The government needed to announce large infrastructure investment, say a brand new, enhanced healthcare system, not just some wellness centres at the block level. If India were to build a healthcare system large enough to treat those likely to require hospitalisation when the next pandemic strikes, India can confront it without locking down.
Sorry, Indians are strong on imagination, but it is beyond even us to see, in these scattered measures and schemes announced by the government, the economic stimulus that will create the broadbased demand India needs to make its factories hum, fill the order books of its service industries, send them scouting for fresh office space and fresh talent, and create the prosperity that will yield jobs, income and tax revenue for the government. It even fails the task of providing immediate relief to the migrant workers, choosing, instead, to bicker over who is to blame for their plight as they traverse hundreds of exhausted kilometres on foot, are knocked over by passing vehicles, beaten up by policemen and converted into visual spectacle by the media and political ammunition by the Opposition.
Even before Covid struck, the investment rate, the ratio of gross fixed capital formation to total economic output, had been anaemic for several years on the trot. India needs to get out of its financial intermediation problem — the banks, stuck with bad loans and bankers, terrified of being accused of corruption, sit on bags of cash and refuse to lend — and complete the swathes of infrastructure and construction projects that have either got stalled or turned insolvent because of missing liquidity — and raise the investment rate above 30%.
For that, the government needed to announce large infrastructure investment, say a brand new, enhanced healthcare system, not just some wellness centres at the block level. If India were to build a healthcare system large enough to treat those likely to require hospitalisation when the next pandemic strikes, India can confront it without locking down.
The government could think of building a new town, call it Taj or Mukut, either term means crown, the English term for corona, besides completion of the stalled real estate, road and power projects across India, via a state-owned special purpose vehicle, say a subsidiary of National Investment and Infrastructure Fund, buying out their debt and converting it into majority equity. Creating a vibrant bond market to finance large, long-gestation projects is another priority.
The government needed to announce imaginative schemes to tap surplus global capital scouring the world for assured positive rates of return, confronted as it is with negative or near zero yields on government bonds in much of its home markets.
It needed to overhaul domestic incentives that today give industry a handsome return on investment in the mere act of financing a project, even before ground has been broken for physical investment, inflate, in the process, project costs and make Indian industry non-competitive by virtue of over-capitalisation alone. It needed to strengthen accounting and corporate governance standards and contract enforcement, so that global capital has the assurance that the money they put into the country will generate returns and the returns will be shared with the providers of capital.
The government says it wants FDI, but converts the Indian am of the global telecom giant Vodafone into a scarecrow that will warn off would-be foreign investors. It boasts of the investment the likes of Walmart and Amazon have made in India, but makes it hard for these companies to do business by chopping and changing the rules they have to follow.
Yes, there are some decent, workable bits in the package of schemes and measures announced by the government. Public housing for rental accommodation is a good move, drawing on the experience of Hong Kong and Singapore, besides of old-world towns like London. Housing for all in a nation of young, footloose manpower cannot mean individual ownership, but availability of affordable, decent accommodation anywhere, for which availability of urban land has to be increased, good public transport infrastructure baked into town design, and then made as far redundant as possible through mixed land use that will allow residential complexes to sit next to work places without either harming the integrity of the other.
If half of India is to become urban over the next 15-20 years, as it must, that would mean an addition to the urban population of 20-25 crore people. They cannot crowd into the existing towns without making them into unlivable hellholes of slums, filth and crime. Additional urban space of something like 20,000 sq km will need to be built to accommodate these drivers of modern prosperity. This is the importance of Mukut. And this is why Andhra’s chief minister Jagan Reddy is committing a crime against India by killing the Amaravati town project, with its scheme of voluntary release of farm land for building the new town in return for a share of the surrendered land in the built-up city when it is ready.
Some of the proposed reforms are sound. And some of the promised money is likely to be spent and benefit the people. But there is not a large supply of these bits.
But who can repress a cry of pure joy at the sky being removed as the limit for Indian industry: outer space and inter-galactical travel have been opened up for them. What’s wrong, you might ask — Elon Musk and Jeff Bezos figure in NASA’s next moon mission. The difference is that Indian industry tries to palm off marketing research as R&D expenditure to claim tax deductions, spends next to nothing on actual research, files nary a patent and cannot see the moon, leave alone the stars, distracted as they are by low-hanging fruit whenever they make a feeble attempt to lift their eyes from the fast buck they chase.
India spends 0.8% of its GDP on R&D, most of it by the government, and deploys 156 per million inhabitants in research. South Korea spends 4.3% of its GDP on R&D, most of it comes from business, and deploys 6,826 people per million in research. The figures for China are 2% of GDP, the bulk of it by its industry, and 1,089 per million. For long-term competitive advantage, this is where the government needs to act.
In bioinformatics, synthetic biology, robotics, material sciences and nanotechnology, artificial intelligence and data analytics, quantum computing and quantum communications, photonic chips, in the next generation communications infrastructure — the areas that will determine future competitiveness and have a bearing on effective preparation for the next pandemic — India needs new capacity. The Indian private sector is too timid to go where few men have gone before, if you discount watching Star Trek.
The government needs to think big, think bold and act decisively. Instead, its intent is to manage the discourse. It is not even transparent on how much of the expenditure would come from the fisc. There is still time to do the right thing.
Views are personal