Sunday, 6 March 2016

Comprehensive Vs Bottom Up : A Tale Of Two Economic Ideologies

This is a conversation I had online with a college senior, and a person working extensively in a consultative position with SME companies at a senior level, with a pedigreed work experience at senior management levels. This conversation is between two people of completely varied economic ideologies, and I hope will provide a glimpse of an alternative path of development. This is a slightly different approach I am adopting, and hope that people can connect, as in my opinion it gives an interesting insight into diverse viewpoints; I know I learned a lot from this conversation, and hope others can also glean a lot...


The conversation links onward from my previous article wherein I had compared and analysed the Middle Class, wherein I had stated : “The cities may not like it, but there is nothing they can do about it. They are outnumbered 5.5 - 1 in Rural Urban Split, or perhaps nearer aproximately {from memory, could be off target} 9-to-1 in terms of income..” Excerpts from the conversation are given below : interested people can look up the full conversation on our open LinkedIn group Th!nking Indian :




THE CONVERSATION


Mr Amitabh D Sinha {Expert Service Culture, Business Strategy} : Vishal, as I had said right at the start, some much needed direction and I stand by that, but I also feel there isn't enough substance for the euphoria.  I am also especially annoyed by your comment that the 'the cities may not like it, but there is nothing they can do about it'. Let us understand we are talking about a single country, there isn't and should not be a competition between urban and rural India - for god's sake we have split this country into enough segments and sub-segments already, let's not add another us Vs. them dimension needlessly.


Given the way this country needs massive urbanization if it is to survive and grow, I also think sentiments of comparison between the rural drive, MII and Digital India are irresponsible - none of them singly, can do what they can do collectively.


Me : This nation does not neet massive urbanisation; not yet anyway - and not for the next decade at least. It needs decent facilities in the villages, make them liveable it needs good primary schools, secondary schools in villages and talukas with good colleges in the Tehsils. It needs good road connectivity. It needs Primary Health Centers in each village, it needs functioning anganwaadis in each vilage, it needs seamless dependable connectivity with tehsil and districty headquarters at each village level. That is the first priority.


The cities, by comparison, have way more than enough, and are in paradise by comparison. Those smart cities, those bullet trains can wait for another ten years, maybe 15. We dont need them, we dont want them - and to be exceedingly blunt, we dont deserve them either. Agreed on MSME; that has to be the second pillar of the nation's growth : as well as home grown organisations, purely Indian of whatever size as the third pillar. But, in order that benefits get to the innermost regions of India - the first pillar simply has to be agriculture.


This is good news for the cities as well; as industry after industry reaches saturation point in the cities, the new business can only come from the hinterlands and the villages. For that, they have to grow. If they do - the cities benefit in auto mode, as they produce the products that will be purchased by the increasing disposable income.


As regards allocation of resources, a 25% increase in layout to Agriculture is nothing to sneeze at; this is after accounting for the 15K Cr reallocation. This is a hefty incease, in addition to the increase in MNREGS, which gives clear signals for the direction the Governmnt is taking. They have no choice - either they cater to wherever the voters are, or they get tossed out in 2019. The writing is on the wall for them, sad to state.


I am not a socialist, neither am I advocating redistribution of wealth. I am just saying count the blessings we have rather than crying for what could have been. We - most of us - have the blessing of a splendid education {because our parents could AFFORD to send us there}. We should enjoy what we have - sure; that is our right as we have {most of us at any rate} worked hard for it.


But that is where I draw the line; while enjoying our success, let us not forget that not 5 feet away from our enjoyment is a destitute for whom our momentary pleasure is one month's food. Keep a thought somewhere in our hearts for them.


Mr ADS : You're not listening. No one is arguing for the trickle down effect theory - the less said about it the better. You're right, we have finite resources. That's where the rub is, NOT in how we distribute them, but how we plan to raise more. I am sick and tired of this 'limited resource' excuse, simply because I see NO effort to raise income, except through routes that are conventional, low yield and burdened.


You say, let's face facts, Indian Urban & Rural are competing, my response is then we are doomed, because it'll be a cold day in hell when either one alone will be able to drive this country's progress - growth of one at the cost of the other is something we've seesawed at interminably, both in theory & policy and look where we are.


We need new thinking hats. We're coming off almost 5 continuous years of crippled policy making (3 from UPA & 2 from NDA), we need to start solutioning, not merely ideating. I know there are elections ahead, but let's ensure we have a nation first


We don't need massive urbanization yet, not for another decade". False. We need massive urbanization to start NOW, but not by increasing the urban slums around our 200 odd urban centres. We DO NOT need the Mumbai's and Delhi's to become bigger, we need to create smaller self-sustaining, contributing, urban and semi-urban centres. Let's face it Vishal, if agriculture is ever to become a monetarily worthwhile occupation for the farmer, we NEED to solve the land parcel issue. The current population and possible productivity dynamic is unsupportable. It's great to talk of doubling farmer income in 4 years, how about increasing farming income? I know you will understand what i mean by that.


That cannot be done unless rural youth migrates to NEW urban concentrations where they are NOT designated as unskilled labour, but as people whose skills are built and used to create wealth for them as well as the nation. That will take manufacturing - there is no other wealth creator is there?


Me : That solution you suggest is certainly doable; but not just yet. We only differ in the time scale. You say now, I say 5-10 years. The rural youth to qualify for jobs in the manufacturing sector will need to be educated, that isnt happening. As I look at later in my budget analysis tonight, that is the one sector that remains a cause of deep concern, one where I can see no action happening anywhere. We will first have to invest in education at village and taluka level - note my points made above, before we embark on the path you and others are suggesting.


