Indian economy: Overnight change is wishful thinking

The new Indian Prime Minister Narendra Modi very rightly asked his cabinet colleagues to set their 100-day agenda with the focus on efficient governance and implementation of programmes. Issues like price rise, agriculture and women's security will naturally be the priorities. True, while focusing on these aspects, the government will take forward on a priority basis the issues left pending by the previous government.
Obviously, expectations of the people are high, especially in view of the deteriorating situation of the Indian economy in the recent past. Gaps are galore. The new government has to move cautiously as the entire world will also be watching the happenings here. The 10-point vision, which includes increasing investment, completing infrastructure projects in a time-bound manner and exploiting the natural resources to the country's benefit, is very much practical.
One of the irritating things is the delay in execution of projects. Project planning is essential. But what about time management? Indian planning suffers defects - either the projects are not implemented or if implemented, it is done in a topsy-turvy manner. A very recent paper has highlighted the fact that delays in implementation of central infrastructure projects have resulted in cost overruns to the tune of more than Rs 1.0 trillion (1.0 lakh crore).
Till March 2013, the cost overruns of about 285 central projects had been estimated at Rs 948.0 billion (94,800 crore). In view of about 8-10 per cent annual accretion, the overruns were supposed to have crossed Rs 1.0 trillion mark by March, 2014. While the original costs were estimated at Rs 4.75 trillion for these projects, the spending had overshot the figure to stand at Rs 5.69 trillion in 2013. Railways saw the maximum cost overruns due to delay in execution of central projects in the infrastructure sector. The cost overruns stood at Rs 456 billion. In the power sector the cost overruns overshot by Rs 150 billion as the costs of projects went up from the original estimate of Rs 1.35 trillion to Rs 1.50 trillion.
The banking sector, next, requires a close institution-friendly supervision, especially as far as the Basel III implementation is concerned. Too much government control leads to clipping of the arms.
Where is the national banking plan? The challenge, at this stage, remains three-pronged: acquiring the right technology, deploying it optimally and remaining cost-effective while delivering sustainable returns to shareholders. Thus managing technology to reap the maximum benefits remains a key challenge for the Indian banks. The government has to keep a close watch.
It has rightly been diagnosed that an institution can optimise performance by ensuring that each of the three sides of the performance triangle-corporate culture, the task the individual must perform and the motivation or behavioural aspect of their employees-should see a cautious approach. It is a pure case of change management and as such banks need to focus on appropriate capacity building measures to enable their employees to handle advanced risk management systems. And it will not be out of the place to mention here that the supervisers as well need to equally equip themselves with appropriate skills to have effective supervision in adopting those systems.
An integrated human resource development (HRD) approach calls for a bold strategy focusing on the systems targeting both business goals and employee satisfaction: a highly developed performance management system, feedback and counselling, potential appraisal system, organisation and development system, career planning and, of course, a well-structured training and development system. Vision, values, innovation, leadership and social commitment-the important personal traits of individuals-have their positive impact on the work environment.
Then what about the farm sector? Is it possible to reach the target of 4.0 per cent by 2017? Hard but not unreachable!
Is it not a well known fact that global hunger is not the result of insufficient food supplies but their uneven distribution across the globe? About 1.02 billion people are going hungry entirely unnecessarily. Still 70 per cent of the world's poor live in rural areas: a sound agriculture sector is very important for their sustainable development, food security and reduction of global poverty. Modernisation is a must in view of the overall picture as we have been noticing over the decades.
Agriculture sector modernisation is a dynamic process in the sense that functions do change depending on the time and space. A 'revolution' is to be aimed at, which, being slow but steady, would spur selective activities and finally the whole agrarian society would witness an upward drift. There are several requirements to be met before achieving agriculture sector modernisation. The increased need for food and raw materials in an area and from outside the area is required to be met. Land use should be optimal, as farm land use gives rise to other activities. Human labour has limitations. Still a labour surplus area, yet resourceful, cannot be left only at the mercy of nature. Natural growth is not desirable in the sense that extra natural forces are available, which, in turn, churns up nature's productivity. Modernisation always leads to a slow but steady growth. Over time the land use has to be optimised by maximising production and employment creations, subject to certain constraints on the social, financial, legal and other fronts.
The problem that needs to be resolved urgently is a two-dimensional one-income and employment. Enhancing the general income is dependent on several planks like: (i) better utilisation of resources, (ii) minimisation of cost and maximisation of output. It is easier for the farming community to devote themselves to the work which they can adapt to easily. Side by side, the external sector also needs to be bolstered. A new foreign trade policy must be there focusing on the long term goal and other such things. There should be a control on imports like gold.
Overhauling the entire process requires time and too much haste is not desirable naturally. Short-term targets are welcome, which, in turn, could help reach the long-term goals. India has the potentiality-the only thing required is transparency in every field.
China has been leaping high. India must not lag behind. If the country does not have the power (money and military), it has to remain contented as a back-bencher. Let there be quicker growth and regional development encompassing the climate factor and food, water and energy security.
Dr BK Mukhopadhyay is a Management Economist and Principal, International Institute of Management Sciences, Kolkata. m.bibhas@gmail.com