This book gives in brief the planning events of the last 35 years in India. Yet, as the author himself has pointed out, ‘whatever progress achieved has been largely neutralised by sharp rise in population’, which has made the so-called ‘self-sufficiency’ in foodgrains a mirage for the very poor. He points out that the development of agriculture has not been as intensive as needed with yields per acre still very poor while at the same time terms of trade have consistently moved against agriculture.
The year 1985 with its Seventh Five Year Plan has allocated 52 per cent of the total investment for the private sector. A change from an over-regulated economic structure to a more liberal economic system was sought. The economic environment is under-going transformation and in this setup the author stresses a need for better co-ordination between industry and agriculture, between the public sector and the private sector, between producers and consumers. He reveals that our industrialization has not kept pace with world advances and our position has slipped to 17th from 10th place in the world list of industrialized nations. The export market share has also dropped to 0.5 per cent from 2.5 per cent of world trade.
Patodia goes on to portray a rapidly changing economic scenario. He points out that over the past 35 years accelerated growth had been prevented due to an over-controlled, over-taxed and over-protected economy. To quote the Prime Minister, ‘We have for various reasons come up with a high cost economy, a very high cost of inputs, whether it is energy, transport or raw materials that have to go in and we are slowly pricing ourselves out of our own markets.’ But now there is evidence of change. The Indian economy is entering into a new phase of liberalization and competition with various new economic measures making the prospects for growth more promising.
Emphasis is laid on balance of trade and export. Export efforts should be viewed more as an investment for the future rather than for immediate profits. Hence, all fiscal incentives for export promotion should be related to turnover rather than profits.
Most interesting is an analysis of the Industrial Policy framework which has led to a ‘High Cost Economy’ which has come about because of the high capital output ratio, low productivity of Indian labour, indiscriminate increase in administered prices as well as the cascading effect of excise duty. Inadequate resource mobilization as well as infrastructural bottlenecks have also been pinpointed as impediments to growth. The author advocates conservation of energy. He suggests that trade imbalances could be set right by learning lessons from Japan and Korea. Since India has a large and emerging rural market, industry has to be re-oriented to meet the specific needs and tastes of rural masses. The problem of unemployment has assumed great importance due to an exploding popula-tion. Pollution control and environment preservation should be accorded high priority by accelerating installation of pollution control equipment in industry through soft loans.
By way of illustration, he conceptualizes a third Industrial Revolution, now in progress, where unprecedented developments are taking place on the technological front, and dramatic progress is being made in the fields of energy, information and communication, including the use of robots. The information revolution will raise the quality of life for all of us. He has also made a few suggestions on outer space and industrial technology.
The author asserts that the winds have changed in India. A new economic environment which encourages free enterprise and competition is coming up due to delicensing of selected industries, liberalization of imports, reduction in taxes, great stress on upgrading of technology, etc.. New concepts such as ‘broad-banding, and ‘single-window clearance’ have been used and pricing policy and sources of finance discussed. Regarding modernization of technology, a policy of ‘one shot’ import should be substituted by import of technology on a continuous basis. The author is of the opinion that this should be backed up by intensive R&D so as to facilitate future absorption/ adaptation. These measures suggested by the author are already the subject of active debate in she country, and the choices are indeed not easy.
A brief description, about the energy scenario in India has been sketched. According to the Advisory Council of Energy, the demand for energy is expected to grow significantly in the next twenty years. To bridge the gap between demand and supply, industry should be encouraged to set up captive power facilities. The Energy Advisory Board estimates that captive power generation will reach 35 billion kw by the turn of the century. Non-conventional sources of energy should also be encouraged. An Apex Body jointly sponsored by the government, industry and business has been recommended.
The small-scale sector and institutions like National Small Industries Corporations need technical know-how and marketing openings. Adequate coordination between large enterprises and ancilliaries in areas of production, pricing and quality should be encouraged. Agriculture being the pre-dominant sector of the Indian economy, there is a need for integrated development of all agro-based industries to benefit the rural population. Mutual dependence between agriculture and industry should be recognized and agri-culture should be treated on par with industry. This would contribute in a large way to the export efforts of our country. Tourism is also viewed as another field where there is great potential for earning foreign exchange.
A rather depressing picture of the public sector is drawn. The public sector is currently running at a heavy loss. To make public sector undertakings more profitable, they should set annual targets for productivity parameters and monitor their achievements periodically and effectively. Ours is a mixed economy with both private and public sectors working together—the two are intertwined and interdependent. However, a new environment of co-operation and healthy competitiveness should be fostered to ensure better efficiency and higher productivity with ‘modernization’ as the aim.
The author is of the opinion that in this new climate for growth, FERA in its present form is a total misfit and an obstacle in the way of international business. It urgently needs a major reform, Indian business has so far lived and thrived under a sheltered and over-controlled economy. However, with an emerging new economic environment, business acquires a new role to take our country into the frontline of industrial leadership.
Winds of Change deals mainly with internal developments, which are either deliberate or unintended. Some of these are highly publicized, some semi-secret, going unnoticed, and some are universally accepted, disputed or controversial. The book is a definite contribution to the study of the Indian economy in general, a contribution to the mechanics of internal change and collaboration with international organizations. Simple and concrete proposals have been suggested by eminent people from the federation of Indian Chambers of Commerce and Industry—the apex body of business and commerce in the country. The book has the rare privilege of having the cooperation and support from the Prime Minister’s Secretariat, and the Joint Business Council Meetings held in Paris and Tokyo.
Laxshmi Gopalaswamy is a freelance writer.