Two big ideas that will unleash the Indian elephant. We were not invited but here are our suggestions:
The large business groups need to be curtailed. A ban on lending by banks to these large groups or a reintroduction of anti-trust laws that limit their growth, would give enough space to an army of subdued smaller enterprises to innovate and create. For example, regulators of the investment management industry have put in place rules that stymie the ability of boutiques or startups. Fearful that mutual fund houses could do ‘bad stuff’, the minimum net worth of an entity that wishes to manage a pass through vehicle like a mutual fund is Rs 500 million (in the US it is Rs 7 million). If SEBI put a few people in jail for their crimes, the minimum net worth rule would not have to be jiggled with. But, hey, who listens to logic when the big goons are out there swinging their bats!
Move decision-making to the district level: Switzerland with a population of 7 million has 26 cantons. The USA with a population of 320 million has 39,044 general purpose local governments; India with a population of over 1.2 billion has 676 districts. Yet, all decisions in India seem to be made in New Delhi (which oversees 7 Union Territories) or in the capitals of the 29 states. If every district was asked to build its own economic and business plan, and implement it – eventually by the issuance of ‘muni’ bonds – India would have a far better chance of thriving. Sure there will be the Detroits and the Puerto Ricos, but there will also be winners. The Congress – led by the infamous Indira Gandhi – in its hunger for power centralized all decision-making over the decades. The BJP – if truly reformist – can free India again.