'Govt should start spending only after revenues flow in'

  • Gaurav Choudhury, Hindustan Times, New Delhi
  • Updated: Jan 12, 2015 09:52 IST

Jagdish Bhagwati, professor of economics, law and international affairs at Columbia University, says the Narendra Modi government has got the sequencing of reforms right, but it should not start spending money until revenues start flowing in. Bhagwati, who will deliver this year’s Madhavrao Scindia Memorial Lecture on Tuesday, spoke to HT on a range of issues. Excerpts:

How would you rate the performance of the first seven months of the Modi government?

They have inherited the UPA-2 government’s inactions. They (UPA 2) didn’t really do anything about corruption. And two, the mistake (they did) was in trying to spend money which they didn’t have. I am for social spending. The UPA 2 government’s major problem was that they had converted a lot of expenditure into social rights and obligations that were enforceable even by the courts. On other hand, growth had slowed down because, among others, of all the corruption charges.
Given the fact that he (Modi) wants to spend the money on infrastructure and others, he has to worry about finance minister Arun Jaitley producing the money. The PM can develop the ideas, put things in place, but he should not start spending the money until he begins to get it in a big way. I think he is going in the right sequence. He is also interested in social spending because that it is part of the Gujarat model.

What are your views about the recent controversy surrounding India’s contribution to scientific accomplishments such as the invention of airplanes?

I think that is nonsensical. It comes to trying to attribute to Indians things that are totally ridiculous, like Pushpak Viman means we had airplanes. That is the wrong kind of way to arrive at cultural chauvinism. We have had mathematicians. We invented the zero, we have had astronomers, we have things like Panini’s grammar and other intellectual achievements. But today’s post-renaissance education and attitude towards science is at the heart of modern development. We can’t possibly be against that. We have to bring it in.

The Prime Minister hasn’t spoken out against such controversial observations. Will it not hurt his domestic and global image?

I think it could in the long run. To expect Modi to be speaking out before he has consolidated is a bit difficult at least in the public sphere. He has the Rajya Sabha to take care of. Privately I have no doubt he is telling them to get off this. He is a very sensible person. There is not a trace of humbug about him. He is very realistic. He is very clear that the way to help the minorities primarily had to be through offering economic opportunities. That’s what he believes in.

What are your views about the controversy on Sanskrit language teaching in schools in India?

Sanskrit is one of the most beautiful languages in the world. The way to do it, like most subjects in India, we need to provide funds for support of teachers. A lot of people would like to study the language. Instead, she (HRD minister Smriti Irani) said replace German with Sanskrit. This is the wrong way to set about it.

There is a raging political storm surrounding the “ghar wapsi” or reconversion of people back to Hinduism. What are your views?

I think (reconversion or “ghar wapasi”) is a terrible thing. Hinduism doesn’t believe in conversion. The proselytising religions do not include Hinduism. They include Christianity and Islam. The idea of converting anybody back is absurd. What he (Modi) should say in my opinion is that this is an absurd view of Hinduism, it is not an appropriate view, that Hinduism is not a proselytising religion and even if some of our brothers and sisters have turned into Christianity or Islam, they are a still part of us. I think he should not let this slide too much. He should come forth and say that a good Hindu is one who embraces all others rather than saying mine is an exclusive religion.

As a proponent of free trade, how do you view India’s attempts at blocking a global deal under the WTO on issues of food security?

Under WTO rules, if we procure food domestically and stockpile, we can use it for domestic consumption. There is no restriction on it. Food security does not require any change in our WTO commitments. There is nothing that prevents you from building a stockpile by procurement and using it domestically. The second thing is at what price we procure. If we procure at a price which exceeds the international price by a huge amount, it would mean protecting the domestic sector. They (the prices) were fixed at 1986-levels at the time of the agreement. Prices have changed dramatically. We wanted prices to be updated. They (US and other WTO members) wanted it at 1986-87 levels. I would have just split the difference. I think the US would have gone along with that. I am going to suggest to the PM to suggest to President Barack Obama on agreeing on this splitting the price different and settle it now. The Prime Minister should also tell President Obama to lay off outsourcing from the political discourse in the US, because he doesn’t need it.

Despite its pro-markets approach, the Modi-government seems unwilling to open up FDI in retail. Why?

It was pretty clear to me that this was something he probably cannot do right away. This is because every political party has some supporters who cannot be taken on. This is something which I expect to happen in the second year of his term after the initial difficulties are mastered.

What are your views about the spate of recent ordinances to get around Parliamentary logjam?

I support executive action. The only problem is that it is easy to reverse executive action. It is more difficult to reverse legislative action.

You seem to support an overhaul of UPA’s flagship rural job scheme NREGA. Why?

There are problems with asset creation. Most of them are useless. You need two policy instruments for two objectives. If you can’t give money, give it through cash transfers through the Aadhar network. If you want to create assets you need to have another set of programmes. But you can’t do two things at one time.

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