India - Maharashtra : Reorienting Government to Facilitate Growth and Reduce Poverty, Volume 1. Executive Summary and Main Report

Abstract

Maharashtra's leadership position
 in India is under threat. The State is facing several
 bottlenecks to development: the private sector is no longer
 embracing Maharashtra and the public sector banks are
 increasingly reluctant to assist Maharashtra in its
 off-budget endeavors. Thus, the status quo is not an option.
 Regaining its leadership position is well within
 Maharashtra's reach. Among its many strengths are: the
 large pool of literate and skilled labor force, a
 well-developed financial system, a talented bureaucracy, and
 willingness to break with the ways of the past. If the State
 can successfully implement its reform agenda, it can quickly
 rebound and be back on the path of growth and prosperity.
 The lessons of the past decade suggest two guiding
 principles: First, the Government needs to articulate the
 message that its reforms are not to hurt, but to help the
 farmers. If reforms are to succeed, they have to be
 pro-farmer and pro-poor. Maharashtra's fiscal stress,
 be it due to power and irrigation subsidies or due to the
 losses in cotton and sugar interventions, has a close
 connection with the rural sector. However, as analyzed in
 Chapter 4, the current rural interventions are imposing a
 huge and unsustainable fiscal cost on the state, and more
 importantly, the bulk of the benefits are accruing to the
 rural rich. the challenge for the government, therefore, is
 to provide more efficient, equitable, and sustainable
 assistance to the rural poor. Second, the government's
 reform program needs to be designed and implemented with a
 medium- to long-term perspective. Piecemeal, short-term
 reforms can only bring short-term gains. The Government of
 Maharashtra faces a simple choice: to try to succeed in a
 difficult reform endeavor, or, since the policies of the
 past no longer work, to give up without trying and condemn
 itself to developmental and fiscal failure. Through its
 2002-03 Budget Speech, the Government has indicated that it
 has chosen the former path. The quicker it moves along it,
 the greater the chances of success.