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The Prime Minister is in a position to pressure his ministerial colleagues to come up with the required action plans and to ensure their implementation.

When the Prime Minister announces an economic policy measure, expectations are indeed high that it will be successfully implemented.

Prime Minister Atal Bihari Vajpayee has announced an 8-point programme on the economy. It is aimed at sustaining the growth which is now evident in various sectors of the economy after a couple of years of stagnancy. Exports are up, production is on the rise, tax collections are buoyant, the divestment programme has finally taken off, demand for non-food credit is rising and the share market (till very recently) was humming again. In fact, the performance of almost all significant indicators pointed towards the long awaited rise in economic growth and development.

It is for the first time that the Prime Minister has made such a comprehensively detailed statement that lists the specific steps the Government is planning to take to sustain and boost the perceived economic growth. That it comes almost immediately after a new Minister took over the Finance portfolio, adds further significance to the Prime Minister’s intervention. Normally, it is left to a new Finance Minister to make all the promising noises when he takes over.

The 8-point economic agenda was unfolded by the Prime Minister at the meeting of the Economic Advisory Council held on July 13. To his credit, he has laid more emphasis on the administration and implementation of existing policies than on new projects or programmes. Thus, there were assurances that the Government’s regulatory procedures would be cleaned up and streamlined; several "growth-hindering hurdles" would be removed and subsidies would be reduced. Vajpayee came out strongly on the need for public-private partnerships in most sectors of the economy, including education, health, housing, sanitation and social security for senior citizens. He said it would be his first priority to bridge the gap between promise and performance. He listed the Government’s successes as the telecom policy, the ongoing national highway development project and the completion of a number of successful divestment initiatives. Significantly, all of them are examples of public-partnership. Vajpayee obviously recognises a good pattern when he sees one and, thus, his stated intention to build on it. He has resisted the temptation (of which many Finance Ministers are guilty) of trying to throw in a slew of new measures to boost the economy.

In fact, the 8-point programme is very much like what a Finance Minister tags on at the end of his annual budget speech when he tries to justify how he is going to reduce the deficit despite budgeting for so many new expenses. Most of the deficit-reducing measures, of course, are forgotten over the year and when the time comes to present revised budget estimates the deficit is larger than ever. Is the outcome likely to be different if it is the Prime Minister instead of the Finance Minister making such proposals. Yes, it is. Apart from the fact that the Prime Minister has the most credibility in the Council of Ministers, he is also in a position to pressure his ministerial colleagues to come up with the required action plans and to ensure their implementation. A number of the more significant proposals in a budget relate to Ministries other than Finance. While it is assumed that there has been a pre-budget agreement between Finance and the ministry concerned over the new proposals, it seldom works out in practice. Most ministers have their own agenda. For example: two years ago Yashwant Sinha announced a limited hire-and-fire policy to ensure that capital is not blocked in sick enterprises. This has been effectively shelved. He also reduced the return on savings in line with the reduction in bank credit rates. The new Finance Minister’s first utterance indicated that he intended to roll back these measures. Therefore, when the Prime Minister announces an economic policy measure, expectations are indeed high that it will be successfully implemented.

As Jaswant Singh himself said after Vajpayee’s address: "When the Prime Minister draws up an agenda, there are no question marks on it. It will be the responsibility of the Government to fulfil it."

However, the Prime Minister has been guilty of the same mistake that is made by most economists when they present an agenda to solve the country’s economic ills. They somehow tend to forget that the Indian economy is agriculture-based and, no matter how grand the development programme, its success rests not just on implementation but also on normal agricultural production. They just assume this, even though they realise fully well that Indian agriculture, in turn, is monsoon-based and one bad monsoon can put paid to the best thought-out schemes and projects. In fact, so significant are good rains to the country’s economic development that the growth achieved during several years of good rains can be brought to naught in just a single bad year. This has happened in the past and, as of the third week of July, is likely to happen this year, too.

Already, the signs of worry are writ large on the foreheads of farmers. Government officials and ministers are in near panic. Most Indian crops are time-bound and if they are not nurtured during a certain period, they wither away no matter how much rain comes after that. There have been ‘normal’ monsoons in terms of the total amount of precipitation, but still drought and famine stalk the land year after year despite overflowing rivers and numerous flood deaths . That is because total rainfall may be ‘normal’ but the timing and spread go awry. Thus, there might be too much or too little rain too early or too late to sustain crops in various parts of the country. This is what is happening in the current year. There has been good pre-sowing rains in most parts, but not enough to sustain the crops thereafter. There are forecasts of good rains later in July or early August but that will be too late and is likely to be too much, in which case mature crops in some fortunate areas may also be destroyed.

The Prime Minister is justly proud of the success of the national highway development programme. Roads are essential infrastructure. The movement of foodgrains and goods is almost totally dependent on road transport, except for a few high-density items like cement and steel and some others where rail transport is more economic. But if agriculture production is hit, not all the roads built under the national highway programme will be of any major help. Agriculture accounts for as much as 20 per cent of the GDP according to some estimates but it underpins the total economy of the country because the ripple effect of a good or bad agriculture year affects almost all sectors of the economy. This year, the situation is reported to be so dismal that even the winter crop is expected to be adversely affected. The Indian capital market responds much more quickly to bad news than to good. Thus, although all economic indicators to date have been on the upside and the market rose dramatically as each achievement was announced, it took but a few days for it to fall back drastically when it became evident that India was facing one of the worst agriculture years in over a decade. It is not that the stock market knows something that the rest of us don’t; what makes the sliding market significant is that it is best placed to judge the impact of a bad agriculture year on industrial production by reason of low buying demand. There are but a few companies which can use the low-demand period to rationalise their operations and plan for the future. Most of them are extremely demand-sensitive and are dependent on seasonal demand. Exports are one of the brightest areas in the current economy but, except probably for the IT sector, no other can sustain itself without a good domestic market. All this does not mean that the Prime Minister’s 8-point agenda is not welcome. But the hype surrounding it, created mostly by sycophantic business federations and political hangers-on, could boomerang, especially when the country is facing elections in nine States and the Centre over the next two years. There is no doubt India needs to tighten up on project implementation, but there comes a time when even the most efficient administration cannot function effectively without adequate infrastructure. The Prime Minister’s 8-point agenda needs to be coupled with an equally aggressive infrastructure development programme. The national highway development programme, per se, cannot be faulted, but there are higher priorities and the most important among them are power and water. Some welcome initiatives are being taken to improve the power situation, but there appears to be no holistic plan in the country yet to improve the distribution of its water resources. It is not that India does not have adequate water resources; the problem is that proper distribution facilities are lacking. The last major multi-State irrigation project that was completed in India was the Rajasthan Canal (now Indira Gandhi Canal) and we all know how heavy the cost and time over-runs were. In fact, this project is still not being exploited to its potential. The latest (uncompleted) project is the Narmada dam project and we also know how it was politicised. Most other irrigation projects are meant to exclusively benefit the States in which they are situated and cannot be called ‘national’ in the true sense.