Tackling Poverty

Key is agriculture reforms. However, there is very little that has been done in this area. Huge workforce is engaged in agriculture, but they are under employed. Too many people keeping themselves busy, doing too little. Not that they are lazy, just that there are not many opportunities. Govt must create an environment where the percentage of population involved in agriculture comes down considerably, allowing consolidation of farms, enabling mechanisation and adoption of efficient farming techniques, resulting in improved productivity.

It is a waste of time and effort to make small farms productive beyond a point. By throwing small handouts to them from time to time, their misery is only being prolonged. Suicides will continue, even with Minimum Support Price regime, free electricity, no tax and waiver of loans from time to time.

Effort should be made to move people out of agriculture into other sectors of economy. Migration of population to urban economic hubs should be encouraged and facilitated. Government on the other hand has been trying to just do the opposite, with schemes like NREGA. Government pays to keep the people poor!

Government should set a growth target of 5% for the agriculture sector, up from dismal 1.5 - 2%. This can not be achieved by throwing money and some crumbs at an inefficient system. The system must be overhauled. It starts with putting someone in-charge, who has the zeal to fix it. Not someone like Pawar, for who agriculture is one of the many things that he does on the side, while he gets some time from Indian politics and International cricket politics.

Till the time that Indian agriculture does not pull its own weight, it will remain a drag on the overall Indian economy, keeping people in perpetual poverty. I wonder what is government's long term vision, if there is one.

Indian Economic Revival - Another Chance Squandered?

Under the political stewardship of the father of India's economic reforms, it is surprising that this government has violated some of the very basic good economic governance principals.  Or is it that this government became so delusional about the amount of wealth or the consistency of maintaining the growth of the heady days of 2006 and 2007 that it took gamble with its finance, which are now coming back to haunt it. Or is it that the people who pushed for some of these economic programs (Sonia Gandhi and Coterie) came from non economic backgrounds and with no leadership vision to see what is right for the nation over next many decades vs. the here and now. Have we again squandered our chance of providing decent living to our people that is not based on grants, but rather on providing people the opportunities to earn it themselves?

Government came up with a bill NREGA - National Rural Employment Guarantee Act - 2005, that guarantees 100 days employment to any adult in the Rural area. However, it is missing one crucial component, guarantee of commensurate output from the States/ Municipalities that execute this program. For all practical purposes, central government just provides wages to people, if they show up for work, even if there is no work.

On one side, people get paid for doing mostly nothing productive, on the other side, the productive part of economy is being starved of labour. People from the farmlands of Punjab and Haryana can testify this. No labourers for the sowing and harvesting seasons.Whosoever is available asks for wages that are many times over what was normal. Labour intensive construction industry is hit equally bad.

It is a double whammy, while the govt is spending tax payer's money on unproductive work, that too something that is locked down for years to come, it is creating supply side constraint for productive part of economy that depends on flow of labour. In a labour surplus country the government policies are creating labour shortage. We are squandering our only competitive advantage in the world, large pool of cheap labour. It is not surprising that we see high inflation in these areas.


Another bad economic decision - Petro products price regulation - When UPA came to power in 2004, under Manmohan Singh, it brought the petro product priving under government control. Contrary to what one would have expected from an economist of Manmohan Singh's stature, he turned the economic logic on its head and killed the open market that was created by the previous NDA regime for the petro products. Many private companies lost their investment and many foreign companies that wanted to enter India, in petro retailing, just pulled their investments out. Now, for last few years, the government is trying to undo its doings by deregulating the petro prices. Once step forward, one step back and a decade lost.

There are so many such instances of economic blindness that it is not funny.