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Fodder points on Economic reforms
- Reforms are meant to improve efficiency by improving competition.
- Despite the enormous noise made about reforms, there is no clarity on what constitutes reforms wrt Indian economy.
- No clarity on what should the impact of reforms be on growth and social sector spending (Health, education, MGNREA etc.).
- It is important to have a clear understanding on the requirements and set goals accordingly.
Pre 1991
- Until the end of the 1970s, and to a large extent even in the 1980s, development was state-directed and state-driven.
- The government subscribed to the theory of ‘commanding heights’ which meant that key sectors of the economy were to be under state control.
- The private sector was kept in check through an elaborate scheme of licences and controls (Licence Raj).
- In foreign trade, ‘import substitution’ was the guiding principle and this meant quantitative controls on imports and high import tariffs.
- [Import substitution industrialization (ISI) is a trade and economic policy which advocates replacing foreign imports with domestic production. ISI is based on the premise that a country should attempt to reduce its foreign dependency through the local production of industrialized products.]
Post 1991
- The country in 1991 faced an acute economic crisis, triggered by a severe balance of payments problem.
- But the crisis was converted into an opportunity to bring about fundamental changes.
- It led to the dismantling of various controls and licences.
- It led to the beginning of LPG (Liberalization, Privatization and Globalization) reforms on a major scale.
- Many areas which were exclusively reserved for the state were thrown open to the private sector.
- The role of the state as a producer of marketable goods and services has gone down.
- However, its role as a regulator and as a provider for public goods and services has increased.
Post 1991-92
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Pre 1991
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Economic growth
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6.8 per cent
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3.5 per cent (1952 and 1980)
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Some measures required towards reforms.
- The basic principle underlying liberalisation is of the need to create competitive markets with minimal barriers to entry and should be extended to all sectors.
- Goods and Services Tax (GST) - enhances efficiency and improves tax buoyancy and brings in uniformity in tax collection.
- Land Acquisition – important to build manufacturing infrastructure. Fixing land prices is against the spirit of competition and the reach of any Land Acquisition Act must therefore, be limited.
- Reforming sugar industry - Molasses are subject to a type of control which results in subsidization of the liquor industry. Gunny bags made form jute should only be used to pack sugar. These measures are anti-competitive and are a curse to sugar industry. All these illogical regulations should be phased out.
- Pricing of natural resources has become an issue. In the absence of competition, transparent mechanisms for fixing the prices must be followed which will be fair to both the producers and the end users.
- Among the sectors that have remained untouched by reforms, the most important is agriculture. Much needs to be done to improve agricultural productivity through scientific research.
- The present marketing arrangements are archaic (They benefit middle men at the cost of farmers). APMC and related laws should be rationalized to suite the present situation.
- Barriers to movement of trade across the country must be brought to an end (Improves competitiveness).
- The administrative framework and delivering systems must be such as to maximize benefits (they should act as facilitators rather than regulators).
- Reforms, to be credible, must not only result in higher growth but also benefit all sections of society.
Fodder points: India-Pakistan-China
- India recently is playing a proactive role in exposing Pakistani atrocities in Gilgit-Baltistan and Balochistan. This comes as a counter to Pakistan’s propaganda in J&K.
China-Pakistan Economic Corridor (CPEC)
- During Mr. Xi’s visit to Islamabad in April 2015, China pledged to invest $46 billion on CPEC.
- “Karamay Declaration” of August 2015 defines China’s role in CPEC and Pakistan’s role in China’s One Belt, One Road (OBOR) initiative.
- CPEC’s main infrastructural corridor, running over 3,000 km, will connect Kashgar in China’s Xinjiang province to the Gwadar port in Pakistan’s Balochistan province.
- CPEC will no doubt boost Pakistan’s progress and prosperity.
India’s objection to CPEC
- Many in India have objected to CPEC passing through a part of Pakistan Occupied Kashmir (PoK), on the ground that it is disputed territory.
Alternative policy
- India can support CPEC and try to get its border regions under it improving economic prospects.
- As a part of regional co-operation architecture, India should make efforts to extend Iran-Pakistan gas pipeline into India.
- CPEC-BCIM interconnection has the potential to immensely bolster India’s energy security both on the western and eastern flanks.
Benefits of CPEC to China and Pakistan
- CPEC helps China build a crucial two-way bridge-link to access the Indian Ocean and conversely for Pakistan to reach out to Eurasia.
- But it is likely to deepen the already complex strategic ties between the two “iron brothers”, dubbed now as equivalent to the U.S.-Israel links.
- China expects CPEC will yield far-reaching economic benefits and regional security.
- First, the Karakoram (land) with Gwadar (sea) alignment has both commercial and military significance to serve as strategic chokepoints vis-à-vis India.
- Second, the CPEC is suspected to be about offsetting the growing U.S.-India intimacy as also in China’s quid pro quo to counter India’s “Act East” policy.
- Third, it seems linked to preventing the Afghan-Pak area from potentially becoming a safe haven for Uighur militants once the U.S. troops leave Afghanistan.
- Clearly, Beijing seeks new opportunity to fill up gaps where India has largely failed.
- Considering PoK’s strategic location, it could have many ramifications for India. It helps manipulate legal and demographic profile of Gilgit-Baltistan (GB).
- Pakistan could lease additional areas in GB to China like the Shaksgam Valley that was surrendered in 1963.
- CPEC will help Pakistan to get access to some landlocked Shanghai Cooperation Organisation (SCO) members.
- It helps Central Asian countries to get access to Indian Ocean and this will in turn help Pakistan economically.
India’s dilemma
- For India, China’s OBOR plan poses a dilemma: joining it raised fears of getting sucked into China game plan.
- But not joining is inconsistent with New Delhi’s broader diplomatic strategy.
- India should explore opportunistic aspects in the OBOR especially for regaining access to the northern axis, prevented by loss of GB to Pakistan.
- Just as India joined the Asian Infrastructure Investment Bank, a wise approach would be to creatively join the Silk Route.
Nepal gets first woman President
- Nepal’s Parliament elected communist lawmaker Bidhya Bhandari as the country’s first woman President.
- This comes after the adoption of secular and democratic Constitution in September 2015.
- Recent Issue: India Nepal Border Blockade
Poverty estimates
- http://mrunal.org/2014/08/economic-survey-ch13-poverty-line-tendulkar-rangarajan-engels-law-mnrega-aajeevika-nrum.html
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