India: Conflation and clarity

Just caught up with this piece by Anil Padmanabhan of MINT written on Dec. 25th. He conflates big time.

The problem is not that rural consumption has risen. But, that it has risen for the wrong reasons and without commensurate increase in productivity or by creating productive assets. That is the flaw in the design of NREGA. It is a rural entitlement programme and not a rural opportunity programme.

Yes, that does not mean that the State should go soft on KingFisher. Why are both mutually exclusive? In fact, both problems have a common source: a paternalistic and feudal state with no accountability, in collusion with vested interests (poverty and business) as opposed to lifting the poor out of poverty and helping markets.

T. N. Ninan has made up more than required ground for some of his recent wishy-washy weekend ruminations with this brilliant piece on how the Congress has brought back all the ills that we thought or hoped that the reforms of the 1990s would slowly begin to eradicate. My only quibble, if at all, is that he has addressed it to Anna Hazare & Co. Not that it is wrong. But, it is the people who support Anna Hazare and yet file for BPL status that need to be addressed.

I have based my Tuesday column in MINT on this piece, to a large extent.

A very stark warning by Pratap Bhanu Mehta here in this Q&A with Business Standard:

You are back to the seventies. State discretion has grown. State interference in regulators has grown. That basic structure that we wanted in 1991, a rule-bound system, friendly to business, a new social contract that says the job of business is to generate wealth and the government will tax that wealth to help those who cannot participate in this economy. All elements of that social contract have broken down. That doesn’t mean that India will come to a grinding halt. There are some underlying drivers. If the savings rate can remain in the 30 per cent range, you have at least some investment going. But nobody in the political system realises that the historical window of opportunity for putting in lasting changes is very small. In our case, it is 10 to 15 years given our demography.

If we don’t lay the foundation for wealth and prosperity in the next 15 years, then the India story is gone forever. You will then grow old, before you grow rich. Our confusions are very much at the structural level.

This post originally appeared at The Gold Standard and is posted with permission.