The very clear mandate to the United Progressive Alliance has once again shown the maturity of the Indian electorate. The voters have resoundingly responded to the worries of anxious analysts who have been making assumptions on the basis of a hung Parliament, and there is a big sigh of relief that the economic development process can get going again. There are already indications that the first 100-day agenda is being worked out, and that this agenda would focus on the economy, internal security, infrastructure as well as the social sectors. This is the strongest mandate for the Congress in 20 years, and it is important to recognize that there are clear expectations of the electorate, and that these should form the priorities for the government.
The expectations of the economists, firms and the financial markets are different from those of the urban voter. Rural voters have their own expectations. It is necessary to look at the expectations of all these three groups separately and to address them.
Of these, the urban middle-class voter is emerging as an important element. This group has contributed to the clear mandate in Delhi, Mumbai, Chennai and other urban centres. For this group, the expectations are that their lives will become easier. They would be looking for uninterrupted power supply, improvement in urban infrastructure such as transportation and water supply, availability of gas and fuel and, of course, law and order. It is possible to look at the enlargement of the Jawaharlal Nehru National Urban Renewal Mission to cover these aspects and accelerate, as in Delhi, the Metro programmes in other big cities; interlink cities through fast trains; use the available gas pipelines for urban piped gas supply; and to find solutions for power and water. Housing construction could be encouraged through cheaper loans, tax concessions and lower interest rates—if the government can get these things done in the next five years, it can be assured of the loyalty of this section of voters for many years to come.
For the rural voter, improvements in agriculture and opportunities for employment are important. The National Rural Employment Guarantee Scheme is an important first step towards providing employment security: But there has to be a cohesive plan to improve productivity and value addition in agriculture, improve rural roads and market access and provide opportunities for food processing and access to urban markets.
The private sector reminds one of Ronald Reagan’s statements that it resembles a baby’s digestive system, with a great appetite for resources at one end and a lack of responsibility at the other end of the system. Tax concessions and relief packages will only go so far. The last three packages have been fairly aggressive and have helped ward off the worst effects of the global crisis. For investment to restart, it is important that the equity markets should revive, that more capital should be raised, there should be easier inflows of capital and less reluctance on the part of lenders for capital-intensive infrastructure projects. A strong finance ministry can make this happen with a couple of well-directed meetings that will ensure that credit flow is not held up through procedures and processes and public-private partnership (PPP) projects get quickly funded and started.
All of these are low-hanging fruit. If the Prime Minister’s Office were to set up teams charged with getting these tasks done, there is no reason why we should not see a quick turnaround in infrastructure activity that will serve as a fillip to the economy.
The more careful strategies needed are those required to deal with internal security, terrorism and law and order. Strengthening the defence and paramilitary forces through technology and equipment is a must. Very little has been done in terms of improvement in equipment and infrastructure, even for the National Security Guard commandos after the Mumbai attacks—these need to be put in place. Strengthening of the defence forces, especially the navy, is needed urgently so that the Indian Ocean continues to remain Indian.
Those who have seen US secretary of state Hillary Clinton’s testimony before the congressional committee last week on the Internet are aware of how tight a leash the US has on our foreign policy. There is likely to be a US-minded solution to Kashmir that is thrust upon us—we need to be prepared and should strategize on our responses.
The media is very concerned about the fiscal deficit. I would like to argue that we should live with it for a while, not turn back any of the tariff concessions in excise, actually reduce tax rates in income tax, and provide incentives for investment. The 11th Plan presumes a considerable flow from PPP investments, and is likely to slip out of our hands if the fiscal reins are held too tight.
This is a doable agenda.
S. Narayan is a former finance secretary and economic adviser to the prime minister. We welcome your comments at policytrack@livemint.com