Austerity - Essential But Not Sufficient

An austere approach is always welcome - in good times as well as these cumbersome times. "Money saved is money earned", and "the rich don’t have a pinch of salt to waste" - these are age-old idioms that extol frugality. As long as these measures are persuasive, voluntary, and devoid of any coercion, they usher in a virtuous cycle. Mindful austerity not only sheds unnecessary flab, it invariably enhances efficiency. Much needed and quite heartening it was to see our leaders demonstrate this by personal example. There have been, in the past as well, occasions of those in power attempting to illustrate rectitude; these have often been symbolic, though. Let us hope this time thrifty gestures go beyond tokenism and bring in tangible gains.

As provident and laudable as abstemiousness may be, there is only so much that can flow from it. In accounting terms, economising the debit side alone won’t catapult an organisation to higher levels. As is a company, so is a nation - we have to ensure we increase our credit side and earn more money.

There are some low-hanging fruits visibly yearning for attention:

1. Land Monetization

Along with disinvestment, land monetization has been an area where we have punched well below our weight. The Central and State governments are the country's largest landowners. The unproductive use of large swathes of land - lakhs of acres worth incalculable amounts - has to be unlocked. According to official data, ministries like Defence and Railways alone hold over 15 to 18 lakh acres, much of it sitting idle in prime urban zones. Throughout India, bureaucrats, government officials, and politicians occupy sprawling, colonial-era properties as residences. It is a relic of the past. A district collector in a tier-2 town occupying a colonial era bungalow worth 100 crores is the public sector equivalent of a non-performing asset. Housing our administrators in modern, vertical complexes isn’t just prudent; it unlocks prime urban land for commercial use, recreation and affordable housing, besides saving massive upkeep and security expenses. The National Land Monetization Corporation (NLMC) must pivot to this radical restructuring.

2. Investment

We know India is in a macroeconomic sweet spot. We have the benefit of demographic dividend, and the consumption and savings mix follows, on average, a desirable 80:20 ratio at the micro level. As with any developing nation, there exists a massive need for capacity creation. In the last twelve years, infrastructure - road, rail, air connectivity, and power generation - has made significant progress. Yet, there still exists the need to quadruple it, providing opportunity for deploying capital to highly productive use. The next generation of land, labor, and capital reforms, and their on-ground rollout, remains crucial. Ultimately, the ease of doing business necessarily passes through the ease of living. Substantive improvement in sanitation levels, urban planning and municipal governance are salubrious for the socioeconomic environment. Structural judicial reform will do far more to unleash the entrepreneurial spirit and usher in private domestic and foreign collaboration than any big-ticket investor summit.

3. Capital Markets

Although the Buffett indicator - the market capitalisation-to-GDP ratio—in India is higher than in several developed and comparable economies, the flight of foreign portfolio investment over the last year and a half has not been arrested. To ensure we do not reverse the hard-won financialisation of domestic savings, certain measures like dividend taxation at marginal rates and the withdrawal of indexation from long-term capital gains tax may be revisited. The idea is to make Indian equity markets more attractive. With fixed-income investments being taxed at marginal rates, recent years have seen a surge in domestic retail investors dabbling in capital markets. There is a natural tendency where investors consume more when they feel wealthy. In a nation of 150 crore people, this wealth-effect-led consumption will be a mainstay of our economy.

4. Tourism

Few nations can match our potential for leisure travel; add religious tourism, and we should be inimitable. The reality, however, is desponding. Tourism is a potent macroeconomic engine, yet India’s share of international tourist arrivals historically hovers at a meager 1%. In terms of employment-led growth, the sector is unmatched: every Rs 10 lakh invested in tourism creates approximately 45 jobs - triple the employment yield of manufacturing and six times that of heavy infrastructure. Moreover, its high employment multiplier means a tourist dollar instantly diffuses into the local MSME economy, supporting several sectors. As well-intentioned urging citizens not to vacation abroad may be, making domestic tourism alluring will be far more effective and help mitigate the massive outbound tourism deficit, where Indians spend nearly $15 to $20 billion annually overseas.

5. Education

This is perhaps the single most transformative factor. We need to urgently address the acute demand-supply mismatch, invest in quality universal school education, and expand seats in higher education. Deficiencies in the National Testing Agency's modus operandi and rampant paper leaks have to be set right to restore institutional credibility. Attracting students from overseas generates valuable foreign exchange, while retaining Indian students at home arrests the exodus of talent and capital. The vaunted demographic dividend will optimally deliver only when harnessed by quality education. Together with healthcare, it remains a sine qua non for any developed society.

Most, rather all, of the above can only be mobilised through genuine cooperative federalism. With the same ruling dispensation at the Center and an unprecedented 70% of states across the country, there shouldn't be any ideological or procedural impediments to structural overhaul.

The Prime Minister quite aptly surmised that 2020s have been a decade of disruption. It started with the pandemic, followed by multiple armed global conflicts and rising protectionism upending the old global order. They say in every crisis lies an opportunity. Can this epochal shift ignite the fire to change? The age of incrementalism and tinkering on the margins is over. The time to reform, perform, and transform is now.

(Note: The writer is the Managing Editor of Dainik Jagran.)