Perspectives of enabling small businesses through better Public Service Delivery

  • Recent push for reforms concentrate on increasing the equity share foreigners can hold in sectors like retail and airlines.
  • Foreign investment is hardly 2% of GDP. This is a small fraction of the total investment rate of around 35% of GDP.
  • Libertarian economists are of the opinion that the major push should focus on investment by Indians which faces administrative and institutional roadblocks.
  • The 2012 Doing Business report of the IFC/World Bank ranks India at just 132nd out of 183 countries in ease of doing business.
  • The Economic Freedom Index 2012 of the Heritage Institute ranks India at 123rd position.
  • Misgovernance is not just about corruption. It is also about the delivery of every government service, including education, health and welfare payments. Above all, it includes the police and judiciary, who are supposed to deliver security and justice.
  • Judicial redress: besides being a moral and human issue it is also a huge economic issue. According to the Doing Business 2012 report, India ranks low in enforcement of contract.
  • The edifice of market economics is built on the assumption that contracts will be honoured. Thus, efficient judicial redress is needed to give an enabling environment for small and medium businesses to thrive.
  • India has come close to getting its credit rating downgraded to junk status because of its stubbornly high fiscal deficit. This deficit, say the rating agencies, is due mainly to high, unwarranted and unsustainable subsidies for oil and fertilisers.
  • Some argue that the  fiscal deficit is mainly a governance deficit. If only the quality of governance improves, then tax evasion will drop and the government will get a tsunami of tax revenue.

 

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