Nirmala Sitharaman's maiden Budget is good, but there's room for more

The first Budget of a government with a five-year mandate was expected to do two things: (a) maintain continuity of action undertaken in the earlier government (as the ruling coalition has remained unaltered); and (b) lay down a plan to consolidate gains made in the previous five years and offer a road map for a bigger push to the economy over the next five years. The finance minister started her Budget speech in that vein by declaring her government’s desire to push India towards a $5 trillion economy in the “next few years”.

India is more than an emerging economy; it is a fast-growing society that is transforming itself. This transformation will have to be driven by human capital, innovation and investment, in that order. Much of this will have to be undertaken by private citizens and businesses. For this to happen, state and central governments have to create an enabling environment. A large part of this enabling environment cannot be sustained without the active participation of the state governments, leaving the central government to nudge (borrowing from the latest Economic Survey) and facilitate the state governments. 

One way to facilitate things on the ground is, of course, to improve connectivity, both physically and virtually. The central government’s focus on investments in physical and digital infrastructure is, therefore, a good one. 

So, are its Make in India and start-up programmes that energise entrepreneurial activity. The current Budget talks about a number of good things in this regard — support to venture capital and angel investors, financial inclusion through digital payments and easy access to small loans, relaxing foreign direct investment restrictions, etc.

The most important thing in this, however, is the growth of human capital. Societies are not transformed by creative laws and budgetary expenditures, unless they galvanise the young to acquire knowledge, innovate and apply their knowledge and skills to local problems. The draft of the New Education Policy makes all the right noises and one sincerely hopes that the government implements their recommendations to all intents and purpose. 

One of the major transformations that is taking place in the world is in the role played by intellectual assets. It is not enough to count the proliferation of patent applications in the country. In China, in the time they have been TRIPS-compliant, 67 per cent of all granted patents belong to domestic entities. TRIPS-compliant India, on the other hand, has assigned only 12 per cent of all its granted patents to Indian entities. This discrepancy has two causes, both connected to a country’s management of its intellectual assets. We produce the globally best in our institutions but lose too many of them to other countries. A successful education policy will only aggravate this trend unless we create an environment where well-trained people continue their work in India. 

Focussing on Make in India and Start Up India are good, but they have to be complemented by creating a labour market that rewards productive labour. Here the governments, both central and states, have to work closely with businesses. While there is emphasis on entrepreneurship and investment, there is little or no thinking on human capital. A good education policy is a necessity but will not be sufficient. We need the labour market ecosystem to be over-hauled so that not every trained person has to become an entrepreneur to contribute to Indian society.

The National Research Foundation announced in the Budget is an excellent idea. I only hope that the money from this does not go to stand-alone centres outside the university system. The young in our country seldom get introduced to research activities in their formative years because much of the research funding can be accessed by the young only if they want to do a PhD or, are already PhDs. Einsteins are not identified when young and then trained; In a group of highly trained peers they become a possibility. 
The writer is the Dean, ISPP, Research Director, IDF

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