Not sops, but solutions
If I were the Finance Minister, I would promote policies that offer long-term solutions and not short-term reparations. Sops and subsidies should give way to opportunities and wealth creation.
Recipe to rescue dying metropolises (urban growth)
The concrete concerns to be addressed:
1. Under-represented, under-financed municipalities
When people migrate from urban to rural areas, their votes do not migrate. This results in lower representation of urban areas in the legislature. There has to be a way to proportionately move votes along with the migration so that their needs are heard. The discretionary transfer of funds from the State is barely enough to cover staff expenses. To mitigate this, there has to be some form of CSR implemented by MNCs and other industrial groups in the cities to support the local government .
2. Absence of strong transport system
Being engines of growth, cities cannot run without a good transport system. It isn’t hi-fi airports, but a strong public transport system with an integrated management of rail and road that is needed to cut down pollution and congestion.
3. Absence of integrated urban planning and functioning
The smart functioning of cities is more important than having “smart cities”. Healthcare, transport, infrastructure, housing and financial institutions should be welded together using technologies such as IoT to facilitate the seamless delivery of services to the tax-payer.
4. Inverted pyramid structure
Every city is bursting with engineers and doctors, whereas there are fewer technicians and nurses. A growing urban economy should be the other way around. Hence, a massive re-skilling programme should be undertaken to impart such blue collar skills to the burgeoning young population through the PPP mode.
Rejuvenating the rural sector
Concerns to be addressed:
1. Better income to the rural population. This willstimulate demand for manufactured goods and services and hence agricultural income needs to be increased by:
a. Subsidy rationalisation and credit expansion:
After achieving a specific target, subsidies would be phased out to allow the reallocation of resources for infrastructure creation, such as warehouse facilities and fiscal consolidation.
b. Reform agricultural markets so that farmers get the right price in an institutionalised fashion
c. Setting up value addition and food processing centres for perishable crops to counter the price fluctuations, to reduce the wastage of perishable crops, and to promote exports
2. Re-skill rural youth for non-farming opportunities as decline in agriculture will deny them a livelihood. There has to be a large-scale programme to re-skill the ‘unemployed and unemployable’ population to move them into non-farming opportunities, such as to the manufacturing sector.
3. PURA by strengthening 73rd and 74th amendments
Dr Abdul Kalam’s dream of Providing Urban amenities to Rural Areas (such as access to drinking water, electricity and healthcare) is possible only by decentralising power. This can be actualised by removing the clutches of the state on the cooperatives and the local government to make every unit of the local government self-reliant to raise resources and utilise them for their service delivery.
Strategies for job creation
It is the entrepreneurial spirit of the ordinary Indian running small business that can counter unemployment. Let us unleash the potential of the MSME sector by:
1. Redefining the classification of what constitutes as MSME, based on employment rather than investment. This is a tested model in developed countries such as the US and Germany
2. With world trade growing at 3.8 per cent, concessions and tax breaks according to the contribution of MSMEs in the export basket.
3. Labour-intensive sectors such as garment and dairy need attention. For instance, FTA between India and EU would give our garment exports an edge over that of Bangladesh. Also, the toy industry, which China vacated, is a huge opportunity for India.
4. R&D to create value-added products such as milk powder and cream, to boost the rural economy. Half the milk produced in India goes waste due to lack of infrastructure and trained personnel. Jobs should be created by training people from rural areas to prevent this wastage.
5. The hospitality and tourism sector , which has great employment potential, is witnessing rapid growth. It is time we tap into this growth by replacing the concept of “declared tariff” with “actual tariff” to calculate GST on hotel rooms and create a special fund for entrepreneurs in the SME category.
6. A common method of valuation between investors and tax authorities would rationalise angel tax and encourage investors to invest in start-ups.
7. Excessive regulation and rigid labour policies should be amended to kick off job creation in all sectors of economy.
This is a historic opportunity for the nation to take these concrete steps and propel the growth of both the urban and rural areas by facilitating job creation. The Budget should not miss the chance to enable these changes.