Thread - the multi-decadal growth path of India after yesterday’s budget.
Yes, I am over-optimistic. Just like every entrepreneur is an over-optimist (imagine Musk being sceptical about the future of batt op cars ten years back), I’m very long on India’s future.
First point to ask is why is this budget such a game changer? After all it is just a speech by a lady, powerful that she is, and nothing has yet been done except a speech. Two responses.
Firstly a budget speech, unlike other speeches and even other promises by govt.s is backed not just by the executive, but once the bill becomes an Act is a promise by the parliament. It doesn’t get more sacrosanct than that in a democratic republic.
But that’s true of all budgets - why is this one different? Many take the example of how Air India hasn’t been sold in 20 years despite honest attempts. That gets us to the more important second response.
Secondly, this time the promises made are DESIGNED to be executed.
Imagine a fight where you choose to move yourself into a corner, because you don’t want to make a cowardly escape from the big bad villain, which option was available to you, that is where we are.
In other words, the govt has chosen to spend very liberally (given the collapse in demand by the private sector). It has chosen to spend - not on - digging holes and filling them up. But rather on infra spending which will see massive benefits for every citizen of the country.
Remember, this is a VERY tough political decision. It’s easy to throw away money at useless projects (digging/filling holes) and people getting some money in their pockets - more as alms rather than income.
As opposed to that making roads or building healthcare facilities takes months to start - postponing the benefits a bit to the workers (and also requiring better skills).
Also the road is likely to be ready only after several years - and absolutely no one will appreciate the work till the first date their car or truck actually gets to use it.
Add to that the fact that the inauguration and credit may possibly be taken by their hole-digging political rival - and the choice is tough. And almost every politician before Vajpayee has always chosen the easier route. And Vaypayee paid the political price for being long term.
When I use the fighter analogy - I mean that the govt. has intentionally drawn itself into a corner, from where exit is not possible without structural reforms.
The massive spending on health, agri support, education, rail, metro, power and distribution, ports, highways, airports COMBINED with almost no new taxes means that the additional funds must come out of un-locking of useless and stuck assets which can be put to productive use.
Just think of your own city - and the hundreds of acres lying disused (I don’t think there are any exceptions to this rule in any mid to large sized city) often right in the centre of the city as thousands of public sector defunct factories lie idle.
Imagine the kind of productivity unleashing if the lands were used for professions, services, factories, small shops, big shops. And that is only one of the thousand ways of unleashing all of us to be more productive.
Most of us don’t need the state’s help (free land to start our shop), but we do need it to get out of the way, so that the entrepreneurial energy that we have always had can be used. If more space is available, rents will be affordable and new busi can start.
Here is the good thing about India even now - the only thing as eye popping as the amounts involved in the annual budget exercise of India - are the eye popping numbers you see everytime there is an IPO over-subscription. https://twitter.com/passivefool/status/1356117844597952512
We are blessed, not too many emerging economies have this, but there is plenty of capital available for entrepreneurial ventures which is willing to scale up. And the number of both domestic (now) and foreign capital firms willing to back young promising companies is amazing.
The four secret sauces of growth, dev and prosperity are (factors of production as economists call it) - land, labour, capital and entrepreneurship. More land is being freed, urbanisation is being given the focus (thanks in part to a brilliant understanding by @sanjeevsanyal)
labour laws have been reformed and need to be implemented, capital is plenty (relatively speaking) except in infra, and of course the Indian spirit (now unshackled) of entrepreneurship seen everywhere in the world will now be seen more in India.
The only missing pieces are public services and infrastructure. We need good public healthcare, we need metro services in cities, the efficient transport of goods via railways, safety and policing to work, power to be on when needed for our factories, and most imp skilling n edu
Of course we also need clean air, clean water and sanitation before anything else.
The Indian govt isn’t very good at providing most of these services. Thus the dependence on private sector, and in some rare cases a public-private partnership is the way forward. This can only work if we have regulators that work.
Privatising electricity distribution without a regulator is an invitation to price gouge customers. So there will need to be a new framework -where privatisation works for the consumers.
And it is eminently possible. Remember from 8 year queue to get an MTNL line just a gen back to Rs. 16 a min for cell calls to unlimited free calls for Rs. 3 a day it’s quite doable in every sphere. With a regulator in place.
India would have arrived when its billionaires use the same public transport as d daily wagers. It seems like a long time away for India’s Soros to take the Mumbai Metro - but it’s not so far away. Already the phone plans of the rich are not too dissimilar from the daily wagers’
I’ll end here - but will add to this over time. None of the things I have said will have quick feedback loops - but all the problems faced in achieving any of the targets will get incredible media attention. But to quote a head of state: “Hamein ghabrana nahin hai”.
I will also have a separate thread on the financial sector announcements and how they are separate game changers by themselves.
You can follow @SandeepParekh.
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