From India Today archives

Jan 19, 2009: What should be done to fight terror?

June 7, 2004: What can Mahmohan Do?

India is poised on the brink, of opportunity and opprobrium. Caught in the vortex
of a global slowdown that has derailed growth and terrorism in the neighbourhood,
India no longer has the luxury of navel-gazing.

The exigency is a fallout of wasted years. The unfinished agenda is replete with
competing compulsions. Success defined by commitment to act will launch India into
the next superpower orbit.

The threat of failure should not be hard to imagine, not in this neighbourhood.
Ergo, there is no room for fig leaves, delaying tactics or alibis. India is no
longer just any Third-World economy, it is a trillion-dollar entity getting notice
at global high tables.

India is poised on the brink, of opportunity and opprobriumIndia is poised on the

brink, of opportunity and opprobrium
An inadequate response, inability to decouple national interest from party politics
and sloth may just stall its migration to the First World. For too long, national
interest has been subservient to political interest. Circumstance precludes
hierarchy of choice. India must define and act in national interest.
Few nations in recent times have defined national interest better than China. Its
practice of geopolitics�be it managing its relationships with the US or dictators,
getting into Sri Lanka or dealing with the Taliban�is a subject for academic study.
But it didn�t get there without securing economic growth. And it is in how it
aligns the immediate with the long-term that merits study. The meltdown killed
demand and sucked out liquidity.

The crux of the matter is that the system has insulated itself from
accountabilityThe crux of the matter is that the system has insulated itself from
accountability
As most economies struggled to spur demand and find funds for investment, China
created a queue of investments�including power projects worth $6.5 billion�to kick-
start domestic demand. While banks and the Government in India debated the nuances
of lending and interest rates, Chinese banks lent $733 billion in just four months
of 2009, which is more than the total lending in 2008.
Thanks to the rush of liquidity, overnight rates crashed and cheaper credit pushed
up demand in retail and real estate. Exploiting low prices it is using its forex
reserves to stock up commodities to fuel future growth. Is it any surprise then
that China is looking at 8 per cent GDP growth for 2009?

India�s challenges are its opportunities. It could surprise the world. It has scale
in its billion-plus population. Its young working-age populace promises demographic
dividends; it has deficits of every kind which when bridged would deliver
consumption, incomes, growth and sustainable stature. Consider some translations of
challenges into opportunities.

Over 300 million Indians live below the poverty line. If they ate twice at a dollar
a day, India�s GDP would go up by $110 billion or Rs 5,50,000 crore. Agricultural
produce worth over Rs 60,000 crore rots every year because India has failed to set
up a supply chain system that can procure, store, process, transport and retail the
produce.

This requires opening up of the retail sector but politicians have successfully
used Wal-Mart to obfuscate the issue. It is tragic that reforms which will deliver
higher income to farmers, better prices to consumers and create jobs are being
blocked as being anti-people. The multiplier effect of opening up the retail supply
chain could add over $200 billion to the GDP when it gets off the ground.

The political class needs to walk its talk. It is not as if the political class is
unaware of the potential benefits but it just hasn�t found the commitment to get it
done. The world over there is a new growing concern about food security. While
India is still debating the merits of importing food, China, Korea, and the UAE are
buying or attempting to buy agricultural land in other countries to meet the food
demands of their populations.

Investment in infrastructure is pathetically low. By some stroke of serendipity,

India initiated two programmes for road connectivity that delivered growth�one
connecting rural roads and the other a nationwide highways project. While the rural
roads have managed to evade political interference, of the 32,939 km of highways,
barely a third of the target length has been completed. Take power generation.

India added 41,110 MW between 2002 and 2007, and plans to add 78,700 MW by 2012. If
it does manage to achieve its target, India would have added 1,19,800 MW in 10
years. To get a sense of the underachievement, consider this. Between 2002 and
2007, China added 3,50,000 MW and in 2007 itself, it added 1,00,000 MW.

It is not surprising that 62 years after Independence, four of 10 Indian households

don�t have access to power. The highways story isn�t very different. Having added
44,000 km of them since 2001, China now boasts of the second largest road network
after the US. Yes, you could ask if we have the money. Truth be told, funding isn�t
an issue at all. Commitment is.

The unfinished agenda is a long litany. In true Indian argumentative traditions,

there has been no dearth of studies or committees though to advise successive
regimes. The UPA had 55 committees within the first eight months of coming to
power, including some headed by the prime minister.

Expert view is that the issue was not money but implementation. Yet nothing has
changed, which isn�t surprising. The Administrative Reforms Commission headed by
Congressman Veerappa Moily has delivered 12 reports but nobody knows if any has
been implemented. The crux of the matter is that the system has insulated itself
from accountability. Between 2004 and 2009, the Government pumped Rs 1,25,000 crore
into education.

Has it made an impact? We don�t know. What we do know is that Myanmar has higher
literacy than India. In five years, the UPA spent Rs 1,93,715 crore on rural
development. It must have helped, but we will never know because the promise to
convert outlays into measurable outcomes was given a quiet burial.

