Since March, every month I wrote an article highlighting that India is facing some serious economic issues. I will like to reiterate some of the key issues that India is facing today:
1. The Hindi heartland is not growing. It is stuck in a vicious cycle of conflict -> clientalism -> few public goods -> low growth -> small pie to share -> conflict. Hence, any political pursuit of ideological and cultural priorities rather than economic ones is a major concern.
2. The agricultural sector is in a dire situation, and the ADR survey showcases the issue well. People are worried because there is not enough money to make in farms, and they are worried more because there are no jobs in the cities to go to. So people are stuck. Short term solutions - to waive loans, offer pensions, artificially raise prices etc. - do not solve deep structural problems of agricultural sector. Rural india has to move up the value chain to processing and manufacturing aspects of agriculture. APJ Kalam and Srijan Pal Singh long ago promoted the vision of PURA (Provision of Urban amenities to Rural Areas), but till date developing processing facilities in villages remains a theoretical goal, probably because capital necessary for such investments is not available.
3. The banking sector has had a terrible bad loan problem which means investments are drying up. There can be many technical factors, but when lending is relational, and "contractual infrastructure" is not mature to ensure proper mechanisms for loan restructuring or recovery, bad loan is bound to be an outcome. Moving away from relational to more arm's length based (contractual) lending requires contractual infrastructure which is effective and impartial. Such impartiality requires that the deliberative powers of a strong executive, are strongly balanced by a procedural bureaucracy (and independent and efficient judiciary), that is accountable to laws not politicians.
The issue is solving India's problems requires a holistic thinking. A reductionist approach that strikes a hammer on every problem that pops up, will create the exact crisis that has been created today.