This is an article that I wanted to write for a long time and had not found the motivation to do so. We have witnessed the fall of INR and have heard many versions about how to stem the rot.
Here are my views, not on how to strengthen the Rupee but on how to strengthen the country:
India is suffering from high inflation for a long time now and there seems a big gap in the steps that the Indian government has been taking and the results of those steps.
My limited knowledge of economics tells me that the government should
1. Instill confidence in the investors of large infrastructural and industrial projects by clearing the air on land acquisition and financing of projects. Many infrastructure and industrial projects are languishing because of not achieving financial closures and roadblocks in land acquisition.
2. Develop a strong agricultural plan to increase the yields. We desperately need a second green revolution to feed our teeming millions. (No free lunches and subsidized food please, that will lead to a idle population). Our country has been facing a demand led inflation and supply of food grains is not keeping pace with it. All the stocks of wheat lying rotting in FCI storage are best utilized for distribution in the open market rather than waiting for them to completely rot to be then given to distillers.
3. Our country needs a strong manufacturing policy. There is an urgent need to have a policy of increasing capacities in all our industries to meet the growing demand for manufactured goods. Many sectors in our country are oligopolies, unless these oligopolies are broken there is no hope of reigning in inflation.
4. Real estate is the highest employer of unskilled labour and is also the root of the unaccounted money in this country. Firstly, our states have to reduce stamp duty on transfer of real estate and strong regulation to see that actual prices are reported during these transactions.
5. The government either has a monopoly or strongly regulates the markets for basic necessities like coal, power, water etc. The government has to get out of these businesses.
6. Business like Coal, Sand, Power Distribution, are controlled by mafia. Our Law and Order system needs an overhaul. Can there be a time limit for framing charges on anybody who is arrested? If one is arrested, can there be a law that forces the police to frame charges within a stipulated time other wise those arrested can walk free? Such a law exists in the US. Another lacuna is the number of times the cases in courts get postponed. Can there be a law that limits the number of adjournments in court cases?
7. Our financial markets are very shallow, even with a turnover of Rs.150 billion on our bourses in the spot markets, we have situations where insider trading, front running, price rigging and circular trading are rampant in the market. For this turnover there are only 20 million investors who have a demat account (a mandatory requirement for trading in the markets). Unless our markets attract more investors, we will not be able to broaden and deepen our markets.
Another thing that ails our markets is that there are two clear financial markets. the unorganized market full of Ponzi schemes and unregulated lending is draining the economy.
Most of these things that I have mentioned here are repetitions from my earlier blogs. But this is a wish list, and these wishes are being granted by those in power.
Therefore there is more of the same. Let us learn from our mistakes and bring about the required change.
All Comments are welcome