In order to protect the environment and water basins, the Punjab Government last week imposed a ban on setting up more cement mills in the province. Merits or de-merits aside of a such a policy measure taken in isolation – with 100% capacity utilization, as at present, such bans unless accompanied by price control and distribution-access mechanisms in coordination with Competition Commission can instead be counterproductive, as they can create a monopolistic environment through cartelization – the announcement nevertheless is a welcome news. The sad part though is that in typical Shahbaz Sharif management style, devoid of any self-introspection or operational transparency, and in which while invariably the public rhetoric is very noble, it rarely bears any correlation to his government’s real time actions, this policy is also no exception! Agreed, that every little step counts, the reality however is that the Punjab Government itself is causing the most harm to environment. With its lop-sided development focus, Punjab of Pakistan is the worst hit by the perils of modern day urbanization in South Asia. In recent studies conducted by the World Health Organization (WHO), the World bank (WB) and the Asian Development Bank (ADB) the phenomenon of mass migration to the urban centers is the highest in South Asia (twice that of the global average) and within South Asia, Pakistan is the worst hit with an average that is 57% higher than the lowest national rate – according to the report, at this pace by 2025 nearly 73% of Pakistan’s population will be concentrated in the urban centers. And no marks for guessing, within Pakistan, Punjab is the biggest culprit where a skewed focus on urban development is causing an urban migration never before seen in history of sub-continent. Again, within Punjab, Lahore stands out with a migration level more than double that of its closest rival city. Needless to say this rapid distortion in demographic-spread is adding unprecedented pressures on health, diseases and control in epidemics, waste disposal, crime control, and food safety’s quality and supply. As the phenomenon takes root other economic and social ailments such as intolerance, extremism, ethnic and social grouping and in-equality are bound to follow – Karachi being a prime example in our own short history! Meaning, the step the Punjab Government should have really announced was to place a ban on all urban development - diverting the funds to rural development - till such time that a reasonable threshold is achieved on living standards in rural areas. We certainly will not be the first ones to do it, the Europeans took cognizance of this back in the 70s and ever since have been working to maintain a balance between rural and urban development in order to ensure a healthy spread of population across their land mass.
Rapid urbanization is indeed a serious problem gripping South Asia and to counter it and its ensuing effects, some important lessons can be learnt from India’s recent budget announcement. Its lay out of IRS24.42 trillion was huge by any standard, but apart from the usual prudence of continuing to nudge India towards a market economy and a rules-based regime - walking the fine line between populism and development – what this time surprised everyone was its heavy focus on addressing farm distress, the socially disenfranchised, affordable healthcare, improving education, encouraging the small-scale sector, and bringing up rural centers in a way that creates both, infrastructure and jobs. Idea being that people do not fell the need to move to cities; in fact over time a reverse migration should take effect; nothing unusual, as we have witnessed this in Europe over the last 2 decades.
Interestingly, the budget’s relevance to Pakistan does not end here. For example, the anti-corruption rhetoric, which the Modi Sarkar feels defines its tenure, was repeatedly reiterated by the Finance Minister, Mr. Arun jaitley, in what is to be his last budget speech under the current tenure: “There is a premium on honesty (today). There was a time when corruption was commonplace.” Key structural reforms undertaken by the government in its four years were also highlighted by Jaitley, as the Modi government is probably conscious of the fact that most benefits of the structural reforms undertaken by his NDA (National Democratic Alliance) so far—like the fight against corruption, fixing the bad debt problem by creating an institutional framework, implementation of the goods and services tax - are largely intangible in nature, at least in the short run. Still, more importantly, the budget mainly focused on the rural economy and rural life: Addressing farm distress; enlarging coverage of healthcare; and improving the quality of education in villages. Taking a script out of the finance minister own speech: “Now our government has taken ‘Ease of Doing Business’ further by placing a stress on ‘Ease of Living’ for the common men (and women) of this country, especially for those belonging to poor and middle class of the society and living outside of the unban centers. For this the largest development allocation in the coming year goes for this very purpose.” For its own part, this Indian government deserves credit as throughout its rule it has resisted taking the easy way out by resorting to unbridled populism, preferring instead to stick to development philosophy defined by empowerment over entitlement (ironically pioneered by the Congress-led United Progressive Alliance, but never truly upheld, which probably cost them the government). To address distress in the farm sector, which employs one in two people in the country’s workforce, a hefty increase was announced in the minimum support price for the upcoming Kharif crop season and at the same time the prevalent price guarantee scheme was re-extended for a period of at least one more year and this time expanded to include all crops - at the moment it is restricted to only select crops such as wheat and rice. This extended model of crop coverage already exists in Madhya Pradesh, implemented by the NDA.
The budget also recognized the importance of healthcare, or rather, the lack of it - especially for the poor. Not only does India have a staggering 300-400 million people still living below the poverty line, even those out of it are just one disease away from sinking back into poverty; even worse, non-communicable diseases have surged in recent years. An extremely ambitious health insurance scheme was announced that would cover 100 million families living in poverty for up to Rs5 lakh, effectively looking to bring 500 million people under its purview. It was termed as India’s ‘Modicare’ (a leaf out of Obamacare’s book), implying that it has the potential to be a force multiplier for the insurance industry; similar to what happened in the Indian telecom industry. Refreshingly, the Indian budget announced last week has in essence been about bringing development to the people, not through freebies but instead by creating an enabling environment. A raft of existing schemes targeting the poor such as Ujjwala, providing subsidized cooking gas; Saubhagya, enabling free electricity connections to poor households; and Jan Aushadhi Kendra, providing affordable medicines, got a big push in the budget. The strategy is to make basic development affordable and accessible—thereby creating ‘Ease of Living’, a tangible matrix that can be showcased electorally.
Jaitley also went to great lengths to establish the Modi government’s intent on job creation: He explained endeavors that would create 7 million jobs in the formal economy this year and he also baited the rod from the other end by incentivizing the employers in promising to absorb the share of provident fund contribution for all new employees for three years.
The emphasis of the budget on the socially and economically disenfranchised was quite glaring: No relief was announced for anyone said to have suffered from disruption triggered by demonetization. Corporate tax was targeted towards the high net worth foreign companies such as Facebook and Google, which operate in the digital space. A provision in the Finance Bill requires these companies, which earn revenues on the rapidly growing Indian online consumer base, to pay corporate tax. Instead, the corporate tax concessions were reserved for the small-scale sector, termed a “major engine of growth and employment”. Last but not least, was the decision to bring back a long-term capital gains tax, another signal that free lunch is over and portion of gains will have to be shared with the national exchequer - to fund development programs.
On the economic front, this budget perhaps marks a good way for this Indian government to sign off, if only it could have also improved upon its human rights record along the way! For Pakistan, it serves as a good paper to learn from, since quite a few policies being attempted on the other side of the border also hold relevance here.
The writer is an entrepreneur and economic analyst.