One more budget, another year lost

One more budget was presented on Monday by the finance minister, and one more year was lost for India!

There was hope this time (again) that the Indian government will muster courage to come up with some truly visionary, path breaking thinking to tackle the daunting challenges that India faces on multiple fronts, including runaway inflation, unchecked proliferation of the black-money economy, increasing deficit in social infrastructure including education, healthcare, potable water, and sanitation, and much-needed structural reforms to give a boost to its agriculture economy and thereby to the hundreds of millions of Indians living in rural India.

While there were many expectations that were belied, a major let down is the maintenance of a status-quo on modernisation of India’s archaic and grossly inefficient consumer goods distribution and retail system, especially relating to food products. For nearly a decade now, various governments have been debating the merits / demerits of having a modern, organised retail system and getting foreign investment into the same. As far as modernisation of retail sector is concerned, there is no evidence on the ground that large, organised retail businesses have caused any harm or mass disruption to the livelihood of small, independent retailers. On The contrary, the potential benefits of modern retail in dampening inflation, creating more and better quality jobs, and leading to investment multiplication through new businesses being created in manufacturing, logistics, and support services are also well documented. Unfortunately, even in this budget, the government has tried to shirk from taking any decision by merely stating that this subject is under discussion.

Similarly, efficient distribution of farm produce can potentially increase farm incomes almost immediately. This can happen simply by abolition of the APMC Act and allowing of free movement of farm goods across India, without changing the intra-state taxation. Although the government continues to talk about improving the lives of farmers and improving their economic plight, no major reform has yet been initiated for the agriculture sector. The budget has been a complete let down on this front too. Investment in new fertiliser plants and in setting up of new cold storage chains is commendable and also encouraging, but this will neither improve the economic condition of the farmer nor will it reduce food inflation in the near or long term, unless more fundamental reforms are initiated to streamline farm to kitchen supply chain.

India’s high growth trajectory could go haywire soon if this deficit of vision on the part of its political leadership continues any longer.

Arvind Singhal is chairman, Technopak Advisors