Kolkata: The government needs to spend on pro-poor programmes, but eventually aim to phase them out and ensure that the needy can earn their own livelihood. That was the conclusion reached by a panel of industrialists and economists at the Kolkata leg of Mint’s Budget Agenda 2010—a discussion on expectations from the Union Budget.
The panellists were Vishambhar Saran, chairman, Visa Steel Ltd; H.M. Bangur, managing director, Shree Cement Ltd; Harsh Neotia, chairman, Ambuja Realty Group; P.K. Choudhury, vice-chairman, Icra Ltd; Mihir Rakshit, economist; Roopen Roy, managing director, Deloitte Consulting India Pvt. Ltd; and Asish Bhattacharyya, professor, Indian Institute of Management, Calcutta.
Mint’s deputy managing editor Tamal Bandyopadhyay moderated the discussion, starting it by asking if pro-poor programmes are sustainable. Edited excerpts:
Asish Bhattacharyya: To my mind, this is sustainable… But the capability of those who are delivering may not be there and we find that many state governments are unable to deliver what is desired. Therefore, we may allocate funds there but to get the desired output, we have to create capability.
Mihir Rakshit: Pro-poor programmes came...when the world was going through recession. Expenditure on these programmes boosted India’s growth. What is most important in the long run is that these programmes should be withdrawn over time and people (should) become employable. It is important to find out to what extent these programmes are creating income-earning capability.
P.K. Choudhury: My anxiety is twofold. First, one should teach people to fish and not feed them fish... What is being distributed at present is more of a dole... Second...how much money is actually reaching the targeted beneficiaries? I’d prefer this amount to be spent on rural education, rural roads, creating right agricultural environment… Instead, we are crippling a large number of people with some political agenda...
Roopen Roy: There was a gentleman who came from Jhargram (in West Bengal) to Kolkata. He had never been to the city, and was dazzled by the gleaming lights and fancy cars. When he was going back he jumped on to a train and asked the person on the upper berth, “Is this train going to Jhargram?” The person said, “No, it is going to Mumbai. Please get off the train.” But the man thought it was a marvel of technology that in the same train the upper berth was going to Mumbai and the lower berth was going to Jhargram. I think we have a situation to tackle—the same train cannot go to two destinations.
We are focusing on wrong measures. (We had) 7.9% growth in the September quarter and only 0.1% came from agriculture, which employs 60% of the people. We have to see whether we are focusing on agriculture in a manner that is creating enough wealth and productivity...
Politics of inclusion
Harsh Neotia: I think the budget-making exercise...is a statement of the government on its political policies as much as it is on its economic policies... the fact that some people would be subsidized is a given. I feel whatever is being done presently is not beyond sustainable level. We need to correct course on some schemes that are not delivering, but in the macro sense, the resultant increase in revenues to the exchequer over a period of time should be able to take care of the contributions that we make to the marginalized sections of society.
Roopen Roy: When you say money is being given from the rich to the poor, and the burden is being shifted from one generation to another, you must remember India and Bharat. The burden is being passed on from India’s generation to India’s generation, but Bharat is standing still.
Vishambhar Saran: One of the things we have to learn from China is to start converting unemployable rural people into employable people and focus on manufacturing. At present, the manufacturing sector is contributing 17% of the GDP (gross domestic product). This should be much higher...
Mihir Rakshit: ...there was a huge improvement in the productivity of Chinese agriculture (before the manufacturing boom). In India, it has not grown because agricultural policy of fertilizer subsidy and various types of distortions have created an inefficient system of cropping pattern and land use...Secondly, the amount of investment that has been made for infrastructure for more than two decades. Chinese investment was to the order of 46-50% of their gross domestic product. India’s...is only about 20-22%...
H.M. Bangur: If the government somehow reduces its budget—collect less and leave more with the people to spend themselves—the productivity of the entire system will increase. Set the rules of the game but allow people to weed out inefficiencies on their own. Right now we are protecting inefficiencies.
Harsh Neotia: This experiment was tried in the US… (But) market mechanism respects profits and not ethics. The (US) government had to eventually step in to contain the excesses of the market.
Asish Bhattacharyya: Education, for instance, is something that the government has to do. Private sector is only investing in higher education, but we need to focus on primary education as well...
Vishambhar Saran: Let me give the example of a very poor state, Orissa. The government there has given private investors the option of either building their own ITIs (Industrial Training Institutes) or taking over defunct ones in areas where they have invested. And this scheme over a period of time will make millions of people employable. There is a huge mismatch in demand and supply of trained manpower. On the one hand, we are saying that there is so much of poverty in the country and, on the other hand, we cannot find enough people to fill our factories.
If you were FM
Asish Bhattacharyya: I would have allocated more funds to pro-poor programmes to the extent possible. There are enough programmes, so I wouldn’t add new ones. But I would definitely invest more in technology to improve delivery.
Mihir Rakshit: I will go for a well-formulated employment generation programme for the poor on a sustainable basis.
Roopen Roy: I would provide at least twice or thrice the amount of money currently given to education and healthcare ...I would unfetter and unleash the large PSUs (public sector units) ...lastly, I would take away as much incentive as possible from large businesses...
P.K. Choudhury: I would like to do three things. I would stop all these schemes—NREGA (National Rural Employment Guarantee Act) and so on. Secondly, I will fund the education sector. My target would be to have a Centre-run school at every sub-divisional town. Third is to have a lot of vocational training schools in small towns.
Vishambhar Saran: I am not in favour of giving cash subsidies, loan waivers and so on.
Harsh Neotia: I think if the FM were hearing us, he would have been very confused by now. I think we all, as a nation, owe it to our people that no Indian should die of starvation.