India is a land of contrasts. Economic and financial reforms are a must to address the growing but unmet aspirations of its citizens
The television in my house wears a forlorn look. My mother watched it regularly till she passed away. This was two years ago. Now, my daughter and wife are hooked to their iPads watching programs on services such as Netflix and Amazon Prime. Much has changed in what they watch in the last two years, ranging from international sports to rom-coms. What’s interesting to note is that how they consume content has also changed a lot.
I have become reasonably adept in using technology and latest products such as mobile wallets. My tastes have changed and my surroundings too. Swiggy and Uber Eats have given me a wider choice of food, with restaurants offering international cuisines in response to huge demand. This has made me lazy too! The other day I ordered “Nimbu Pani” when alone at home. How tough can mixing lime and water be? But there you go.
India is changing rapidly, and with it the needs of the people. Economic developments mean new infrastructure is being built: developed roads, better metro connectivity and better airports. However, social infrastructure, which plays an important role, such as basic education, hospitals and health care services are still very weak.
These are trends in urban India. Let’s talk about the other India or ‘Bharat’, and a visit to my native place presented a rather different picture of this life.
Most of rural India has seen changes too and is unrecognizable from a decade ago. Adoption of technology is transforming the lives of India’s farmers through better irrigation, improved network connectivity etc. Banking channels are more visible. Availability of credit at low interest rates is made easier through operation of NABARD (National Bank For Agriculture And Rural Development) and branded products are available in more areas. E-commerce companies have also become active, with people at my village being able to order online products with delivery at the nearest district headquarters.
Rich farmers were comfortable as they had large houses, with children well settled, and mechanized equipment for their farms. However, I could also see distressed faces among farmers. Shortage of income and jobs was more visible. And school buildings were dilapidated which has always been a disheartening sight.
What I described above is just a glimpse of the rapid changes happening across India and across various age groups. The changes are good for some and not so good for others. The disparity in living standards is very high.
While consumption trends are robust, the manufacturing side is still struggling. Our physical and social infrastructure needs dramatic improvements. The education system is in dire straits. Unplanned urban expansion is happening at a rapid pace, and ill-conceived projects are proving to be expensive, and at times irrelevant.
Given this brief background, there are multiple areas to be focused upon. It also means that reforms are needed to address these issues:
An immediate need is to create a suitable environment for Capex to increase. The number of private capex projects that have been stalled has increased over the last few years to near record high at 25.4% as per the CMIE data. This is an alarming number. Availability of bank credit and easier norms for land acquisition is something that needs urgent attention. Acquiring clean zoned land is a challenge. Medium-sized entrepreneurs say that acquiring land and all the clearances for starting a venture is still a huge problem. Therefore, land reforms are a priority. But land reforms without fair compensation can become a non-starter. Hence adequate social infrastructure needs to be created for people who are displaced by these land reforms.
Between 2009 and 2019, close to 200 million new voters have come into the electoral system. It also means that young people are getting ready to work. So any reform or steps taken by the government should address this issue of job creation, it means stepping back and doing reforms on skills, education as well as encouraging new industries to flourish.
A commitment to a stable tax regime, in any form will help. But it needs to be stable and internationally competitive, as India is vying with other countries to attract global capital and businesses into India.
Needless to say, the depth of every market has to be increased; be it the market for private equity, debt or the public markets.
Reforms should address economic disparity, and a fairer distribution of income and wealth will help in the long run. The choice is not between generating wealth and distribution, it is about striking a better balance.(The author is a director at Quantum AMC. Views are personal.)