Interview with Vice-chairman, NITI Aayog
Will the socio-economic caste census for rural areas be the basis for various entitlements by the government? Will the poverty number, if calculated by NITI Aayog, be just an academic exercise?
The Socio Economic Caste Census (Rural) addresses many of the same issues that the poverty analysis by the erstwhile Planning Commission did. These issues include how to define poverty, how to identify the poor for purposes of distribution of benefits and how to track them over time to assess the progress in combating poverty. The NITI Aayog Taskforce on Poverty Elimination has been looking at these questions afresh. Our analysis will naturally take into account what we have learned from the SECC. I do not think the conventional poverty analysis based on the expenditure surveys loses its significance in any way, but given what we have from the SECC, we do need to think whether we additionally need a separate official poverty line based on expenditure surveys. At the moment, this is an open question with which we will be grappling as we carry forward the work of the taskforce.
Investment cycle is refusing to perk up because of overstretched balance sheets of corporates. If monsoon falls deficient, rural demand will also not pick up. Do you think a growth slowdown is staring at us?
You are the masters of pessimism! The overall investment-to-GDP ratio has continued to hold up around 30 per cent. Growth rate is on the accelerating, not decelerating, path. The government has been steadily introducing growth-friendly reforms which are essential to eliminating poverty. It has been removing bottlenecks that had held up numerous infrastructure projects and is also committed to higher spending on infrastructure. Even the latest news on monsoon is positive. True, not all sectors are booming. And sectors that are facing difficulties are far more vocal than the booming ones. This is as it should be in a democracy, but it also has the side-effect that the negative voices drown the positive ones.
Not only us, former Finance Minister Yashwant Sinha, too, seems to be a pessimist. He has said growth looks rosy due to statistical change in methodology of estimating the GDP. The ground reality does not mirror that. Do you agree?
As you know, I am one of the greatest admirers of the former finance minister whose reforms (along with those under former PM P V Narasimha Rao) were the key to the eight per cent growth India experienced for almost an entire decade beginning 2003-04. But on this issue, I differ from Sinha. I have come across no serious analyst who questions the changes in either data or methodology that the new series has introduced. What some are questioning are growth estimates to which these improvements give rise. But how scientific is it to judge a method by the outcome? Should we, then, also deem unreliable the estimate of 7.5 percent average growth from 1988-89 to 1990-91 (based on the old series) because some other parameters during this period were so weak as to lead to the balance of payments crisis of 1991? Or reject the 6.7 per cent growth estimate for 2008-09 (also based on the old series) since this was otherwise a crisis year in which our exports plummeted?
In the context of perking up growth, would you prescribe much more aggressive easing monetary policy stance by the RBI?
I am sure the RBI governor recognises the need for it and we will see some substantial action on this front in the forthcoming months.
How do you assess the impact of Greek crisis on India? In this situation, is the projection of 8.1-8.5 per cent growth not ambitious?
Direct exposure of India to Greece is close to nil. Therefore, the question to ask is how much of a contagion effect would the Greek crisis have on outside countries to which India has exposure. Here, too, the answer is: not very much. Unlike most of the crises of the past, the Greek crisis has been a process instead of an event. Therefore, much of its fallout has been absorbed along the way and the European Union has been taking steps to insulate itself and, therefore, the remainder of the world from what might come in the next several days. And do not forget that Greece might yet vote ‘yes’ in the referendum, in which case we will return to the process that would continue to unfold gradually.
Europe is falling into one crisis after another. Do you think European Union is a failed idea?
Those of us who had followed the difficulties that the “snake in the tunnel” and European Monetary System arrangements had faced in the 1970s and early 1980s have always feared that a single currency with multiple national governments, independent budgets and banking systems would face difficulties. On the other hand, the idea of a United States of Europe has had a long history and one whose time had perhaps come. It really had to be tried and for all we know, it may still succeed.
RBI governor Raghuram Rajan has said central banks are following the weak currency policy that was followed at the time of the Great Depression. In this context, how do you assess the central banks’ move and what should be your policy prescription for them?
We live in a world of flexible exchange rates in which, depending on relative inflation rates, some currencies would depreciate while others appreciate. The rupee itself offers an interesting example. Compared with the exchange rates at the end of 2013-14, it now stands substantially appreciated in nominal terms (and also real terms because the inflation rate in India is much higher than in each of these countries) against the euro, pound sterling and the Japanese yen, but it has nominally depreciated against the US dollar. Insofar as the issue of exchange rate changes due to deliberate central bank interventions is concerned, it is inevitable at least for the emerging-market economies that are progressively opening up their capital accounts. Central banks do have to opportunistically build up the foreign exchange reserves to deal with the volatility of international capital flows as these flows are liberalised more and more. This is how the RBI has added $355 billion to its kitty from none at all in 1991 when we faced the balance of payments crisis.
The one per cent tax over GST to woo producing states such as Gujarat and Maharashtra has been criticised by many, including industry. How do you see the proposed move?
GST is a process and not an event beyond the fact that it will come into effect on a specific date. And since it will bring about a major change in how we collect taxes, states have natural anxieties about how it might impact their revenues. So the one per cent tax is a compromise transition measure until states find out the new system will deliver them more, not less, revenue than the old system.
There is opposition to the land Bill in its present form. What would you suggest the government to get consensus around the Bill?
I have full confidence in the Prime Minister on this matter and would not second-guess him on it.
NITI Aayog is in the process of restructuring its staff and planning to invite people from the private sector as advisers. How do you plan to go about it?
The mandates of the NITI Aayog are different from those of the erstwhile Planning Commission. Therefore, some restructuring is required to realign the institutional structure to the new mandates. I will have more to say about this after we have made reasonable progress towards this realignment.
Will consultants from foreign countries also be invited. If yes, would it not lead to the same controversy that the erstwhile Planning Commission had faced?
Today, talented Indians live all around the world and we must be willing to draw on their expertise in the interest of the nation. At the same time, India has rules and regulations on how and under what circumstances can we draw upon such talent. So, our effort will be to do what is in the national interest within the rules and regulations of the Government of India and those of the state governments.
Source: Business Standard