Governance requires the pursuit of ‘Yogakshema’ – protecting the welfare of all citizens through righteous conduct, strongly predicated on empirical soundness. The ‘state’ encapsulates the collection of institutions tasked with exercising the people’s will and governing the republic with its constitution as its charter, and svadharma as its character.
All stakeholders – whether in government, business, civil society, or the rest must act through innovative forms of collaboration. All approaches, therefore, to fulfill the resolve of building Viksit Bharat@2047 must fulcrum on sound public governance and Bharat’s Knowledge (Dharmic Value) Systems. Economic governance ought to be more than the sum of its economic, social, political, behavioral, scientific, technological, environmental, institutional, and organizational processes. Each is interlinked and contributes to an outcome far larger than the sum of the parts. This is Bharat’s Darśana (not philosophy) for sustainable growth. The ensuing principles generate a collective institutional approach, which is increasingly discernible in today’s Bharat.
NITI Aayog’s paper titled ‘Vision for Viksit Bharat @ 2047: An Approach Paper’ wants Bharat to avoid the middle-income trap. As for the economy, to become a developed nation, we need to strive to be a $ 30 trillion economy by 2047 with a per capita income of $ 18,000 per annum. Progressing from a middle-income to a high-income level requires sustained growth in the range of 7-10 per cent for 20-30 years. It is a Bharat whose social, cultural, technological, and institutional features will mark it out as a developed nation with a rich heritage and one that is capable of functioning at the frontiers of knowledge.
Few among many underlying principles which are getting increasing traction, across stakeholders include: We are a market-based economy, not a market-based society; Ease of Doing Business is about finding ways to reduce costs – time / money / convenience / trust / accountability etc. (“The fundamental principle of economic activity is that no man you transact with will lose, then you shall not”); For future-readying Bharat, the real R&D must be about finding answers to questions that have not been asked; Bharat’s transformation requires higher productivity, not just factor-market reforms, labour, capital and digital public infrastructure; It is only through a thrust on human capital development, scaling up skills to raise productivity and wages, and a higher rate of public and private investments that generate quality employment that we can hope to be where we want to be; We need to navigate AI’s dystopian realities; The financial inclusion for women must never be a long walk; ‘Disinvestment’ must move to value creation (though privatisation is no longer subterranean).
The brilliantly analysed, Economic Survey of 2023-24 talks of “heavy lifting to be done on the domestic front because the environment has become extraordinarily difficult to reach agreements on key global issues such as trade, investment, and climate. Overcoming these requires a grand alliance of union and state governments and the private sector. It is worth reiterating that job creation happens mainly in the private sector. That requires another tripartite compact – between the government, the private sector, and academia. This compact is to reboot the mission to skill and equip Indians to catch up with and get ahead of technological evolution. The role of the corporate sector has never been greater than it is now. The culture of investing for the long term has to be nurtured and sustained. Profitable banks lend more, (and so are the insurance companies, which protect and build resilient societies). There has to be conversation, cooperation, collaboration, and coordination across ministries, states, and between the union and states. Forging and sustaining consensus between governments, businesses and the social sectors are necessary to succeed in this endeavour”.
The Economic Survey has stated that around 8 million jobs in the non-farm sector need to be created each year until 2036. “Job creation in the economy will occur through various inherent economic processes, not solely because of government schemes. The Indian state can free up its capacity and enhance its capability to focus on areas where it has to by letting go of its grip in areas where it does not have to. The Licensing, Inspection and Compliance requirements that all levels of the government continue to impose on businesses is an onerous burden. Relative to history, the burden has lightened. Relative to where it ought to be, it is still a lot heavier. The burden is felt more acutely by those least equipped to bear it – small and medium enterprises”.
The policy response to the economic principles and imperatives has been robust. One of the noticeable achievements in recent years is the bolstering of macroeconomic stability. There is a significant opportunity in the post-COVID world for Bharat to become the front office of the world, not just the back office. The central bank’s commitment to a legally mandated inflation target (there is a strong view that while food may continue to be part of the CPI basket, its weight must reflect today’s consumption patterns) has boosted confidence in the economy. The government has maintained the fiscally conservative stance that would make even the IMF proud. The quality of expenditure continues to improve. Capital expenditure (capex) continues to be prioritised. There is a nuanced proposal aimed at job creation and skill development for the youth. The continued focus on accelerating domestic manufacturing will create demand for skilled talent. Measures such as addressing inverted duty structures over the next six months, setting up of investment-ready ‘plug and play’ industrial parks, and making factors of production competitive along with facilitating markets will have a medium to long-term positive impact. Changes in Customs duties on different items will have a more immediate impact. Finally, the economic policy focuses on the expanded use of DPI across myriad sectors like agriculture, e-commerce, education, health, law & justice, logistics, MSME, and urban governance. These are proposed at population scale that should lead to productivity gains, new business opportunities, and innovation. The encouragement to entrepreneurial culture must see government acting as a facilitator to make full use of Bharat’s demographic dividend for the next 30 years.
Bharat has already ushered into less taxing times: Simple, well administered, no exemptions regimes with further promise of comprehensive review of the Direct Taxes Code; Crude oil could be the first item brought under GST followed by natural gas; In what arguably may have been one of the boldest reforms earlier, the government had made corporate tax rates globally competitive. The Nuclear energy has finally received due recognition. The government will partner with the private sector for a) setting up Bharat Small Reactors, b) research & development of Bharat Small Modular Reactor, and c) research & development of newer technologies for nuclear energy. A financial sector vision document will set the future agenda; one hopes the far reaching FSLRC recommendations for a principle-based and an integrated financial service will receive its due understanding. The proposed taxonomy for climate finance for climate adaptation and mitigation will have an enduring value. Morgan Stanley’s Research has green-flagged pivotal supply-side policy reforms that are changing Bharat rapidly.
Among many reflections on policy initiatives, few are worth highlighting here. In the agriculture sector the larger priority is still with the consumer, and there is still not adequate research and development (R&D) spending. The marginal returns of investing in Agri-R&D are over ten times. Whilst recognising the commendable job of continued capital expenditure in infrastructure, it is time to recognise Education and Health, too, as infrastructure. Bharat’s industry must be spared of the price pressure of Chinese imports.
The dual tariff structure should partake of one set of tariffs that factors in the direct and indirect market-distorting state subsidy, and another set of tariffs for the rest of the world.
The continued unravelling of the Economic Policy Framework for economic development will see more reforms, and facilitation of the markets, which demands a shift in our analytical lens to the one that refrains from simplifying problems. In the midst of our massive demographic dividend, ‘we need to be bigger on big things and smaller on small things’.
Bharat’s resurgence adds to its civilisational continuum whilst catering to its larger vision of ‘Vasudhaiva kutumbakam’ – ‘World is One Family’ (Bharat is already contributing 18 per cent to global growth!). The economic governance requires continuing with definitive set of principles that guide policy making. The resultant “politics” will steer the country forward rapidly through enduring compacts with the widest possible body of stakeholders – so visible for the first time since 1947 – urging Bharat to grow economically, progress socially, produce sustainably, and distribute values created equitably.
Arun Agarwal is an author, columnist, teacher and ex-CEO. He is currently a Professor of Practice at Rizvi Institute of Management Studies and Research, Mumbai.