Begin typing your search above and press return to search.

State should focus on areas of comparative advantage: Baruah

By R Dutta Choudhury

GUWAHATI, May 24 - To tide over the economic crisis arising out of the COVID-19 pandemic, Assam should focus on the areas in which the State has comparative advantage and embrace agriculture sector reforms. This was the view expressed by Rajiv Baruah, a private investor and former investment banker.

In an interview with The Assam Tribune, Baruah, who was the CEO for Credit Suisse AG Mumbai Branch till December 2018 and has worked across a broad range of Investment Banking areas with a number of International Banking institutions in Singapore, Hong Kong, London and Mumbai, said that the focus of the Government should be on preserving the economic vitality.

Following are excerpts of an interview with Baruah, an MBA from IIM Ahmedabad, and Hansraj College:

The Assam Tribune: What will be your suggestion for revival of the economy of Assam following the COVID-19 pandemic?

Rajiv Baruah: The primary focus of the government should be on the preservation of the economic vitality and economic potential of the State. Undoubtedly and understandably, there will be a clamour for relief from various affected segments of the populace. The Government has to offer comfort to those affected. But this relief should not be at the cost of the future health and economic wellbeing of the State and its people. This is a hard act for any political establishment as the short term is always more attractive. On the other hand, not losing sight of the long-term goal will pay dividends to the same political establishment in the long term.

Looking at the problem on a more granular basis would be instructive. Assam�s economy depends significantly on the following non-Government sectors � agriculture, tourism, remittances, entrepot trade and finally the plantation industry. From the budget papers, we learn that the Gross Value Added (GVA) is 29% from Agriculture, 49% from Services and 22% from manufacturing.

Each of these sectors have their own dynamics and will have been impacted differently by the Covid pandemic.

AT: The lockdown following the outbreak of COVID-19 exposed several weaknesses of Assam. One of the major weakness that came to the fore is that the State is heavily dependent on other states of the country for essentials. What will be your suggestion to deal with the issue in the days to come?

RB: No state or country can be self-sufficient in all areas. If Assam is productive in those areas where it has a comparative advantage, then I would say Assam has done well. Self-sufficiency by itself has no meaning unless it is accompanied by economic logic. I would suggest that first, we should focus on those areas where the State has a comparative advantage, say production of rice, vegetables, fruits and flowers. Second and more importantly, we will have to enthusiastically embrace the proposed reforms in the Agricultural Sector to improve the State GVA from rural areas and the agricultural sector.

AT: As the State is gradually opening up from the lockdown, the threat of flood is looming large, which will again put the State on the back foot. What will be your suggestion to deal with the problem?

RB: With deforestation in the upper reaches of the rivers and the soft alluvial soil in our State, floods will be in our lives for the foreseeable future. We will have to learn how to live with it. This does not mean that we ignore the problem. We need to understand that nature of flooding, the areas where flooding happens, prevent people from making permanent houses in flood plain while permitting the cultivation in the Rabi season (a bit like the Bosa system of cultivation in the late Ahom period), improve drainage to allow the smooth evacuation of the flood waters once the rivers recede and ensuring that floods do not interfere with the road and rail communication systems. We should get over our desire to control the rivers and manage floods with embankments. It is just not possible.

At the same time, I am not advocating that our cities and towns should be neglected and left open to flooding. Where we have made a mistake of extending a township on a flood plain, or where the river bed has risen above the town, as in Dibrugarh, I would propose that only those specific areas be protected. For the rest, with proper hydrological studies, we should look to guide the flood waters away, rather than prevent floods.

Once we look at the problem as once of living sustainably with our rivers, Assam will be better off and happier.

AT: This year the lockdown posed a major threat to the farmers, mainly because they failed to sell their products. Weak system of marketing seems to be a major issue in Assam. What will be your suggestion to improve the marketing system?

RB: This is a problem, not only in Assam but across India. It is well known that the larger problems in agriculture start from the post-harvest period. Our problem is not in producing but in farm gate prices, storage, and distribution. The solution is to bring competition into the area, to encourage multiple economic agents to compete to buy the produce from the farmer. I am very hopeful that the reforms announced by the Finance Minister would fully be carried out. That has the potential to be a game changer for rural India.

AT: Tea industry is one of the major industries in Assam and according to an estimate, the industry suffered heavy losses during the lockdown. As imports are coming down over the years with China, Kenya and Sri Lanka marching ahead in tea exports, what will be your suggestion to boost the tea industry?

