Improving India - Holistically.

After a great start to the millennium for the country with the GDP even touching 9% in the latter part of the first decade, it has been only one way for India since then – downhill.  Be it the slowing economy, rising fiscal deficits, border tensions with neighbours and the humungous scams that surfaced has put India on the back foot again.  Some of the problems that India faces today were highlighted in an earlier blog (http://bit.ly/NVd2NP) and it received some constructive criticism as well that I can crib about the current condition but not suggest improvements that can develop the country.  It did not take much time to find solutions to some of the problems.  And if a no-brainer like me can think of it, the rulers in the capital (any party that comes to power) are much more intelligent and diplomatic to develop India.

First - coming to the problem of economic turmoil in the country.  The finances of the country are in pretty bad shape.  CAD is rising and has already hit 95% of the budgeted CAD in the first 9 months of the year.  Major reasons are populist schemes like subsidizing kerosene, Food Security Bill which will be a pain for the next government no matter which party comes into power.  Instead of going for such populist schemes the government can manage their supply chains better and avoid leakages.  For example, India has a bumper harvest in almost all seasons of rice and wheat which make up the staple diet of the people.  But the problem is managing them.  This leads to humungous wastage which can be avoided if there are adequate storage facilities.  FDI in FCI would be of great help.  Food Corporation of India (FCI) is one company which can be managed to end the food woes of India.

Next is defence.  No country, especially countries like India which are surrounded by countries like Pakistan on one side and China on the other, can afford to rely on imported weapons to give a fitting reply.  India, even though says that it has started an indigenization drive, imports as much as 55% of the parts used to build missiles like Brahmos.  R&D must be encouraged and investments must be made to make sure that in the coming decade we supply technology required to make defence weapons.

If the foundation is not strong, the building is bound to crumble.  Our education sector is like that base.  If we do not provide quality education, the future is bound to be doomed.  A recent report in the Mint has described India as a country where the percentage of people receiving education has increased but the quality of education has decreased substantially.  Why can’t the government invest in schools instead of bailing out, say Air India or financially supporting banks which are loss making.  A country’s natural resources or PSU undertakings are considered to be a nation’s wealth and need to be run effectively to support the entire industry in times of crisis but if good money is constantly being put to bail out bad money it is not a wise decision.  Some divestment is appropriate.  It is a shame that we do not have a single world class university which we can call to stand out in the top-10.

Inclusive banking is one thing that India still has not been able to achieve.  In spite of an initiative by RBI to open a certain amount of branches to encourage people to avail banking services, it has not achieved its aim.  More than 50% rural bank accounts are dormant.  Also none of the Indian banks feature in the world’s largest banks.  To ensure India has a considerable number of banks in the world map, consolidation of nationalised banks is important.  This will improve both efficiency and ranking of Indian banks.  Having 27 nationalized banks and over 3000 private and cooperative banks is way too fragmented for a country like India.

Another major problem for India is the telecom industry.  There are no set rules and it seems that rules are framed for just one group (rather 2 after the split).  Rules have to be such that there is healthy competition.  Another problem is the functioning of MTNL and BSNL.  It makes very little sense to have one operator in 2 circles while the remaining telecom circles have another entity.  Schemes like VRS and reshuffling should enable merger of the two entities.  While private telecom players have moved to third party managed infrastructure which enables them to optimise their services, BSNL is still stuck with old methods.  One of the major reasons for BSNL’s failure is its inability to award tenders for expansion.  Since it is not efficiently managed, fixed number of lines is laid beyond which tenders have to be floated.  A PSU telecom company can take the country to the next level of telecom revolution but in India, BSNL is trying to survive its evolution.  Even the SIM cards used in phones cannot be produced in India which can pose a huge security threat in the future.  Such is the shoddy infrastructure for a sector I love and belong to.

These are just some of the things that are in the planning but not implemented by subsequent governments.  There is an Indian version about the ants and grasshoppers story (http://goo.gl/xLqG9y).  If the government does not plan well it is not far that the story will turn into reality.  The sardars and rulers in Delhi need to do something before it is too late.