Building growth and prosperity in new India

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Jun 10, 2020

Two years back Prime Minister Narendra Modi had challenged bureaucracy to transform the lives of common citizens in the 115 most backward districts of India. He did not term them as “backward” but called them the “Aspirational Districts” of India. These districts included some of the most far-flung, complex and difficult districts of India and were selected through a transparent process.  In the last two years, these districts have seen transformative changes across health and nutrition, education, financial inclusion and basic infrastructure because of convergence of all government programmes and real-time monitoring and ranking of districts on 49 different indicators. This flow of data on a real-time basis, use of technology, challenging districts and States on good governance through ranking and building tech platforms has been the hallmark of reforms and restructuring of governance in India during the last six years. This technological leapfrogging of governance is driving efficiency and effectiveness and will yield rich dividends in productivity on a sustained basis.

Some years back I was working in the traditional fisheries sector of Kerala. My job was to enhance the returns of fishermen who were getting a mere 20% of the market price of fish. The biggest challenge was to open bank accounts for fishermen. The process of “Know Your Customer” was a nightmare. It took us ten months of chasing physical banks and bank managers to do this.  Contrast this with experience today. You can walk into a bank branch and open your bank account using your biometric in one minute flat. From ten months to one minute has been the paradigm shift. According to the global index report released by World Bank a whopping 55% of all bank accounts created across the world during 2014-17 were opened in India. Of the 380  million PMJDY  bank accounts opened till date around 53% are in the names of women.

Let us look at the scale of technological transformation in the last few years. The government put its energy in getting the JAM (Jan-Dhan Aadhaar Mobile) trinity going. This forms the basic data infrastructure for India’s stack consisting of e-KYC,  e-Sign,  instantaneous payments (Unified Payments Interface) and digilockers. This has been the single biggest factor for the expansion of financial inclusion in India and has presented a unique model for the world. For people to get subsidies or social benefits they needed a bank account. Hence under PMJDY, a no-frills bank account for all Indian adults were opened, all of them linked with Aadhaar. When I was a young officer our then Prime Minister had said that out of every rupee transferred to poor there is a leakage of 85 paise. In sharp contrast, today India undertakes a cumulative direct benefit transfer of 11.1 lakh crores. In 426 operational schemes across 56 ministries, there is not a single paise of leakage. Direct benefit transfer and governance reforms have increased the government’s efficiency to target beneficiaries directly. This has enabled India to remove duplicate and fake beneficiaries and plug leakages. The resultant savings from this alone last years has been 1.7 lakh crore. The next key transformation has been in the sphere of digital payments. India had hitherto been entirely a cash economy. Thanks to BHIM/UPI, consumer bill payments have become extremely simple and easy. We have seen the emergence of UPI based transaction platforms such as Google Pay, Samsung Pay, PhonePe, Paytm. We are now doing over three billion transactions a month and targeting for a billion transactions a day. India’s approach to digital platforms has been unique. We are creating platforms where government creates the brick and mortar of the foundational layer with startups and innovative enterprises building interfaces and layers on top. The effort has been to break silos through real-time governance and move away from case to case approach to systematic governance with meaningful participation of stakeholders. These are all next-gen reforms.

A great example of this is the government e-Marketplace (GeM) which is the national public procurement portal, all online end-to-end for open, efficient and transparent procurement of goods and services by the government. The platform has transformed legacy procurement systems through a disruptive marketplace model and the use of technology, analytics and digitization of process. It is an example of minimum government and maximum governance. Similarly, the National Agriculture Market (eNAM) is an electronic trading portal which networks the existing mandis under the agriculture product market committees to create a unified national market for agricultural commodities. It removes information asymmetry between buyers and sellers and promotes real-time price discovery based on structural demand and supply.

I recall that in the first presentation that I made to Prime Minister Modi in June 2014 as the then Secretary, DIPP, I was directed to focus on Ease of Doing Business and make India easy and simple. India was then ranked 142 in World Bank’s EODB Index and in the previous four years had only worsened its position. Since then a vast number of rules, regulations, processes and over 1400 laws have been eliminated.  As a consequence, India has jumped up 79 positions in the global rankings – the only large country in the world to have made such a quantum jump. Our target is to get into the top 50 next year and within the top 25 in the next three years. In a federal country like India, it is the states which attract investments. We, therefore, started ranking States on outcomes. There was an intense competition. The first year Gujarat came number one. The very next year Andhra Pradesh beat Gujarat and in the third year, Telangana and Andhra emerged on top. But the good thing was that eastern states like Jharkhand and Chhattisgarh made radical reforms and came fourth and fifth. My belief is that if competition can transform eastern states which highly resource-rich India will have long term equitable growth. 

Accompanying this was reforming the entire Foreign Direct Investment regime. We piloted different proposals for a liberalizing sector after sector and abolish the Foreign Investment Promotion Board. All of them were approved by the Prime Minister.  These reforms have led FDI inflows in India growing and expanding from US $36 billion in 2013-14 to US $74 billion in 2019-20. This, despite the global FDI, flows falling sharply during the same period.

