Economically, India is unstoppable but for its politics,? affirms Bimal Jalan. He draws a direct connection with the now infamous FDI in retail faux pas. ?It?s not about a plus or minus in the retail sector, it?s about the signal that India is sending out. These are decisions taken at the highest levels of the government and announced at the highest levels of the government and are being reversed. So, what can you trust? I am not taking sides on what is right or wrong, but how do you function in such a scenario.? The former governor of the RBI tells Sarika Malhotra that if a country can give the largest free and fair elections, it can do anything, provided it has the will to do it.
The Central Statistical Office has said India?s economy grew at the slowest pace (6.1%) in two years in the third quarter of this fiscal and that investment rate continues to decline. What are your observations on this dismal piece of data?
Since I have been observing these figures from close quarters, I must say that this is not a cyclical drop. If you are an investor and you are seeing a policy paralysis of this magnitude ? rampant corruption, lack of accountability, top bureaucrats and ministers in jail ? whom can you trust to execute policy? It?s an inexplicable situation to expect growth in such a politico-economic scenario. We must remember that growth rate is not about decimals alone.
Will slowing growth add further pressure on the central bank to lower interest rates?
Obviously. But these things are short-term adjustments. I will hope that instead of looking for short-term adjustments, which are welcome and will be done, the underlining systemic causes that are threatening to multiply and are in multiple voices are dealt with. And that must happen sooner than later.
Don?t you see a problem with the government indulging in wasteful spending?
In the present circumstances, funding the welfare schemes is an issue. The crux of the matter is that given the level of poverty, deprivation and need for basic services, government programmes have to be in place. But the key is that they have to be very carefully implemented so that their cost-benefit ratios turn positive. Take the example of PDS, a Planning Commission study shows that 48% of the money spent is diverted. We have to confine ourselves to the basic necessities, but the most important thing is not the money but ensuring that what is spent is spent well and reaches the target. As the FM himself has said we have a difficult situation ? fiscal deficit is an issue, desirable programmes have to be funded, and slowing growth is dampening investment. To strike a balance between fiscal deficit, growth and subsidy is always a difficult task. I frankly don?t know how the FM plans to walk the rope this Budget.
Any suggestions for better implementation of the PDS?
The major problem in the effective administration of poverty alleviation schemes is the number of agencies involved in decision making and implementation. Several of these agencies do not work in unison because of their conflicting objectives. Then there is the Centre-state conflict. For greater clarity and accountability in the decision-making process, the government should appoint a single public sector agency to implement the programme. A minister could be appointed to monitor the efficacy of the programme?s implementation. The Centre should just announce the policy and reimburse the amount of money according to the scheme and the number of beneficiaries and let the states decide on the other parameters depending on the circumstances in the state. The Central minister can monitor the progress. Decentralisation is the need of the hour. It?s a simple case ? If a country can successfully conduct the largest free and fair elections in human history through an independent Election Commission, why can?t other bodies deliver. Similarly, for delivery of essential services create agencies which are at an arm?s length from the government but are responsible to the government. They should be manned by efficient bureaucrats and targets should be set by the government. Annual accounting should be done on the ground. Let an independent implementation body work on the deliverables and execution and the government should make policy and monitor progress. Ideas are not just about figures, but implementation. We?ve to focus on decentralisation and holding authorities accountable. And it can be achieved.