation And Water Management
Related to this objective, the governments need to work towards improving irrigation across the country. The linking of rivers has been on the agenda for long and then forgotten. It is time to bring this idea back on the table and work towards channelling the water of perennial rivers like the Ganga towards the south so that a corridor is created for providing water to other states. Investments can be made jointly by all states concerned with the Centre.
The second area which needs serious reforms is in the education sector, as this is a major lacuna today when linking the youth with jobs. A positive outcome with the spread of e-commerce and construction activity is that several jobs have been created. However, this is in rather low-paying jobs which require neither education nor skill. While e-commerce as an industry is to thrive and grow, more jobs will surely be created. But this does not provide an income which is needed to drive consumption in future. This is why we need to get back to the basics and focus on skill development.
Education And Skill Development
Students need to be segregated based on their academic performance, as all cannot go ahead with higher studies. Focus on job-creating skills becomes essential, which can range from AI-related to the more modest—carpenter or tailor. Once students are put through these skills, they can be linked with the apprenticeship scheme of the government so that they are more industry-ready. In this context, it may be worthwhile to create such courses in universities, and, just like there are BA and BSc degrees, among others, there can be one for special skills called BSS. The courses can be designed to cover practical skills, with students taking on specialisation in their third year. This way there will be a perfect supply of skilled personnel for industry.
Making MSMEs More Independent
The third area, which is probably more challenging, is to make the MSMEs more independent and in a position to stand on their own. MSMEs have played an important role in terms of contribution to industrial growth and exports and, hence, to the GDP. Their numbers are staggeringly high, but they have had several challenges which, though being addressed, continue to remain. This is why all crises in the country, which can be a war of tariffs, affect them first, and the response is to provide relief normally through the credit channels. This kind of subsidisation is good but has come in the way of making these units work towards becoming more professional. This mindset has to change, and the subsidy should now be towards having these units become bigger so that they are able to compete globally. For this to happen, they need to become more professional and get away from the family or proprietorship approach, the form of structure they have followed so far.
These three areas should, hence, be the focal points for the government in terms of reforms because these will all be at the micro level where they are required. The approach so far has been more top-down at the macro level, which has been largely achieved where only incremental tweaks are required. Micro-level reforms would cover a larger canvas and bring about development in areas which really matter.
The author is Chief Economist, Bank of Baroda and author of ‘Corporate Quirks: The Darker Side of the Sun’. Views are personal.
