The market and Keynes

The ruling National Democratic Alliance’s election manifesto cannot be faulted for lack of ambition.

It has aims like making India the food factory of the world, the global manufacturing hub, the global health care destination, and so on — there’s even the vision of making India the global higher education destination, regardless of what Murli Manohar Joshi is doing to the IITs, the IIMs and the universities. All this is to be achieved in various ways, each one more modern and reformist than the other.

So, the NDA talks (here’s real change) of allowing foreign investment in the retail sector, of focusing on the “connectivity revolution” (roads, Internet, knowledge and markets), of encouraging commodity exchanges and futures as a means to increasing farmer incomes and reducing the burden on the FCI, and of a pan-Indian e-governance strategy.

For the urban citizen in particular, e-seva is to be made a common platform for paying all bills, registering property, getting birth and death certificates, and so on. For the rural one, Krishi Seva Kendras in every village, increasing the reach of Kisan Call Centres and e-networks like Agmarknet.

With legislation to be enacted to allow leasing in and out of land, although only for farmers, a beginning is to be made towards broader lease markets in the sector. An “open skies” policy is to be implemented within 30 days of the NDA coming back to power, and most tax exemptions are to go within the next two years.

Having made all the right noises and promising to put in the enabling policy regimes that will attract private investment, the NDA also wants to go back to the time-tested (and failed, one should add) method of achieving its goals by unleashing a huge barrage of investments. So, there’s 50,000 MW of additional power investments to be made during the next five years, when the real issue is reducing theft and creating appropriate policy structures to attract private investments.

There’s Rs 20,000 crore to be spent on the Remote Area Rail Sampark Yojana, Rs 1,00,000 crore on the Sagar Mala project, and several times that on the river inter-linking project whose advisability hasn’t been proved beyond reasonable doubt. And while the Delhi metro’s viability is still unproven, the NDA is promising more in different cities. The huge projects apart, the NDA isn’t giving up on its “directed” approach either (directed lending, directed interest rates, and so on).

Rural branches of banks are to be required to assess the agro-processing potential in their area and then finance it. And since a Monitoring Committee for Elimination of Regional Disparities is to be set up, presumably this could mean some more Congress-style incentives could actually slip in as well.

Apart from what such huge expenditures will do to the fiscal deficit, someone needs to tell the NDA that if you have pricing and policy reforms, you will not need so much of Keynesian-style spending.