With signs of stagnancy, frustration has led to government bashing being in vogue – Economic Times

This has created an impasse and we need to resolve these contradictions. Land reforms are not easy because merely compensating owners for industrialisation does not actually lead to improvement in their lives. What happens to those who work on this land and are now displaced by a factory coming up? The same holds for mining.

Further, while FDI in retail can be a panacea in the long run for agriculture, there will be a lot of displacement of kirana shops, which is a social issue.

Given that the number of jobs is not growing, displacing labour on grounds of efficiency will add to the unemployed which is serious as we do not have a social security system. Therefore, decisions should be calibrated as they involve deeper social issues.

There are other issues like FDI in insurance or pension funds. Prima facie, these sectors require capital to expand and the debt market needs long term players. The controversy here really is whether FDI will add value. In banking for example, having more foreign banks does not mean rural penetration.

Will this hold for insurance or pensions too? There are no easy answers here and the justification cannot be that India requires more dollars and should, therefore, open all the doors. We need more discussion here.

The subsidy bill and the absence of will on the fuel bill is another cause for dissatisfaction. The FM has indicated the ratio of 2% will not be breached.

But let us understand that while it is easy to say we should move to market prices, the inflationary impact of 0.5-1% is a tough call when CPI inflation is close to 10% and WPI inflation is around 7%. While the rich should pay market prices, we do not have a system for separating the distribution aspect so that farmers are not impacted.

The error we make is to judge the government as a business entity that runs on commercial lines. We expect the government to raise revenue without hurting us (the CAG report talks of almost 1.4 lakh crore of revenue foregone in direct taxes, two-third of which went to the corporate sector), spend money on infrastructure so that we can run our automobiles well.

But we are overtly critical when the word subsidy comes in. Nor are we willing to recognise the social and political compulsions that underlie all government action. We need to stop and think before raising this bogey of policy paralysis again.

(The author is chiefeconomist at Care Ratings. Views are personal)