Wednesday, May 13, 2009

What to expect out of new government?

By A K Prabhakar & Tanmay G Purohit

After 5 years of U.P.A government where does India stand and what more should new Government do to sustain and grow faster?

In the last 5 years I strongly have a feeling that reforms didn’t proceed and India has wasted 5 precious years due to pulls & pressures of coalition politics. There are many urgent reforms which would keep India on the fast growth path. (Nothing special has happened except for Nuclear Deal and Domestic Civil Aviation reforms)

I would like to first quote a few instances in today's context to express my views better; Hyundai Chennai factory strike for 17 days has forced the company to rethink its export strategy from India. The company has planned to produce i20 meant for Europe in Europe itself. (

Dirty politics and hopeless union pressures:-

MAH & MAH strike in Nashik plant where a single person problem has kept production in abeyance. ( ) And earlier we have seen HEROHONDA and TATAMOTOR NANO project in West Bengal facing huge hurdle. Auto companies in USA and other developed parts of the world are getting slowed down because of recession but Indians are buying more vehicles as we see from the stats. Such strikes and plant shifting is prospects of the nation and India with more than 100cr of population can’t miss opportunity to become a Global manufacturing hub.

General Motors Corp will shift more production of U.S. bound vehicles to plants in China, South Korea, Mexico and Japan and away from plants in Europe, Canada and Australia-----and there is no mention of India. (

Labour Laws:-

India has failed to reform the labour law which is outdated and so rusted. If we need growth and want to find more jobs for fast growing younger generation, India should move in quickly to reform on an urgent basis. Whatever progress we are witnessing is on Technological front, it is also necessary, but we got to have the employment rate higher as we are a labour-abundant nation.

Legal System:

Justice delayed is justice denied and this is forcing many to rethink Indian business strategy. Madoff Ponzi Scheme came out even after Satyam Scam but now Madoff has been sentenced and his punishment is already started, what has happened to Mr Raju? Why can't he be brought to justice sooner? We still have Kasab in custody and until last week he is shouting that he is not guilty. Now it’s almost 6 months after 26/11 and no justice so far for the dead!

Growth will get muted if Banks and FI slow their lending programme due to fear of growing Non-performing assets. There have been many rejoinders as well as court rulings which have virtually stopped any collecting method by Banks and lending institutions making already delayed justice system with more overload.  If FIs can't even get back their principal money from defaulting borrowers, how will new loan-creation happen even if we have minimum 3% CRR and zero-interest rates across the economy? (Many NBFCs have resorted to criminal proceedings [Section 138 of Negotiable Instruments Act] without understanding the implications and lost precious time missing the time limit for filing civil suits)

Land Reforms:

Land reforms hindrance we are seeing and many experience also, already I had written about ills of POA-Power of attorney where many lands in India are held using this mode and once there was a proposal to abolish this way of holding land as Government was losing revenue and which increased legal complication. (POA- has landed many complicated issue. Land owner A gives Power to a Buyer B and without assigning any reason A can cancel the Power where a simple paper notification and a notice of intimation is only required and this becomes a valid cancellation and consent of B is never required)

And if you recollect I had warned many on Realty stocks 15 months before as most of the Land bank were just a POA or Agreement and not a proper registered Sale deed.

Because of fragmented land and growing urbanization, agriculture is also lagging.

Agricultural Reforms:

Agriculture is an unavoidable element of Indian Economy, India ranks 2nd worldwide in farm output. Agriculture and allied sectors like forestry, logging and fishing account for nearly 16% of India GDP and employ nearly 2/3rd of the workforce. Current agricultural practices are neither economically nor environmentally sustainable and India's yields for many agricultural commodities are low. Poorly maintained irrigation systems and almost universal lack of good extension services are among the factors responsible. Farmers' access to markets is hampered by poor roads, rudimentary market infrastructure, and excessive regulation. Even after showering so many subsidies and exchequer-burdening debt waiver programs, Indian Agriculture sector has grown by only about 2.5% a year for many years.

Farmers have to depend on Monsoon but many times even after good Monsoon, lack of irrigation facilities make farming difficult. Corporate farming is one thing which is yet to catch and it can bring large pieces of land under cultivation which will make farming much more viable than it is now with fragmented lands.

Agricultural Exports as a %age of Total Exports from India were above 20% in 1996-97 but have come down to 10.92% in 2006-07. Sugar Rates are at 30-year highs and last year many countries along with India faced food shortage. If we take out pampering subsidies and debt-waivers, there haven’t been any special programmes for Agriculture after Green Revolution. India occupies 28% of the world area for agriculture (2006 figures) and has share of 21.51% in world agriculture production, whereas China has 19% of world area and produces 29% of the whole production in the world – now numbers speak for themselves!

Social Reforms:-

Indians don't have a unique identity, yes, we have Ration Cards, PAN cards, Election IDs but those are just like contemporary documents right now. There has to be a unique ID Card which has got all the info of the citizen like they have in USA - Social Security Numbers. Crime is progressing very fast and for grabbing the criminals we need such systems to track them down wherever they go. Entering India is very easy as we see so many infiltrations through Bangladesh,Pakistan by all kinds of routes, and we have not done enough to stop them from coming, no wonder we witness so many bomb-blasts! Some days back there was a proposal to allow reservations in private sector, but that looks against the notion “right person for the right job”, already reservations are losing relevance as rich are becoming richer with no benefit for the poor.

Pathetic Subsidies:-

In some parts of India, people are given free Television Sets, free electricity for demand of votes. Any mishap like floods and you will have a reward of Rs 50,000 or Rs 1,00,000 to all the affected people. Superficially it looks great but it is making people lazy, they know that even if they don't work, government will always feed them with subsidies. Free water, free food and what not! For just getting the votes and sustaining the government, the population is being made disinclined to work.


There is a lot more to talk about but until these things don't get fixed, how can we say India is truly shining? The other day only a joke was being circulated in Yahoo - "What a funny nation India we are living in! People buying shoes from A/C show rooms and vegetables from road side carts, here Pizza reaches faster than ambulance/police, Car loan @ 5% and education loan @ 12% ... India shining!" Alas, this is a reality.

There is development and India is growing, but if government doesn't perform its part of the game well, it will be a crippled economy in no time once again. Any new government, irrespective of its so-called sacrosanct document "manifesto", has to take care of these issues as these are basic elements of any society and we must not remain deprived of such fundamental developments. Median Age of population in India is very low around 25 years as compared to ageing population of other countries like China, USA and Japan. Real tragedy will unfold when these young Indians start performing at their best but lack of reforms won’t bear fruits to those industrious efforts, who is to be blamed at that point of time? Aren’t the people coming through Votes more dangerous than the people coming through Boats?

Data Sources: - World Bank, India Ministry databases, Wikipedia, Various Web Sites,,contentMDK:20195738~menuPK:295591~pagePK:141137~piPK:141127~theSitePK:295584,00.html


Manik Taneja said...

Nice One...but that is the paradox of Indian Politics..we have no choice but to vote for the better one of the two worst choices

zain khan said...

yes the politicians waste the 5years. the govt under NDA plan for joining rivers, and road link as grant trunck roads. the congress govt put it in ice box, land reforms should be priority, record of every inch of indian land. the own property laid ideal there is no loan on it. i have bitter expriance of educational loan, despite of clear title the manager deline after wasting my 20 days.

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