Arvind Singhal: The 'eco-logical' balance

MARKETMIND

Like in nature where maintenance of an ecological balance is paramount for retaining existence of diverse life forms, there is a certain immutable "logic" that is essential to achieve "economic" balance and sustained growth.

Unfortunately, successive governments in independent India have failed to appreciate the complex inter-linkage and inter-dependence of various facets of socio-economic policy.

As a result, imbalances have begun to show up more and more prominently as the population of India has almost trebled in the last 60 years.

The results of the most recent general election have resoundingly brought up this fact that the last few decades of policy making have only succeeded in creating wider schisms in the country, which if not corrected immediately, can create bigger and more dangerous fissures in our nation's fabric in the times to come.

In this context, it is indeed a very welcome change to read about the current government's intentions to increase spending on social and physical infrastructure and give due priority to education, healthcare and the agriculture sectors.

A weak, illiterate population can only be a drag on the nation and lead to a widening gap between the haves and the have-nots. Likewise, no government can get away without redressing the stark reality of having over 70 per cent of its population earn just about 24 per cent of the national income.

Unfortunately, this is where my optimism begins to wane. The Common Minimum Program released by the new ruling front gives a feeling that the UPA constituents have yet not understood the inter-dependence of different aspects of our economic activity. I shall give two examples to illustrate this point.

It is no secret that the financial condition of the average Indian farmer has been precarious for decades.

Despite the existence of various ministries to alleviate the hardship for the farmers, and tens of thousands of crores of annual subsidies being doled out each year (perhaps at the cost of spending on education, healthcare, and infrastructure for the entire nation), none of the governments have addressed the core issue of very poor price realisation by the farmer for his output whereas the price paid by the end consumer remains very high.

The very high degree of fragmentation of land holdings (preventing economically efficient farming), the multiplicity of intermediaries including the inefficiency in the APMC system, restrictions on movement of agro-products from one state to another, almost non-existent cold chain systems across the country, practically negligible value addition through "processing" at or near farm gates, and total fragmentation of the retail system dispensing the food products to the 1 billion consumers is the essential cause behind the farmer remaining poor and millions of Indians going hungry or paying a higher than necessary price for getting the food on their tables.

Till the time we bring together the multitude of ministries and other government agencies under some kind of a holistic control, there is no chance of de-fragmenting these anomalies and streamlining the farmer to the consumer supply chain in a manner that there is minimum value loss in the chain.

For many years, I have held the view that if we can make a serious effort to promote a very strong retail front end, and both retail and the government make a serious effort in streamlining the supply side, it would not be inconceivable to reduce or even eliminate the need of any kind of subsidisation to the agriculture sector.

The entire rural population, of course, is not only engaged in farming. Our nation has been blessed with an incredible heritage of arts and crafts, and fortunately for us, the diversity of this heritage spans the entire country rather than any one or two specific regions.

Yet, our artisans' life is as pathetic as it is of the average small farmer. The artisans and craftsmen have little or no access to modern technology, raw material, design training and input, and marketing/branding savvy to enable them to realise better financial return for their talent and effort.

Millions of Indians are still trying to eke out a living from these human skills, operating at the fringes of poverty while again, the exceptionally fragmented "supply" chain (and again, ironically, the problem is worsened on account of multiplicity of ministries and other government agencies) prevents even the affluent Indian (and international) consumer to have a convenient access to these products (while China continues to capture billions of dollars worth of export market).

I therefore hope that the new government shall give a very fresh look to the entire "eco-logical" balance of our economy, and make a serious effort to address the challenge in a holistic manner rather than the knee jerk, piecemeal approach of the past!