GDP as national security PDF Print E-mail
Thursday, 16 August 2012 00:10
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PM bang on in his prescription, will UPA listen?

Prime Minister Manmohan Singh hit the nail on the head when he said, in his Independence Day speech, that is was time to view economic issues as matters of national security. Even simple maths makes this clear. The difference between a 5% and a 9% GDP growth makes a R8,000 crore difference to the annual defence budget, and that’s assuming no change in the proportion of defence spending. Add to this, the impact of GDP growth on development spending—emphasis on raising this has been a central plank of the anti-Naxal strategy—and the impact is higher. Of course, when the PM said the lack of political consensus was preventing this higher GDP growth, what’s not clear is whether he was referring to the Opposition or to his allies, more likely both.

Indeed, the government’s biggest failure has been its inability to show its allies as well as the Opposition that they benefit from economic growth. Between 1994-95 and 2002-03, when per capita income grew around 2.99% per annum, development spending by all state governments put together rose just 8.9% per annum. When annual per capita income growth rose to 6.91% in the 2003-04 to 2009-10 period, development spending in the states rose by a whopping 17% per annum. With poverty levels also falling hugely, it is obvious the parties in power in the states also benefited. And given the number of states the Congress party is in power in, it is obvious the Congress’s allies and the Opposition parties are the biggest beneficiaries. Even in terms of the social agenda that all political parties pursue, it is the SC/ST/OBCs and the Muslims who have seen the sharpest fall in poverty levels thanks to the higher GDP growth.

What is unfortunate is that apart from the usual exhortations—“we must make every effort to resolve the problems inside our country”—there is little to suggest the PM is going to take action. Indeed, the recitation of his government’s achievements—100% enrolment in primary schools, 12 crore mid-day meals, 8 crore MGNREGA jobs—are all part of the old mindset where the focus is on outlays and not outcomes. Indeed, the fact that 8 crore MGNREGA jobs were given last year is admission of failure to create an environment conducive to job-creation. The biggest problem today is that of the fiscal deficit—low public savings are what have resulted, primarily, in the lower investment levels. Perhaps an Independence Day speech is not the place to spell out detailed action points, but there are enough areas where action can be taken without even incurring the allies’ or Opposition wrath. These include, for instance, rolling back the retrospective tax, clearing aviation FDI, ending the EPFO monopoly, clearing RIL and Cairn proposals, giving more subsidies through Aadhar, conceding compensation to states to get GST going … The nation waits. As do the credit rating agencies.


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