Problems with skyscrapers p.

The Economic Times on Sunday JANUARY 15-21, 2012

18

economy

8
powerful players opposing this.

Things GoI Can Do For 8% GDP Growth

PM says growth will be 7%. Pundits say reform this and reform that. But there are some little-discussed changes that can boost growth. Heres a list. And given our political economy, we also identify the spoilers and estimate the difficulty index
:: Bibek Debroy

CUT DEBT/GDP RATIO TO 25%

Why Because the ratio now is 66%.
High debt through high borrowings increases inflation and interest rates and reduces private investments.

MAKE OUR TAX RUPEES DO MORE

Why Because if our taxes are spent as
efficiently as all expenditure reforms suggest they can be, every rupee spent can be 50% more effective. This will upgrade all public services.

How By ramping up disinvestment and

near-eliminating tax exemptions. Nothing else will work given subsidy, wages, interest payments and capital expenditure. Subsidies will only be paid out of the National Investment Fund, which is supposed to receive all the funds from sale of public assets.

How By following dozens of excellent reports, including the one from second Administrative Reforms Commission. First reforms can include decentralising welfare spending, making schemes work on zero-based budgeting and empowering the Delivery Monitoring Unit. Impact on GDP Better quality public goods and services can
increase growth by 1%.

MAKE RBI INDEPENDENT

Why Because monetary and
exchange rate calls will be free from official influence. Financial reforms will get an impetus.

Impact on GDP A big switch from public spending to private

investment and consumption will add 1% to growth.

Spoilers Most politicians. Industry. Difficulty Index Very, very tough to do. Too many big and

Spoilers Administration heavyweights and those whose

business it is to filch public funds.

Difficulty Index Very tough, requires real political bravery

BUILD ROADS, POWER PROJECTS

Why Because the case for both power
projects and roads is obvious.

REFORM LEGAL SYSTEM

Why Because smarter laws change the
relationship between citizen and government and between business and government and boosts economic activity.

How By amending the 1934 RBI Act. How will RBI brass be appointed? May be a variation of the process through which positions like CVC are filled. RBI governor should be accountable to Parliament in this system. Impact on GDP No direct estimate possible. But an independent central bank cant but boost growth. Spoilers Senior political figures
who understand the political value of a non-independent central bank. Bureaucracy.

How By, for roads, upgrading land

acquisition procedures and giving the nodal body, NHAI, an activist chief. Clarity on land issues will also help power projects, which also need a new mining law and faster environment clearances. Clear projects in or before 300 days, as has been proposed. The land and mining bills arent perfect, but their becoming laws will help.

How By following many existing blueprints. The 2003 Malimath committee report on criminal justice reform, for example. Lokpal agitations hit a popular nerve because of low conviction rates. Thats a clue for the government.

Difficulty Index Tough to do,

big players in opposition

Impact on GDP Government estimates suggest 1% increase in

infrastructure stock can raise growth by 1.5%; 1 % from power and 0.5% from roads.

Impact on GDP Studies point out an efficient legal system can increase growth by 1%. Spoilers No one, really, at least no one with enough clout. Difficulty Index Easy to do, needs political imagination.

Spoilers No heavyweights against this. But NGOs will protest. Difficulty Index Not-so-tough and quite doable.

TWEAK NREG
Why Because it is not helping village
economies. More productive assets need to be created. And NREG labour doesnt learn any skills.

SCRAP BHARAT NIRMAN

Why Because thats the wrong focus.
Focus on rural reform and urbanisation. Bharat needs to shrink. NSS data says this is happening anyway.

FIX TIME FOR LAW-MAKING

Why Because setting aside a
fixed time per session for passing bills may make MPs feel they have less wiggle room.

How By reducing the stipulated

proportion of expenditure on wages. And by making skill formation a part of NREG. Fewer people will be employed, but they will be better trained and will create useful things.

How By allowing corporate investment

in farming, freeing internal farm trade, persuading states to scrap restrictive laws. May be, the Congress-ruled states can start the reforms to show the way.

How By MPs agreeing to this. Impact on GDP Impossible to quantify. But imagine reformist bills passing quickly. GDP is bound to get boosted. Spoilers The current
Opposition perhaps?

Impact on GDP Done comprehensively, rural reforms can add

1.5% to GDP growth.

Impact on GDP A tweaked NREG will be a small, but vital,

part of demographic dividend, which can add 2% to growth.

Spoilers Many across the political class, some states,

old-style farm traders.

Spoilers Congress leadership, National Advisory Council. Difficulty Index Easy to do, provided the Congress brass
and NAC do not stand on ego.

Difficulty Index: Easily done,

if all House leaders see sense. The writer is Consulting Editor, The Economic Times

Difficulty Index Very tough to do, unless Congress starts a

bold experiment in states it rules.