In an open letter addressed to Prime Minister, Mr P Chidambaram, former finance minister in the erstwhile UPA government has taken pot shots at Modiji for his ‘alleged’ failure to create jobs. He laments that during 2014-15, jobs were generated at a measly rate of 100,000 per quarter which works out to 400,000 in the whole year.
Mr Chidambaram’s observation is reminiscent of a phrase coined by ex-Prime Minister, Dr Manmohan Singh “money does not grow on tree”. Dr Singh was alluding to efforts-led creation of wealth even as right under his nose, people witnessed a contrasting spectre of huge amount of national wealth being plundered and given to close contacts/favourites of political bosses in the grand old party. However, drawing a parallel from his anecdote, Mr Chidambaram should know that ‘jobs are not created over night’.
Even the most rudimentary thinker would know that job creation is the outcome of a long-drawn process whereby an entrepreneur first conceives a project, tests/assesses its viability, prepares a blue print, gets necessary approvals [land, environment, etc], ties up funds from banks & financial institutions and finally takes all necessary steps [such as power, water, gas connections, approval from municipal and other local bodies etc] to execute it leading to successful commissioning and start of production.
There is an ‘inevitable’ time lag between the day a project is conceived to the day it goes on stream; the extent of time lag varies depending on the type of project, its size, location, financing requirements and a host of other socio-economic and political factors. For the kind of projects, Mr Chidambaram cites viz steel, fertilizers etc it could run in to several years perhaps, even decade [the steel project of POSCO in Odisha for which a memorandum of understanding (MoU) was signed in 2005, is a good example].
Under a decade of UPA dispensation, the entire eco-system was “adversarial” to potential investors [including foreign investors] who would normally look for attractive business opportunities and timely execution of projects. While, on one hand, continuing uncertainty of policy environment indeed a situation of ‘policy paralysis’ [primarily due to erosion in authority of prime minister] deflected them away from India, on the other, project implementation was affected due to delays in approvals, cumbersome procedures, multiple centres of power and all pervasive corruption.
The then government indulged in gross-mismanagement of the economy vide splurging un-productive expenditure, ballooning subsidies, bloated welfare schemes [much of allocation under these siphoned off again thanks to endemic corruption in their administration], letting reckless mis-use of fiscal incentives given to industries for development of backward areas or for exports and tax avoidance etc. All of this resulted in un-sustainable increase in fiscal deficit, high inflation, high interest rates, increasing current account deficit in turn affecting investment sentiment and growth.
The investment by public sector undertakings (PSUs) also came to a virtual standstill due to (i) policy paralysis and poor governance affecting decision making; (ii) substantial reduction in budgetary support and (iii) eroding the internal resources of profitable PSUs like ONGC, OIL, GAIL, CIL, NTPC, IOC, BPCL, HPCL etc either by asking them to pay high dividends or through other innovative means like directing ONGC/OIL to share burden of under-recoveries on sale of kerosene, LPG, diesel etc.
The development of infrastructure viz., power, roads [including rural roads], ports, airports, railways, highways, telecom, irrigation, warehousing etc also took a back seat under UPA dispensation. In highways, faulty design of concessionaire agreements besides bureaucratic delays led to construction coming to virtual standstill. Meanwhile, private investors almost got scared away and until last year, they were not willing to touch PPP [public-private-partnership] projects even with a pole.
Even as the writ of ‘discretion’ and ‘crony capitalism’ [a cryptic phrase for currying personal favours in distribution of natural resources and award of contracts] ruled and a plethora of scams proliferated, courts were forced to intervene. The intervention of courts in executive domain by way of ban on mining or embargo on policy decisions, also inflicted a heavy cost by stalling development. But, for scams, this could have been avoided.
The so called employment guarantee scheme viz., MGNREGA [Mahatma Gandhi National Rural Employment Guarantee Act] started during the UPA regime (in 2005) turned out to be guzzler of precious resources. Instead of creating assets aimed at providing sustainable basis for employment, the flagship scheme was used for handing out doles. Even these doles did not reach beneficiaries due to large-scale pilferage of funds.
The central government also played a big role in hampering development in states by holding back/delaying approvals, inordinate delay in release of funds, too much of centralization in implementation of centrally sponsored schemes (CSS) and giving very little leeway if at all, to state governments in their formulation . The spirit of cooperative federalism was completely missing under the decade of UPA – regime.
In this backdrop, when Modi took charge on May 26, 2014 he was carrying no magic wand that would remove aforementioned stumbling blocs – all deep routed and of structural nature – over night. Team Modi [most of his cabinet members are young parliamentarians having the zeal and dynamism in sync with their boss] has worked assiduously from day one [de facto, he was on the job from May 16 when election results were out] and in last one year succeeded in filling most of the potholes. For details on all that it has done and its achievements, pl read:-
The green shoots are already visible with GDP registering growth of 7.3% during 2014-15 up from 6.9% during 2013-14. In each quarter of 2014-15, growth was higher than corresponding quarter of 2013-14 with last quarter viz., January – March, 2015 recording 7.5%. The growth in manufacturing [considered to be hotbed of employment] during that quarter was spectacular 8.4% as against 4.4% during January – March, 2014
Modiji’s success in improving the investment sentiment [most crucially by resurrecting the authority of prime minister], un-clogging stalled projects and improving the ease of doing business may also be seen from a sharp spike in gross fixed capital formation (GFCF). The nearly Rs 65,000 crores increase in GFCF in Q4 to Rs 855,000 crores [at 2011-12 prices] over Q3 figure was the highest quarter-on-quarter increase in last 2 years.
In budget for 2015-16, there is some reduction in allocation for education, health, child development etc. However, this needs to be viewed in the light of efforts to improve fiscal deficit on one hand and substantial increase in transfer of funds to states [as per recommendations of 14th Finance Commission] giving latter more leeway in spending on social infrastructure. Even more crucial, this government is focusing on improving quality of such spending [minimizing leakages] that will lead to much better outcomes than under a scenario where budget allocations are more but impact on ground zero is minimal due to leakages and in-efficiencies.
In a nut-shell, vide a significant improvement in investment climate [triggered by good governance and reforms], boost to infrastructure spending without compromising on fiscal consolidation, focus on “Make in India” [other supplemental initiatives like “Skill India” & “Digital India”] and schemes for economic and financial empowerment of majority of poor viz., PM Jan Dhan Yojna (PMJDY), PM Suraksha Bima Yojana (PMSBY), PM Jeevan Jyoti Bima Yojana (PMJJBY) and Atal Pension Yojna (APY), Modi – government has prepared a solid ground for catapulting India on to a high and sustainable growth path.
And since, this growth has a people focus and involves their participation on a massive scale, it will give a big boost to employment. Therefore, Mr Chidambaram and other naysayers need to show some patience and wait for the outcomes which will inevitably be positive as the mission is being led by a Prime Minister whose intentions are pure and sole motto is development and welfare of the poor.