Next, realizing that entrepreneurship technology and innovation are at the heart of transforming India, Government launched the Start-up India movement. An increasing number of advanced technology start-ups, the rising adoption of data analytics, artificial intelligence and internet of things in everyday processes and continuing investor interest in Indian start-up have created a dynamic ecosystem. Many of India’s start-ups are revolutionizing service delivery and quality across several emerging areas of growth. A large number of them are finding solutions for the unique challenges of India and several of them are leveraging technology to enhance health and education outcomes. In a  very short while we have been to develop the second-best ecosystem for start-ups in the world with over 21 unicorns. To encourage innovation reengineering of proceedings and online filing of Patents and Trademarks was undertaken. This has led to Patent examination increasing from 22631 in 2014-15 to 800088 by 2019-20. The time required for Patent examination has reduced from 6 years to a mere 12 months. The period of examination in new trademarks has reduced from 13 months to less than 30 days. 

Some commentators have argued that this is a government which believes in gradualism and has not undertaken big-ticket reforms. Some others have spoken about implementation on the ground. Nothing can be farther from the truth. Two of the biggest reforms ushered are the Goods and Services Tax and the Bankruptcy Code.  Creating the GST council – a new federal arrangement where Centre has only a 33% vote and States account for 66% with any dispute requiring a 75% support has been pathbreaking. It subsumed 17 taxes and multiple cesses, aligning India with global regimes, ended long queues of trucks at state borders and created a seamless national market.  The Insolvency and Bankruptcy Code has been a key economic reform leading to faster recovery of stressed assets and quicker resolution. It has instilled a better sense of credit discipline and for the first time in India, there is seriousness among defaulting borrowers because of the fear of losing their assets on the ground in a timebound manner If the resolution process fails. A vast number of cases are being disposed of even prior to the IBC process as the borrowers make good and amounts in default to the creditors. Another tough bullet to bite has been to Real Estate Regulation Act (RERA) which has brought discipline in the construction sector, provided protection to consumers and ensured that delivery of the ongoing construction is a seamless process. 

The Ujjwala Yojana (providing 8 crore cooking gas connection to below poverty line families), Ujala (distribution of 123 million LED bulbs savings 43 million kilowatts hour per day) and Deen Dayal Upadhyaya Gram Jyoti Yojana  (providing electrification to all villages) are examples of speedy timebound implementation on the ground. 

Government has also sent out a clear message to investors across the world by restructuring its direct tax regime. It slashed the corporate tax structure to 15% for new manufacturing companies and 22% for all companies. The new rates bring India on par with most OECD and neighbouring countries like China and Indonesia. The lower rates will reduce the cost of capital and catalyse investments. 

In my view, the best examples of the reformistic zeal of the government was demonstrated by two key social programmes – the Swach Bharat Mission and Ayushman Bharat. Both of them have gone beyond being mere government schemes and have become the shared vision of the entire nation. I have admired SBM as it did not lay emphasis on the construction of toilets but focused on behavioural change and outcomes. It succeeded because of strong political will and PMs personal commitment and the fact that it was demand-driven. Out of pocket healthcare expenses which are catastrophic push nearly 66 lakh households of India into poverty every year. Ayushman Bharat through 1,50,000 health and wellness centres is shifting the focus of healthcare provision towards providing primary healthcare to its citizens. PMJAY while providing insurance to 50 crore beneficiaries will leverage facilities in public and private hospitals. It has been a remarkable success story. 

The COVID-19 crisis offered an opportunity and the government has demonstrated courage and determination to usher in long-pending radical reforms. It has given the freedom to Indian farmers to sell to anyone and freed them from the APMC monopoly. It has amended the much dreaded Essential Commodities Act to enable farmers to get better price realization, attract investments and make agriculture competitive. Foodstuffs including cereals, edible oils, oilseeds, pulses, onion and potato have been deregulated. Contract farming has been introduced to enable farmers to engage with processors, aggregators and exporters. There are big-ticket reforms and will drive the doubling of farmers income by 2025. Similarly, the redefinition of MSME sector based on turnover which was held up for over two decades, the commercial mining of coal, the massive liberalization of the mineral sector and the announcement that Public sector will remain only in a few strategic sectors clearly demonstrate the determination of the government to make structural reforms. These are all unpresented measures. There is clear intent that business must be driven to size, scale and efficiency by private sector and government must only be a catalyst.  

The last few years have seen wide-ranging reforms and there are several implementation success stories which have transformed the lives of the citizen at grassroots levels. The 1991 reforms were essentially industrial delicensing reforms. Recent reforms cut across technology, innovation, institutions, FDI, governance and touch several unreformed key sectors. Together they represent a watershed reform moment which will drive India’s growth and prosperity. To rephrase my namesake Immanuel Kant, I believe that these reforms will be a means to transform the lives of our people. 

 

DISCLAIMER : Views expressed above are the author’s own.


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