Opinion - Editorials

Familiar refrain

AS EXPECTED, THE Government's spokespersons have contradicted some of the critical observations of the World Bank on the economy, contained in its recent report entitled "India: Sustaining Reform, Reducing Poverty." Indeed, the Bank while making several familiar points in its homily has probably exaggerated the magnitude of India's macro-economic ills only to underline the need to hasten the reform process. For instance, statements such as the country's current fiscal deficit is worse than it was in the crisis year, 1991, and worse than it was in many other countries during a macroeconomic crisis, are based on a very narrow statistical interpretation. They ignore the rapid, even dramatic strides, made in the food economy and in the external economy. After a decade of economic liberalisation, the latter is more closely linked to the domestic economy than ever before. Ample food stocks have acted as an effective cushion against drought, as they were meant to do. With foreign exchange reserves at an embarrassingly high $83 billion, with exports growing at a reasonably fast pace and with the current account being in surplus for the second year, the Bank's report seems unduly pessimistic.

In any case, the annual assessment does not carry the weight of yesteryear. Most certainly, that has to do with the vastly changed context in which India is placed in relation to international financial institutions, including the World Bank and the IMF. Whereas during the three decades beginning with the 1960s, India depended largely on these institutions even to finance its current account deficit, today it is in a position to retire costly external debt ahead of schedule. The relative strength of the external economy was again seen in a dramatic role reversal vis-a-vis the IMF. From being a borrower, India has become a contributor of resources.

One does not need the World Bank to tell us that with one third of the world's poor, the country needs rapid growth to reduce poverty and create enough jobs to sustain income increases for its one billion population. There are macroeconomic vulnerabilities and structural impediments that will have to be countered more forcefully. The Tenth Plan has targeted an 8 per cent GDP growth every year. However, even in the second year the target looks elusive notwithstanding the much better prospects for agriculture and the nascent industrial recovery. India's development policy challenges, according to the Bank, are twofold: (a) improving the management of public resources, reducing budget deficits, prioritising productive investments, and enhancing the quality of service delivery and (b) improving the investment climate and raising productivity levels in industry, services, agriculture, and rural development. A development agenda on those lines will necessarily have to address frequently discussed economic concerns. Apart from fiscal consolidation, the list includes tax reform, subsidies, financial sector reform, and improved delivery of public services. The Bank is passably original in its discussion of the last — the reform of the civil service on which delivery of public services so crucial for economic well-being depends. It makes out a strong case for redeploying manpower to jobs involving frontline delivery services, away from the more conventional administrative and support functions. The beneficial impact of computerisation has been minimised by the failure, in many cases, to redeploy staff and restructure internal processes. As emphasised by the Bank, reform of the bureaucracy has got to be high on any future development agenda.

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