The reportedly Rs 20 lakh crore post-Covid-19 economy stimulus package announced by prime minister Narendra Modi in a national televised broadcast on May 12 has greatly disappointed India Inc and most monitors of the Indian economy because of its opacity and promise of loans strewn across Central government programmes, and token grants for stimulating aggregate demand. Nevertheless the uninspiring stimulus package has a silver lining. Buried within its details are declarations of intent to legislate comprehensive land and agriculture reforms, and sweeping denationalisation of public sector enterprises (PSEs).
The agri reforms package contains the overdue proposal to abolish the Essential Commodities Act, 1955 which imposes limits on the quantities of wheat, rice, onions, cooking oil etc that wholesalers and traders can stock in warehouses and godowns. Enacted to prevent hoarding and profiteering, the Act has had the unintended consequence of discouraging construction of private warehouses and storage units in which farmers could hold stocks awaiting price stabilisation, rather than distress sell their produce. Refreshingly, the stimulus package includes provision of Rs.1 lakh crore for an Agri Infrastructure Fund for loans to agri-business entrepreneurs (not government enterprises, please!) to promote downstream warehousing, cold chain and food processing businesses in rural outbacks.
In this connection, it’s noteworthy that because of historical discouragement of a downstream agri-produce processing industry, India’s farmers incur a loss of Rs.50,000 crore every year due to produce despoliation. The proposed establishment of a national free market for agri-produce will result in high farm gate prices and huge reduction in wastage of horticulture produce in particular. This coupled with earlier reforms proposed to allow contract farming and free sale of rural land, will — if not sabotaged by the nit-picking bureaucracy — surely spur rural growth and development.
Likewise, the privatisation of PSEs proposal included in the stimulus package will be a gamechanger, if implemented in letter and spirit. All PSEs in non-strategic industries will be privatised. Moreover, private companies will be permitted entry into strategic industries where the number of PSEs will be restricted to four. By any yardstick, this is a radical and comprehensive denationalisation initiative. The plain truth is that over the past several decades, the country’s over 500 perennially lossmaking PSEs and nationalised banks have bled the economy dry by their failure to generate surpluses for investment in public education and health.
The Modi government’s financial stimulus package to revive the comatose economy in the aftermath of the Covid-19 crisis and the national lockdown is inadequate. But its agriculture revival and PSE denationalisation proposals — if forcefully implemented — have the potential to engineer a clean break with the bankrupt socialist development model of post-independence India.