Column : Response to the global chill

Feb 11 2012, 01:55 IST
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SummaryThe news that the finance ministry has decided that the budgeted expenditure next year should not necessarily be in the framework of the annual plan was distressing.

The news that the finance ministry has decided that the budgeted expenditure next year should not necessarily be in the framework of the annual plan was distressing. The finance ministry reportedly wants expenditure to be decided not in the annual plan but as per the Rangarajan Committee, which has decided to abolish the concept of resources for the plan and plan expenditure to facilitate their concept of rationalisation of public expenditure and investment. GoI seems to have decided to send these signals as the economy descends below the 7% growth figure and as aggregate investment and manufacturing growth rates fall. The plea that I made in my last piece in this paper for “incentive mechanisms, technology policies, skill training, strategic plans and tariff tweaking for 29 industry groups where in their (National Competitiveness Commission) opinion we are at or near the global best” (http://www.financialexpress.com/news/gearing-up-in-2012/900785/0) is not the kind Delhi is heeding.

Interestingly, my plea seems to have had resonance elsewhere and the emerging global literature on the forthcoming BRICS Summit in Delhi in March this year outlines that, for strategic emerging industries, China’s current Twelfth Five Year Plan has, at the industry level, specific targets and details of policies on taxation, tariffs and domestic procurement. The approach paper to the Twelfth Plan in our case, on the other hand, sagely suggests for the manufacturing sector that (in the years of global slowdown) we should develop international networks and consultative processes.

There was, however, hope in the reviews the PMO was doing of investments and roadblocks in relation to infrastructure, agricultural policies and strategies of successful PSUs. We also need to follow through on ideas emerging from the global economic debates, for the approach paper is right in suggesting that global aspects can only be neglected at peril. It is valid to argue that, given the global slowdown, Indian growth at around 7% is not to be scoffed at. But the context here is, can the economy do better? Unfortunately, the buzz from visiting ‘experts’ and businessmen is pushed by their own agendas and one of the lessons of the meltdown from 2008 is that transparent arm's length relationships between corporate, financial and consultancy entities are, more often than not, missing. Unfortunately, the press in India generally tends to downplay the comments of serious independent scholars and economists. As Stiglitz never tires to tell us, the FFI types are normally not the

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