By Hardayal Singh

John Maynard Keynes did a great disservice to future generations when he said that in the long run, we are all dead. Inadvertently, he may have shifted the discourse in public policy towards ad hocism at the expense of long-term outcomes. The consequence of this shift, particularly in India, has been disastrous.

The recent health emergency in Delhi-National Capital Region (NCR) is one manifestation of such systemic myopia. One of the origins of this crisis springs from surplus rice produced in Haryana and Punjab during the kharif (autumn) season.

Currently, the buffer stock is 27.2 million tonnes against a national requirement of 10.25 million tonnes. Rice is a water guzzler. Production of one tonne of rice requires nearly 7,000 tonnes of water. So, if GoI is compelled to export 12 million tonnesof rice out of its current surplus, it is actually exporting 84 billion tonnes of water. The only reason farmers produce this crop is because they are supplied free water and electricity, and are assured of a minimum support price (MSP).

To conserve scarce groundwater resources, farmers in these two states are statutorily prevented from planting paddy till mid-June every year. So, they can harvest rice only in late October-early November.

The only way they can prepare their fields for the next rabi planting in November is to burn the stubble emanating from the earlier crop.

When wind speeds are low, this creates a poisonous smog. Beyond band-aid solutions, the only way out is to create incentives to nudge farmers away from rice towards crops such as fruit, vegetables and maize. Besides saving scarce water, this would reduce air pollution in Delhi-NCR by about 30%. Augmenting maize production would also help India cope with its ethanol scarcity for fuel purposes.

In the 1980s, GoI resorted to reckless borrowing to finance development. As a result, the combined fiscal deficit of the central and state governments climbed from 6.3% of GDP in FY1982 to 9.4% of GDP in FY1991. By that time, a full-fledged forex crisis broke out, since shortterm external commercial borrowings rose to 146.5% of forex reserves. Timely loans of about $3.4 billion from the International Monetary Fund (IMF), and friendly governments like Japan and Germany, prevented the economy from plunging into chaos.

Called upon to carry out economic reforms by IMF, GoI did the barest minimum required of it. It reformed the consumer markets. But out of fear of a popular backlash, it failed to reform the public sector, education sector and product (land, labour and capital) markets. The consequences of this are being felt even today.

Internationally, too, most governments often do what is expedient at the cost of what is right. In the future, the economic and social costs of such failures are likely to be much greater. As new advances in molecular biology, artificial intelligence (AI), nanotechnology, IT and Internet of Things (IoT) shape our lives, the rate of technological and social change will be much faster. As a result, considerable expertise will be required to anticipate and deal with the problems thrown up by a new world. Unemployment will assume anew dimension with increasingautomation. Growth alone will not be able to create jobs. People will have to update their skills through their lives to remain relevant.

Would it not be better if we frame policies that anticipate long-term developments, rather than react to crises when they descend on us? In the case of north Indian cities and towns, seasonally each year.

The writer was chief commissioner, income-tax

DISCLAIMER : Views expressed above are the author's own.

Here is the original post:

In the long run, we must live - Economic Times