“If Modi doesn’t carry out reforms, I will be among the most vocal critics”
Though critics claim that his line of thinking obliquely favours Gujarat chief minister and BJP’s prime ministerial aspirant Narendra Modi’s development model, US-based economist and Columbia University professor Arvind Panagariya says that he uses Gujarat only as an illustration and that his main goal is reform.india Updated: Dec 07, 2013 00:50 IST
Though critics claim that his line of thinking obliquely favours Gujarat chief minister and BJP’s prime ministerial aspirant Narendra Modi’s development model, US-based economist and Columbia University professor Arvind Panagariya says that he uses Gujarat only as an illustration and that his main goal is reform.
In an interview to HT, Panagariya spoke about the UPA’s social sector programmes, the election outcome and what the new government should do to get India back on the growth track. Excerpts.
What is your outlook on the Indian economy, given thecurrent slowdown?
There are two possibilities. Immediately, what I expect is that growth has bottomed out and we should be gradually coming out of it. But, more importantly, where we go in the next 10-15 years, in the medium-term, will depend, to a very large extent on what happens in the 2014 elections and what the new government decides to do. The first immediate task of the new government should be to unfreeze the policy paralysis that continues to exist, which in my mind is the single-biggest cause of the current decline in growth rate. If it successfully breaks the logjam in the decision-making process that exists at the Centre, we should quickly see growth rate jumping back to 6-7%.
If it then goes back to reforms and starts building infrastructure in a big way, highways and electricity in particular, then we can even achieve a growth rate of 9%.
But there is also a second possibility. If the new government basically repeats what the outgoing government has been doing in the last few years, then we are in serious trouble.
What are your thoughts on next year’s Lok Sabha elections?
It is hard to say what the election outcome is going to be. But the one thing that seems highly probable is that the present government is not going to return. The mood against the present government seems to be so alarmingly negative and hence I would be surprised if they were to return to power. But anything can happen in elections.
What should be the sequence of reforms for the new government in terms of policy priorities?
The new government can actually start on a clean slate by systematically bringing about transparency in procurement systems. It also has to announce its commitment to reforms and start making good on it.
There is not so much room for waiting to sequence. If it is a decisive government it has to move on multiple fronts simultaneously. It has to establish its credibility that it is a reformist government and it truly means business.
The UPA government’s biggest achievements seem to be in social sector programmes. What are your comments on these?
On the social front, I would rely personally on cash transfers as far as enhancing the purchasing power of the people is concerned. For example, I would start giving people cash and start winding down the NREGA. Likewise, for the public distribution system, rather than requiring the beneficiaries to go to the fair-price shop, should give them cash and let them decide whether they want to buy it from the market or government ration shops. Both can co-exist.
But isn’t the direct benefittransfer (DBT) a similar policy?
The DBT scheme is half-hearted. There is no thinking on whether these cash transfers are ultimately going to replace some of the existing social programmes. There is attempt to unify the existing transfers under the unique identity scheme (UID) accounts. The government has to prove that it can deliver. The same competitive pressure such as the ones seen in banking and telecom can be brought to bear in the public distribution system.
How would you describe theperformance of the UPA on the economic front over the last 10 years?
The UPA government has been incredibly lucky that it was preceded by two prime ministers — Narasimha Rao and Atal Behari Vajpayee — who carried out an enormous amount of reforms. The UPA happened to suddenly come in power in 2004 when these accumulated reforms had pushed the growth rate to 8%. It was clearly the lagged effect of the reforms that was carried out earlier. Growth happened and the UPA government was then able to build the social programmes.
For the social programmes, they should get partial credit, certainly, although I don’t see how any other government would have done things terribly differently. Probably better.
But while they reap credit for that, they also have to accept the blame for dropping the ball on growth-oriented reforms, including in areas as non-controversial as infrastructure. Who was politically against building up the infrastructure? It was simply a failure of delivery.
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?
I use Gujarat as a metaphor. You can call it the Tamil Nadu model. That’s fine by me. I have always bet on reforms.
Would you describe Modi as great reformer?
Yes, if you look at the last 10 years and the kind of things that have been happening compared with most other places. You look at the work that he has done in agriculture, that never actually gets the play in media. You don’t see the kinds of delays and still no decisions being taken in many states. You can see the difference between Gujarat and my own state Rajasthan. Whoever is the prime minister should come in and start addressing the issue of reforms. If Narendra Modi comes to power and does not carry out reforms, I will be among the most vocal critics.