Sloth afflicts every department. It is not just physical infrastructure or business

processes that have suffered. Quality of education is a serious problem and so is
lack of employment avenues. Yet, a pay review committee discovered that 25 per cent
of posts of teachers in Central universities and colleges are lying vacant. Take
counter-terror measures and basic law and order. India averages 142 policemen per
lakh populace when the UN standard is 222. Clearly, in a billion-plus populace, any
deficit�in this case eight lakh policemen�will show up as it has.

But neither state governments nor the Centre has found it necessary to address the
issue. This despite the fact that creation of these jobs and the need for them
aligned political and national interests perfectly. Or take the issue of national
identity cards which is a must for tackling terror. For over 10 years now different
governments have stalled the idea for clearly political reasons. The time for
politics and pilot projects is over. Why can�t the Government select a smart card
that can store data that includes medical and personal details? It can jump-start
the process by at least issuing it to all those who have PAN cards, election
identity cards or passports.

Strangely, common sense solutions seem to elude governments. India needs to create
over five million college and university seats to accommodate rising enrolment for
higher education. Every year over four lakh students attempt the entrance tests for
2,400 IIT seats. We need to create capacity to meet the surge. At a different
level, every year 4,50,000 students travel abroad for education spending between
$13 billion and $18 billion at foreign universities. Many of these universities
want to set shop here, creating campuses, jobs and research facilities, but have
been denied permission.

We need resources and processes to create capacity. With a six-crore population,

the UK has 125 universities and with 30.4 crore, the US has over 2,400. Both the
countries have clearly benefited immensely as they have been able to attract talent
while fuelling the economy. Joint ventures between these universities and Indian
colleges is the obvious solution. As India acquires status on the geopolitical
plate, it will need to create capacity and attract the best minds.

Time for a national agenda.The list of missed opportunities and obvious solutions
is far too long. Blaming fractious coalitions and regional parties has its limits.
After all the arrangement is consensual and national outfits are party to it.
Secondly those in opposition cannot escape censure. After all you would expect a
vigilant opposition to raise the alarm in any democracy, particularly on national
issues. Budgets are allowed to be passed in a melee, absenteeism is conspicuous
during serious debates and Bills of public interest are left to lapse. Clearly not
just the ruling coalitions but also the Opposition has failed the people.

For over two decades, mandates have been fractured but political formations have
used common programmes to create a semblance of order enabling them to share the
spoils of power. This has served the political class well but really the common
minimum programme is a formula to stay in power. It is not an instrument that will
deliver change. Perhaps a time has come for a common acceptable agenda to be
drafted by both sides.

This could include issues of national security, geopolitical stance, ensuring

outcomes on social spending, problems of governance and measures to promote growth.
This could form the basis for drafting out a national agenda and decoupling it from
petty party politics. It would also insure India from itself and the volatility of
a flat world. It may sound utopian but remember, failure is not an option.

ACTION PLAN 2009

A common minimum programme for the government.

PUMP UP THE ECONOMY: Growth is a social, political and economic imperative. India,
like China, can weather the meltdown, provided the government enables consumption
and investment by cutting cost of credit, spending efficiently and dumping sloth.

TERROR IS NOT A VOTEBANK: With four failing nations in the neighbourhood, securing
India must be priority No. 1. Political parties must resolve to decouple counter-
terror strategy from electoral politics.

INVEST IN INFRASTRUCTURE: A 21st century economy can neither be held hostage by

power outages nor can it travel on 19th century roads. China added 44,000 km of
roads and 4,10,000 MWof power between 2002 and 2009.

LEGISLATE LEGISLATION DEADLINE: Governments sit on vital legislation. The UPA

regime saw over 40 Bills lapse. Bills must be passed within two sessions of
Parliament.

INDIANS NEED AN IDENTITY CARD: Enough of committees, debates and pilot projects. It
is imperative to institute a national identity card which can be a multi-use ID
proof.

OPEN UP RETAILAND ALLIED SERVICES: Opening up retail is not about Wal-Mart but
delivering income in rural marts and value to consumers. Agri produce worth Rs
60,000 crore is wasted annually for lack of facilities and poor marketing.

BABUS, LEAVE EDUCATION ALONE: India needs new schools, colleges and world-class
universities. This will not happen in a licence raj. Opening an institution means
getting a dozen clearances and then dealing with the inspector raj.

BET FOREX RESERVES ON INDIA: India must use its forex reserves selectively to fund
infrastructure, build oil reserves and create a sovereign fund to bid for
distressed assets and to help Indian entities fund acquisitions.

TRANSFER MONEY DIRECTLY TO THE POOR: That ministerial allocation alleviates poverty
is a myth. Dismantle the sponsored schemes subsidies structure. Erect a tech-
enabled system which will transfer cash directly to the poor.

ABOLISH EXCESS MINISTRIES: Abolish Central ministries whose functions overlap with
the state ministries and transfer resources to states. This will save money and
deliver efficiency.