RB: The tea industry is facing myriad problems. All these problems lead to a negligible return on capital invested. Nothing exemplifies this problem more than the capital flight from this industry leading to leading Plantation Companies wanting to sell their gardens.

The industry must solve this problem themselves. They must drive the low quality teas made by merchant manufacturers, the so called �made tea�, out of the market. This will have the added benefit of our small growers getting a premium for good plucking practices. Finally, the industry must be able to brand the high-quality teas to get a premium price. I would recommend that the Government guides the industry rather than use the heavy hand of regulation as no government can make a failing industry successful.

AT: Unemployment is always a major problem for Assam and because of the lockdown, more than five lakh youths from Assam, who are working as security guards, hotel waiters etc in other states of the country, are returning home. Is there any possibility of providing them with self employment opportunities?

RB: Looking to provide employment is to look at the problem from the wrong lens. Our society must become entrepreneurial and productive. And our youth need to be armed with the right tools to participate in such an entrepreneurial and productive economy. This lack of high-quality employment has been a long-standing problem in Assam. I cannot see any short-term solution. But in the long term, if civil society, educational institutions and the government work together, and necessity drives our society into becoming more entrepreneurial, I see a possibility of our youth trying to make a go of it within the State.

AT: Despite best efforts, Assam has not yet been able to attract investors from outside to the desired extent. What will be your suggestion in this regard?

RB: Why would investors come to Assam? What is it that we can offer that will permit an investor to make a good return on his investment? If you think through this problem of attracting entrepreneurial capital, you will realise that asking investors to come to Assam is a losing game. True, the odd investor might come. But they will come for the subsidy, for the promise of an incentive. The capital we need is the capital that stays in the State even when the subsidy or the incentive runs out. What I would propose is that the State should focus on the areas where is has a comparative advantage. As of now, this would be in the agricultural and related areas. Encourage entrepreneurship in a few specific sectors where markets are accessible. And we should bring the full force of the thinking and doing capacity in our State to focus on these areas. Our Universities, research institutes, government extension counters, farmer and producer cooperative institutions should be all focused on areas where the State has a comparative advantage. Else we will be frittering away our energies in unproductive areas and will have nothing to show for it.

More in Entertainment
Next Story
Similar Posts
State should focus on areas of comparative advantage: Baruah

GUWAHATI, May 24 - To tide over the economic crisis arising out of the COVID-19 pandemic, Assam should focus on the areas in which the State has comparative advantage and embrace agriculture sector reforms. This was the view expressed by Rajiv Baruah, a private investor and former investment banker.

In an interview with The Assam Tribune, Baruah, who was the CEO for Credit Suisse AG Mumbai Branch till December 2018 and has worked across a broad range of Investment Banking areas with a number of International Banking institutions in Singapore, Hong Kong, London and Mumbai, said that the focus of the Government should be on preserving the economic vitality.

Following are excerpts of an interview with Baruah, an MBA from IIM Ahmedabad, and Hansraj College:

The Assam Tribune: What will be your suggestion for revival of the economy of Assam following the COVID-19 pandemic?

Rajiv Baruah: The primary focus of the government should be on the preservation of the economic vitality and economic potential of the State. Undoubtedly and understandably, there will be a clamour for relief from various affected segments of the populace. The Government has to offer comfort to those affected. But this relief should not be at the cost of the future health and economic wellbeing of the State and its people. This is a hard act for any political establishment as the short term is always more attractive. On the other hand, not losing sight of the long-term goal will pay dividends to the same political establishment in the long term.

Looking at the problem on a more granular basis would be instructive. Assam�s economy depends significantly on the following non-Government sectors � agriculture, tourism, remittances, entrepot trade and finally the plantation industry. From the budget papers, we learn that the Gross Value Added (GVA) is 29% from Agriculture, 49% from Services and 22% from manufacturing.

Each of these sectors have their own dynamics and will have been impacted differently by the Covid pandemic.

AT: The lockdown following the outbreak of COVID-19 exposed several weaknesses of Assam. One of the major weakness that came to the fore is that the State is heavily dependent on other states of the country for essentials. What will be your suggestion to deal with the issue in the days to come?

RB: No state or country can be self-sufficient in all areas. If Assam is productive in those areas where it has a comparative advantage, then I would say Assam has done well. Self-sufficiency by itself has no meaning unless it is accompanied by economic logic. I would suggest that first, we should focus on those areas where the State has a comparative advantage, say production of rice, vegetables, fruits and flowers. Second and more importantly, we will have to enthusiastically embrace the proposed reforms in the Agricultural Sector to improve the State GVA from rural areas and the agricultural sector.

