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Pro-poor, pro-business PDF Print E-mail
Wednesday, 20 August 2014 00:00
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Of course the two can co-exist

It speaks volumes for how distorted the political discourse has become that finance minister Arun Jaitley needs to justify his government’s position—as his Facebook status, a sign of our times—of being pro-business while being pro-poor at the same time. There is the obvious point Jaitley has made, of how, unless the government gets revenues, it can have no development-spending—of the R18 lakh crore of revenues the Budget targets, R13.6 lakh crore are to come from tax receipts. There is the equally important issue of jobs. Despite the spread of the public sector and the expanding scope of the government over the past 6-7 decades, public sector jobs account for a mere 2-3% of total employment in the country—if ways are not found to make doing business easier, jobs growth will be the casualty.

And while it is desirable from a public policy point of view to focus on preventing cronyism, it is equally important to keep in mind that the other extreme—of promoting only PSUs—is even more undesirable. Telecom is an area where there have been, since 1999, several allegations of cronyism and, in many cases, this has rightly been dealt with a firm hand. But the counterfactual also needs to be kept in mind—for all the favours bestowed on them, including giving them 3G and BWA spectrum more than a year before their private sector counterparts were given this, the market share of BSNL and MTNL is just around 11%. For all the bailouts given to Air India and preferential treatment at airports, its market share is just 18.5%. Were the government to take away spectrum from the PSU telcos, or award bilateral rights to other airlines, this will be seen as cronyism—a CAG report has come down in favour of keeping bilaterals for Air India—but it will certainly help India’s consumers. Removing the PSU monopoly over oil/gas exploration, and auctioning oil/gas fields instead of handing them over to PSUs, has resulted in a situation where 32% of today’s crude oil production comes from the private sector. A similar story could get replicated in coal, were the government to open up the sector. Far from being pro-business, if there is a charge against the government, though it is very early days yet, it is that it has not done enough for business.

 

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