The Hindu : Business : `Good intentions by themselves will not help'

Online edition of India's National Newspaper
Monday, May 31, 2004

Business

Business

`Good intentions by themselves will not help'

The CMP of the new government at the Centre departs significantly from similar exercises in the past.

THE COMMON Minimum Programme of the new government at the Centre departs significantly from similar exercises in the past. It focuses on the priorities before the Government, rather than making a detailed narration of plans for various sectors of the economy. As one would expect, the thrust is on employment, followed by agriculture and the social sectors.

On the industrial sector, the document makes several promises, indicating its good intentions. While industrial policy happens to be the critical area in which the coalition partners and the supporting parties differ significantly, from the point of view of effectiveness of policy formulation and implementation, one would expect clearer policy indications.

The basic economic problem — of limited resources and a large number of demands — haunts the Government. The immediate imperatives of economic policy, therefore, are to bring down the high revenue deficit from its present higher level of Rs. 99,860 crores and to achieve a higher growth rate of 7-8 per cent in a sustained manner. Industrial output registered an increase of 6.9 per cent during 2003-04, making it the best performance in eight years. But such a high growth rate, by itself, is not enough.

Growth induced employment

The issue of jobless growth, which the economy had marked since 1993-94, has been addressed by the CMP in overall terms by giving much greater focus on employment. The earlier estimates of the Planning Commission have indicated that out of the 50 million job opportunities anticipated by the terminal year of the Tenth Plan, 30 million have to emerge from growth buoyancy. This indicates that the economy needs to focus significantly on growth in order to generate a desirable level of employment opportunities in the coming years. The translation of the relationship between growth and employment to the operational plane will, therefore, be the primary task of the new government.

While focusing on growth, some critical issues of economic policy surface. Policies in the past depended heavily on disinvestments, FDI and service exports. These three areas have become areas of intense scrutiny in the new policy environment. Disinvestments as a means of resource mobilisation cannot be relied upon significantly. The tempo of FDI, especially financial capital inflows, is likely to come down. Business process outsourcing and manpower exports, other things being equal, are likely to be a major reliable source in the coming few years.

The document of the United Progressive Alliance, however, tries to correct an area that was much neglected in the past couple of years. The manufacturing sector had received only limited attention in recent years due to the dominant role of the services sector. A concrete policy attention to manufacturing competitiveness through a national Manufacturing Competitiveness Council may be beneficial in the long run, considering India's relative advantages in the sector as compared to many other countries.

Vague plans for unorganised sector

Regarding the role of the SSI sector, the CMP does not seem to be clear. The Nehru era had produced a sound articulation of the role of small industry. But this dynamic sector became a victim of competitive populism since the late 1960s. Though the CMP elaborates on areas such as technology, investment and marketing support and the easing of Inspector Raj, it does not seem to offer a policy departure from the beaten track.

The proposal for a National Employment Guarantee Act is in the right direction. However, it is just an extension of the old Employment Guarantee Scheme of Maharashtra and the early employment programmes of the Ministry of Rural Development.

Operating between two extremes, that is, the urge for growth and the need to assure welfare, one of the best possible options before this Government is to plan the development of the unorganised sector on scientific lines, because it is this sector that provides 59 per cent of the GDP and 92 per cent of employment opportunities. But to do that, the imperative is to make this sector more transparent and accountable.

While a National Manufacturing Competitiveness Council may help monitor the performance and needs of the organised industrial sector, for the unorganised sector no such regular mechanism has been offered. On the other hand, it has been proposed to establish an ad hoc National Commission to examine the problems facing enterprises in the unorganised and informal sectors and to make appropriate recommendations.

Going by past experience, the setting up of ad hoc committees and commissions is not likely to lead to substantial positive results, as their recommendations often remain unimplemented. The proposed revamping of the Khadi and Village Industries Commission, if implemented, can lead to positive results. But one cannot expect any radical change because the political compulsions are likely to be much more deep-rooted.

The experience of public policy, as it relates to employment generation in the country so far has not been encouraging though several new programmes have been announced by the Prime Minister and the various Ministries from time to time. Despite good intentions, implementation remains far from satisfactory. There is no monitoring mechanism that will help assess the actual employment impact of programmes, except for some norms or parities used by the ministries or departments concerned. It is such anomalous situations that need to be corrected first.

Active labour market vital

If employment generation on a massive scale is the thrust, one should start with an active labour market policy. Opportunities for capacity building should be assured. This will be a major step towards achievement of item No. 6 of the basic principles of governance outlined in the preamble of the CMP, namely, "to create the energies of our entrepreneurs... ... .''

All these demand an active labour market policy which India is yet to evolve. For a meaningful programme for sustainable employment generation, there should be a permanent mechanism for coordinating and overseeing all such programmes.

P. M. Mathew

(Director, Institute of Small Enterprises and Development.

He can be contacted at: ised@md2.vsnl.net.in

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