AT: As the State is gradually opening up from the lockdown, the threat of flood is looming large, which will again put the State on the back foot. What will be your suggestion to deal with the problem?

RB: With deforestation in the upper reaches of the rivers and the soft alluvial soil in our State, floods will be in our lives for the foreseeable future. We will have to learn how to live with it. This does not mean that we ignore the problem. We need to understand that nature of flooding, the areas where flooding happens, prevent people from making permanent houses in flood plain while permitting the cultivation in the Rabi season (a bit like the Bosa system of cultivation in the late Ahom period), improve drainage to allow the smooth evacuation of the flood waters once the rivers recede and ensuring that floods do not interfere with the road and rail communication systems. We should get over our desire to control the rivers and manage floods with embankments. It is just not possible.

At the same time, I am not advocating that our cities and towns should be neglected and left open to flooding. Where we have made a mistake of extending a township on a flood plain, or where the river bed has risen above the town, as in Dibrugarh, I would propose that only those specific areas be protected. For the rest, with proper hydrological studies, we should look to guide the flood waters away, rather than prevent floods.

Once we look at the problem as once of living sustainably with our rivers, Assam will be better off and happier.

AT: This year the lockdown posed a major threat to the farmers, mainly because they failed to sell their products. Weak system of marketing seems to be a major issue in Assam. What will be your suggestion to improve the marketing system?

RB: This is a problem, not only in Assam but across India. It is well known that the larger problems in agriculture start from the post-harvest period. Our problem is not in producing but in farm gate prices, storage, and distribution. The solution is to bring competition into the area, to encourage multiple economic agents to compete to buy the produce from the farmer. I am very hopeful that the reforms announced by the Finance Minister would fully be carried out. That has the potential to be a game changer for rural India.

AT: Tea industry is one of the major industries in Assam and according to an estimate, the industry suffered heavy losses during the lockdown. As imports are coming down over the years with China, Kenya and Sri Lanka marching ahead in tea exports, what will be your suggestion to boost the tea industry?

RB: The tea industry is facing myriad problems. All these problems lead to a negligible return on capital invested. Nothing exemplifies this problem more than the capital flight from this industry leading to leading Plantation Companies wanting to sell their gardens.

The industry must solve this problem themselves. They must drive the low quality teas made by merchant manufacturers, the so called �made tea�, out of the market. This will have the added benefit of our small growers getting a premium for good plucking practices. Finally, the industry must be able to brand the high-quality teas to get a premium price. I would recommend that the Government guides the industry rather than use the heavy hand of regulation as no government can make a failing industry successful.

AT: Unemployment is always a major problem for Assam and because of the lockdown, more than five lakh youths from Assam, who are working as security guards, hotel waiters etc in other states of the country, are returning home. Is there any possibility of providing them with self employment opportunities?

RB: Looking to provide employment is to look at the problem from the wrong lens. Our society must become entrepreneurial and productive. And our youth need to be armed with the right tools to participate in such an entrepreneurial and productive economy. This lack of high-quality employment has been a long-standing problem in Assam. I cannot see any short-term solution. But in the long term, if civil society, educational institutions and the government work together, and necessity drives our society into becoming more entrepreneurial, I see a possibility of our youth trying to make a go of it within the State.

AT: Despite best efforts, Assam has not yet been able to attract investors from outside to the desired extent. What will be your suggestion in this regard?

RB: Why would investors come to Assam? What is it that we can offer that will permit an investor to make a good return on his investment? If you think through this problem of attracting entrepreneurial capital, you will realise that asking investors to come to Assam is a losing game. True, the odd investor might come. But they will come for the subsidy, for the promise of an incentive. The capital we need is the capital that stays in the State even when the subsidy or the incentive runs out. What I would propose is that the State should focus on the areas where is has a comparative advantage. As of now, this would be in the agricultural and related areas. Encourage entrepreneurship in a few specific sectors where markets are accessible. And we should bring the full force of the thinking and doing capacity in our State to focus on these areas. Our Universities, research institutes, government extension counters, farmer and producer cooperative institutions should be all focused on areas where the State has a comparative advantage. Else we will be frittering away our energies in unproductive areas and will have nothing to show for it.

More in Entertainment
Similar Posts