The finance minister’s assertion that Indian economy can surpass 8 per cent growth rate has not surprised many. Like all governments, this regime too is trying to paint a lively picture of economy as LS elections are just around the corner.
But in today’s inter-connected world economic growth of a country depends more on global environment that what its government talks or does. For example, what will happen to economic growth if oil prices move $90? In mid-September it was looking like a real possibility. The way bond yields went up, there was sharp compression in net margins of companies where crude is either as raw material, directly or indirectly. Next big uncertainty would arise if US-China trade war gets worse after the March 31, when negotiations gets over. All these would impact global economy as well as India.
Instead of making rosy projections, the government should focus on structural reforms that could make the 8 per cent plus growth a possibility if not this year than at least few years down the line. While structural reforms are often construed as manufacturing, banking or financial sector reforms, the real need of it is in the farm sector. Without a productive agriculture sector, a sustainable GDP growth would simply be impossible and the Indian economy would be far less volatile.
The central government can’t escape its responsibility by just stating that agriculture is a state subject. The agriculture sector supply chain needs immediate attention. Successive governments in their budget speeches defined such goals like establishment of cold storage facilities. But nothing much has happened on the ground. Every year a good farm output results in high wastages. There is something wrong with the current policy as not many companies have come forward to invest in this important part of economy.
Our policymakers need to review and try to figure the basic faults and work on improving them. Also, it should involve all stakeholders, including farmers and corporate. The fact that commodities trading future is expected to pick pace, it’s an opportunity to reap a good harvest with prudent and futuristic corrective measures.
The second area where the central government can act is ban on export/ import of agri commodities. Look at the history of ban on exports of agro commodities. They were imposed when due to one or the other reasons prices of agri commodities shot up in the domestic market. To calm the resultant clamour, which any price increase brings, the government ends up banning exports. However, after imposing the export ban, which is quite frequent, the government forgets to remove it on the normalization of prices. And farmers, in the anticipation of higher prices next year too, end up over-growing that particular commodity, creating a glut in the market. By the time the government reacts and removes the ban, farmers are already in distress.
Instead of knee-jerk reactions to price rise or over-production, the government must study the consumption/production trend of every agri commodity and formulate a well-defined policy that if the production of a particular commodity is above certain level, it will be automatically be open for export and if below a certain threshold it would be banned from exports. The availability of such clear-cut and direct policy and information before hand would help farmers as well as all other stakeholder in the export supply chain to figure what is likely to happen and what they need to do.
Till then, it’s better not to talk about great growth figures, which is done just for the sake of it.