As regards size of land holding - certainly I understand. At 1.39 Ha average land size and upwards of 76% Small and Marginal Farmers, with 90% {I think} holding less than 2Ha, that is a concern - true. Yet, strangely, these small and micro farms are more productive than larger holdings.


Agriculture requires Seeds, Water, Land Quality, Water Quality, Credit, Market Access, Post Harvest Technology, on a priority...


Mr ADS : There comes a time Vishal to ignore percentages and go after hard numbers. So when you tell me a guy who earns less than 40,000 per annum as usable income is going to have it doubled in 4 years, my mind tracks that against expected consumer price rises @ 10-12% p.a. and the fact that his minimal need for some level of security is more than 1,00,000 today, I am less than ecstatic.


Similarly when you say, a 25% hike in rural outlay is nothing to sneeze at, all I can say is, percentages are for reports. Let's talk hard numbers in terms of what sells for how much and therefore how far will the money go. My simple submission is that if looks as if it will not go as far as we need to, we can't throw up our hands in despair and whine 'but this is all we have', nor can we sneak a piece from one plate and drop it on another and pat ourselves on the back for a good job well done. We have to find ways to earn more. & We have to find them NOW


Me : Sure size of holding is a concern - but not a priority. Right now priority is education and the issues I list above. The NSDC, {http://www.skilldevelopment.gov.in/aboutus.html} which is a landmark initiative, will take time to make its impact. We have no choce other than to wait in the interim


In order that farmer and farming income increase, you have to tackle irrigation first - the most visible and immediate impact {to the tune of upto 100-300% depending on other factors} is by irrigation. But that leads to other issues, thus you also have to simultaneously tackle water and land quality, seeds, pests, credit and market issues as well. Most of these are now being looked at, which is what makes me euphoric.


I think the solutions are being implemented in the now - except education, which is a deep and lasting worry flashpoint. With inreasing incomes in Rural Sector, deepening connectivity, dismantling of APMC {or rather, changes to APMC}, Credit on the board - the income should rise in the next few years, and that is welcome.

But without education, there is only so far we can go...


Mr ADS : Why must government wait to do everything itself? Push for a larger manufacturing base and let small industry take care of vocational education that creates jobs for the rural youth as well as paths for aspiration. It is industry that needs the skilled resources, free up some breathing space for industry, stimulate growth factors and industry will create jobs because that will become a bottleneck they can solve.


Please remember that SME in India has grown despite a hostile, inhospitable terrain wherein they have at best been ignored and usually exploited worse than slaves. That SME has still grown is a testament to solution finding ability - partnering them makes sense, pushing them into corners and creating a paradigm where they have no incentive for growth is not only ridiculous, but downright suicidal.


Agriculture requires Seeds, Water, Land Quality, Water Quality, Credit, Market Access, Post Harvest Technology, on a priority... Agreed on every single point. What agriculture DOES NOT need is bottlenecks created by governments trying to do everything by themselves. The government needs to become aggregator rather than sole executor and facilitator rather than regulator. Market access, PHT, Seed quality and Irrigation are definitely areas where the government can invite and leverage non-government players both for knowhow and financial capability.


Credit is the bugbear I agree, yet credit policy is virtually ignored in budget after succeeding budget, citing Basle and various other reasons. Why is Indian bank lending still operating on principles and practices that may have been contemporary 35 years ago, but certainly never any time since?


You said this budget was ideation, unfortunately you're right, 3 chances gone, 2 to go, we're still awaiting a gameplan....


Me : Amitji, your take on taxation is fully warranted and accurate; lower taxes make sense for everyone. But is that currently doable? With the taxation returns being around 3 Million, large - majority, in fact - are currently not paying direct taxes. Therein lies the rub. We first need to broaded the tax net, and bring in all people in it. Then we can look at further rationalisation.


As it is, the current situation is far better than what it used to be, that I am sure you will agree with. One of the biggest challenges our country faces is the spectre of black money, and the attendant challenges this poses. With the direct tax net being so narrowly defined, how is any other course feasible? Arent we all to blame - as per turn our eyes the other way on this issue?


On the aspect of the MSME, I would be the last person to argue with you; having had practical work experience in small companies, and a wide-spectrum exposure to the MSME in one particular industry in North and West India. MSME is a segment that needs support. I am always reminded of an outstanding I had with an SME that had its production lines shut due to lack of credit and the attendant inability to pay for raw material from Vendors like me.


Honestly, I did not spot anything too exciting on the MSME front, although I could be wrong as I focussed more on rural sector. I will go through the precise recommendations as I write my Budget review on that segment.  That said, MSME segment also needs to look at its own self in a mirror and reform itself from within if they are to attract talent and retain them. One of the biggest challenges for them is the inability to attract and enthuse mainstream people from organised industry and use their organisational skills and talent...


The Government has rolled out credit targets for the priority sector, and that is a ray of hope, but I do not recall much else in that realm. I could be wrong, but that is what I currently recall.




CONCLUSION :



I have edited large parts of the conversation, which is rather long; the full conversation can be found on the featured post of Th!nking Indian. I would especially love it if people can focus on the highlighted and bold points raised by Mr ADS, which are indeed thought provoking. He consistently has been at centre point, and arguing for increased focus on several parameters where focus is required : SMEs, Raising internal resources, no need for raising rural – urban divide issue; the comments also highlight two diametrically opposite ideologies : Rural and Bottom up from my side versus Comprehensive from Mr ADS... Is the comprehensive doable? Further conversation with him should give a better idea... stay connected

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