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Corrective Medicine PDF Print
Written by Sumita Kale   
Friday, 19 March 2010 10:22
The government has the power to overhaul the way things are done. All it needs to show is more resolve, and inclusive growth will follow
Source: Outlook Money

The broad objectives of Union Budget 2010 are in continuance from those of the previous year: to restore a 9 per cent rate of growth and to make development more inclusive. But more significantly, it puts down “to fix the weaknesses in government systems, structures and institutions at different levels of governance” as one of its objectives. This, unless met, says the Budget, is “one factor that can hold us back in realising our potential as a modern nation”. In fact, the largest impact of this Budget for households and firms will come through if the government manages to meet the challenge of reform in governance.
What does this reform entail? The Economic Survey has this time devoted an entire chapter to the government’s new role as an ‘enabling state’, in which it does not try to directly deliver everything to the citizens. Such a state creates an environment of minimal interference and yet basic necessities are ensured for the poor. In such an environment, the need for programmes like the NREGA will also diminish over time. But this means that efforts have to be made in numerous areas—agriculture, education, health, labour laws, local urban government systems etc.

At the fiscal level, this means dismantling various controls and changing the systems of providing subsidies. While deregulating fuel prices is essential, this Budget also talks of moving towards a system of providing subsidies for fertilisers directly to the farmer. The need for governance reform has been stressed often in the country, the methods to do this are not new, e.g., removing PDS outlets and using a smart card to dispense cash to the poor to buy their own grain from any store was mooted in 2002. Now, with the UID given a hefty allocation in the Budget, this is one revolutionary tool that is finally being taken up seriously.

The finance minister did not need to invoke the rain god in his speech for delivering a broad-based recovery ahead—the government has the power to overhaul the way things are done. All it needs to show is more resolve, and inclusive growth will follow.

The author is chief economist at Indicus Analytics