The National Institution for Transforming India (NITI) Aayog will soon start the process for preparing a 15-year perspective plan that will replace the five-year plan model from the next financial year. In an extensive conversation with Santosh Tiwari, the vice-chairman of the NITI Aayog Arvind Panagariya lists out the successes of the NDA government during its two years in office and also explains how the focus of the new plan framework will be on the public sector. Excerpts:
Which are the areas where you think that things have really moved in the last two years?
The government’s focus has been to cover a wide range of areas. Agriculture and social sector, rural economy and infrastructure are some of the areas where the government has been able to see a fairly substantial movement in the last two years.
Do you see Jan-Dhan becoming a major driver in pushing reforms in the social sector, or is it just an extension of UPA’s Aadhaar-based direct benefit transfer scheme?
Aadhaar was a very important stepping stone, but still its potential could not have been realised for the delivery of social programmes without the beneficiaries having bank accounts, and that is where Jan-Dhan accounts was a master stroke. It is clear to me that the Prime Minister was thinking in a holistic way when he made the decision to keep Aadhaar—he also saw that he will not be able to use it effectively without the beneficiaries having bank accounts.
Social sector schemes appear to be focusing less on poverty eradication. Isn’t it?
For social sector schemes now, mostly, we are not using conventional poverty measures to allocate expenditures. The government is in the process of moving in the direction of announcing some basic things which everybody should have, like housing, livelihood, drinking water, electricity, connectivity through rural roads, etc—something that the government is promising either by 2019 or by 2022, depending upon which social programme you are talking about. The Prime Minister himself supervises target-fixing and also their progress. Building of roads, power connectivity and laying down of railway tracks has accelerated.
But the progress in terms of meeting even Swachh Bharat Abhiyan targets is not that encouraging, not even that of building toilets…
On toilets, that is not true. If you go back to last year of the previous government, they built about 5 million toilets. But, in 2015-16, the current government has built about 12 million toilets. Rajasthan alone has built 2 million toilets.
There has been some success in roads and railways, but the big concern is from where will the money come to push investment…
That is truly a big question and associated with that is creation of jobs. For this, we need to accelerate growth, in the labour-intensive manufacturing sector in particular, so that more jobs come through. And this will, of course, help accelerate growth because that is where we have comparative advantage and the scope for expansion is huge there. If we get there, then we will have 8-9% growth, which will start giving us more revenues. At the same time, we can do other things on the tax base side. Expanding tax base is also an important instrument for expanding revenues. Our tax base tends to be a bit narrow. If GST goes through, it will give us another big avenue to expand the tax base. But you are absolutely right that we are bound by the FRBM Act as far as fiscal deficit is concerned, so the only two ways to expand spending are to further growth and expand our revenue base.
FRBM will not allow public spending, and private sector spending isn’t coming in the next three years. Do you expect a change in this situation going ahead?
The situation can certainly change if there is acceleration in growth. If growth situation improves, then the banking situation would ease up a bit, and then the private sector will also do its bit.
Any pick-up in investments also requires a change in the approach towards big policy steps like multi-brand retail or promotion of GM crops. This is not happening…
India, at the end of the day, is a noisy democracy and things move slowly, but an effective and determined government can move things. As you have seen in many fields over the last two years, the Prime Minister has successfully moved. The latest example is the insolvency and bankruptcy law. Other legislations have also happened. Even in the multi-brand retail, at least on the food chain side, some goals have been accomplished. While the UPA government policy allowed 51% FDI, this government has now allowed 100% FDI in food supply chain, with the clause to source food from India. There is now some consideration going on that, at least on some of the ingredients, the government will relent so that they can be imported. Likewise, on GM crops, we may see progress, but that remains a touchy subject. In fact, none of the states currently allow field trials. So here also we need some states coming forward in permitting trials. These are difficult reforms and so it requires building of the constituency involved. I am optimistic that things will move in these areas as we see movement in other areas which we had previously thought can’t happen.
In case of GST, why can’t the 18% rate be put in the Bill itself, as demanded by the Congress party?
It would be unusual for the government to do so, as it has not been done elsewhere. It is finally the finance minister’s call whether he concedes to the demand, which appears necessary to carry forward the reform, or the Congress maybe changes its mind. I do hope this will get resolved one way or the other very soon.
The 12th Five-Year Plan is ending this year. What next?
The government has made a decision just now that five-year plans will no longer be followed. The NITI Aayog will formulate a 15-year perspective plan. And then, there will be a seven-year strategy to measure progress during the first half of that period, and there will also be a three-year mid-term macro framework plan. The nature of planning is going to be very different. How different and in which all ways, we will start discussing it now.
So, how will the allocation of funds to states change?
The three-year exercise will very likely have to go into this issue, getting some sense of what the revenue streams would be in the next three years, and then how these revenues will be allocated across different ministries. There will be issues attached to how the expenditure through different ministries will be allocated, particularly in centrally-sponsored schemes across different states.
How will state-level planning be carried out now?
It will be up to the states how they think of the process. We will provide assistance to states from here. But, right now, the way the Finance Commission has delegated the powers, the states are in much greater control of their plan and there is also the Prime Minister’s view that states should be empowered to have control over their expenditures. Whether they continue to write their plans or start thinking differently in terms of expenditure will also evolve.
So, mainly, in place of a five-year plan, you will now have a three-year plan…
There is a little difference here. In five-year plans, we were thinking in terms of planning both the private sector and the public sector. Even thinking in terms of how much steel you would produce, the number of automobiles, etc, but that a three-year plan will not do. This is more in the nature of planning the allocation of funds for the social sector, which is the primary responsibility of the government, though the private sector also contributes to areas like education and healthcare. As far as the private sector is concerned, we will focus less on that and the development here will be the result of market-determined decisions by private entrepreneurs.
So, the focus will really shift to where the government is directly involved. We will also lay out a roadmap as to where we want to be in 15 years’ time, and also the policy changes needed for the same.
By when will this exercise be over?
As you know, the implementation of whatever we do has to start in 2017-18, because 2016-17 is the last year of the 12th Five-Year Plan, so we will have to race through this exercise. We are certainly going to be tested in the next 10 months.