More than anything else, the biggest threat we face today is the inability to turn our strongest-ever demographics to our advantage. While India is expected to have one of the highest economic growth rates over the next 30 years, driven largely by its young population, the road to that future is neither paved with roses nor success destined. Policy has to support the social, economic and political aspirations of this young demographics. For a government that seems to be in the process of shrugging off its policy inertia, here are four political-economy solutions.
One, control the extent of black money in property markets — the hub of undisclosed income. This might hurt in the short-term, but will transform the financial pipelines of India over the next decade. The government — today — has to do just one thing: create a legal option under which any citizen can buy property at a rate that’s Rs 1 or more higher than the disclosed sale price through a transparent auction. Here’s the process.
Step 1: the claimed price of every apartment should be put out on an internet website, inviting bidders.
Step 2: prospective bidders should be given 10 days to bid higher and deposit 10% of the value to the authority.
Step 3: on Day 11, the bids should be opened and if there is an offer that’s higher than the stated price, the deal should go to the highest bidder.
Step 4: the new bidder be given 30 days to pay up — or lose his deposit. Of course, if no citizen comes forward, we should presume the deal is clean.
Two, look beyond increasing foreign direct investment (FDI) while designing reforms. The idea of economic reforms has been captured by an ideology whose sole agenda is to increase FDI. On that front, the latest proposal by the Department of Industrial Policy and Promotion, released last week, is a step in the right direction.
While raising FDI limits to 51% in multi-brand retail and 100% in single-brand retail, it has set three conditions that look beyond. First, half the investment should be in backend infrastructure like cold chains and warehousing — crucial to strengthen India’s distribution. Second, 30% of sales should be to small kirana shops — critical to link the prosperity of small shops to that of large retailers. And third, 30% of all sourcing should be from small and medium enterprises — something that may be difficult to enforce, but let the debate begin. Going forward, we need more such creative solutions in the space of consumer protection, investor rights, transparency in economic reforms.
Three, build political consensus around agriculture. Being a state subject, there is little the Centre can do. But as India moves forward on the shoulders of its young demographics, it is inconceivable that we leave leave half the population to survive on less than a fifth of its GDP. The solution: deliver greater returns to the farmer through the reform of state mandis.
Here, the only reform needed is of transparency that is possible through technology. What we need to ensure that the farmer who sells his produce gets the price he should. I understand that the agriculture system is far more complex than merely a price — the aarhti (the middleman on the mandi floor) is also a provider of finance to the farmer and that skews the social equation. That’s why we need policy innovation to drive the agriculture agenda and hiding behind centre-state inadequacies is not acceptable. Let the Congress-led states begin the reform process, show success and then make the issue political and take the electoral war to other states.
Four — and this is the most important — enforce law and order. In other words, make crime a higher-risk business. The enforcement of such a legal infrastructure will allow average people to get on with their lives with dignity. Such an invisible infrastructure will also catalyse social interactions. To respect and adhere to contracts, for instance. Increasing the stakes for criminals, however, would only be a first step, given the abysmal track record of the rich and powerful who spit names on the face of law and drive off. The bigger step would be to enforce criminal liability, jail terms that are merely appendages in a tattered rulebook for now.
Finally, the government has to ensure that young women can walk freely on Indian streets. It is only under the blanket of this security that half our population would be able to be fully productive and allow the country to reap its true demographic — and political — dividend.