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Indian-born economist Arvind Panagariya gave the strongest possible indication Friday that he was open to joining a Narendra Modi-led central government after the Lok Sabha elections. The Columbia University professor stated that if Modi became the Prime Minister (PM) he would be able to run a “well-functioning” government, remove the policy freeze and reassure the bureaucracy about the PM’s backing for legitimate decisions. He spoke to HT about a range of issues in an emailed interview. Excerpts:
What is your outlook on the Indian economy, given the current slowdown?
With Narendra Modi likely to be the next Prime Minister, I view the outlook going forward as being excellent. Most of the conditions for a return to 6 to 7% growth (high savings rate, a competitive exchange rate, an open economy) within a year are in place. The main missing gradient is a well-functioning government. My expectation is that Mr. Modi will correct this deficiency.
There are reports that leaders from the Bharatiya Janata Party (BJP) are in touch with you on design of its economic policy. Your comments.
In the past I have provided some inputs but to my knowledge, lately, Mr. Modi is solely focused on winning the election with the largest possible margin.
What is the first immediate task that the new government should do?
Appoint a pragmatic environment minister; end the paralysis in decision-making by reassuring the bureaucracy that the PM would take responsibility for all their legitimate decisions; fix the health of the banks and reform the recently enacted Land Acquisition Act.
What are your thoughts on the current Lok Sabha elections?
I have less information on this than you. But my own impression is that since 1984, we once again have a wave election in which people are voting for Mr. Modi and against the Congress regardless of the candidate in their constituencies or the performance of the incumbent state government. I expect the NDA to comfortably pull off an absolute majority.
Prof Jagdish Bhagwati, in an interview to Reuters, has said that you were a strong candidate for a hands-on role of chief economist to the prime minister, if Narendra Modi is elected after this year’s Lok Sabha elections. Your comments and are you open to such a position? Has any discussion taken place between BJP leaders and you in this respect?
If I am convinced that I will positively contribute to the betterment of the nation and Mr. Modi invites me to join his government, family circumstances permitting, I will do so. On other maters, you should ask Professor Bhagwati.
What should be the sequence of reforms for the new government in terms of policy priorities?
I have long argued that to generate good, organized-sector jobs for the bottom 30 to 40% of the population, we need the reform of labor laws, cheaper and reliable electricity, good road railway connectivity and highly efficient ports. We must also pay urgent attention to higher education reform. On the social side, we need to gradually shift to cash transfers, reform the RTE Act and begin working on a pragmatic health policy that is not subverted by the poor ability of the public sector to deliver services.
There appears to be a view within the BJP that RBI governor Raghuram Rajan should be replaced because of his rather hawkish monetary stance on price control. What are your views?
To my mind, Mr. Rajan has done a terrific job. I also think that Mr. Modi himself is a pragmatic politician who will make a decision solely on the consideration of what would best promote the national interest.
The UPA government’s biggest achievements seem to be in social sector programmes. What are your comments on these?
This is largely correct since the UPA did very little to carry forward what Professor Bhagwati and I call Track I reforms aimed at promoting faster and more inclusive growth. Also, I would have gone for a different approach to promoting social goals, one that would have yielded a lot higher bang for the buck.
What are your views on the UPA’s direct benefit transfer (DBT) scheme?
The scheme is very far from the direct cash transfers. A genuine scheme has to offer the rural folk a choice between cash transfers, on the one hand, and subsidized food and employment guarantee under NREGA, on the other.
How would you describe the performance of the UPA government on the economic front over the last 10 years?
I wish the UPA had not given up on Track I reforms since they were necessary for sustained rapid growth and, therefore, continued expansion of social programs.
Your critics say that your line of thinking has a political underpinning that obliquely favours the Gujarat model of development under Narendra Modi. Your comments? Critics have argued that the so-called `Gujarat model’ is a more hype than a real development model. What are your views?
I favour outward-oriented and market-friendly policies. Since Gujarat has followed these policies and metaphors are helpful in public policy discourse, I have used the term “Gujarat Model” to describe these policies. So, the causation for why I favor the Gujarat model is exactly the reverse. On the performance of the Gujarat model, I have extensively written with facts and figures in a number of places. India itself flourished because it adopted the “Gujarat Model,” thanks to the Narasimha Rao and Atal Behari Vajpayee reforms. Critics have provided no evidence to persuade me otherwise.
Would you describe Modi as a great reformer?
I see him as a pragmatic politician driven by a desire to promote the national interest.
The BJP is opposed to FDI in multi-brand retail. What are your views on this?
This has neither surprised nor bothered me in terms of what it might mean for reforms in other sectors. Small shop-keepers have been traditionally the largest constituency of the BJP and their view of retail FDI is determined by that consideration.
What are your views on the new legislation on land acquisition?
This is the single most important barrier to long-term progress that the next government would inherit from the UPA. It rightly tried to correct the injustice that had been happening to the farmers under the old, 1894 Act but the solution has turned worse than the problem.