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Economy Check

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The Uttarakhand Government released the provisional estimates of the State Domestic Product for 2018-19, which indicate a drop in the growth rate at 6.8 % as compared to 7.84% in 2017-18 and 9.83% in 2016-17. The per capita income has increased to Rs 1.98 lakhs, but the rate has, proportionately, dipped. This is better than the national average but is on the decline in line with the general state of the economy. Of course, the per capita income of better than the national average does not tell the true story, because of the obvious inequality in income which is high. No government can be happy with just the average without taking into account the Gini Coefficient. The Uttarakhand Government, therefore, has to address the decline in the overall growth rate and, also, work on ensuring higher income levels for the poorer sections, particularly in the hills.
The government, either at the centre or in the state, cannot manage the businesses that are in decline. It can, however, ensure that regulations, infrastructure and general conditions are conducive to economic growth. Policies have to remain steady and consistent, while contracts have to be respected and not subject to whimsical change and other eccentricities. One of the reasons why Industry is facing difficulties is the attempt by the Modi Government to wean it away from the crony capitalism of the past. Business models in the ‘socialism’ of yesteryear were based on what could be obtained cheap from government in terms of land and tariffs, as well as subsidies of various kinds. These businesses invariably became unviable when these boosters ran out. Businesses were planned from the start along the lines of diverting subsidies, and using the land for other purposes. Bank loans were not paid back and the skeleton of the business allowed to be repossessed. This was seen more in the small and medium sectors, and then the bad practices continued into the larger corporations.
The government today expects profits to be made from legitimate business activity, competitively produced goods and services. Businesses are crying foul and expect the taxpayer to pay for their failures. This is no longer possible as funds are needed for reviving India’s financially challenged nationalised banks, along with necessary expenditure on infrastructure and general administration. This provides an opportunity for a new breed of professional entrepreneurs who not only have breakthrough ideas, but also the ability to manage these businesses as profitable enterprises at every stage of growth. They cannot continue to suckle at the teats of government giveaways. Closer to home, Uttarakhand must rediscover its USP and implement the best practices if the decline in growth is to be reversed.