Arvind Panagariya, the Columbia University professor, has been a strong votary of the Gujarat model of development and his views have played a major part in the formulation of BJP’s manifesto for 2014 general elections. With Narendra Modi-led government comfortably in place to take measures for bringing the economy back on track, Panagariya tells Santosh Tiwari that Gujarat-like labour law reforms are required to boost the manufacturing sector besides other measures to improve the situation on the policy front, including a single window involving states for clearance of projects.
The 2014 Lok Sabha election results clearly indicate that people have rejected politics based on caste, religion and dole. What should be the new government’s priorities in this backdrop?
A broad priority has to be the promise made by Narendra Modi during the campaign: Growth and development. If we can grow at 10% per year, we will be able to end abject poverty, ill-health and illiteracy much faster than if we grow at 5%. At a higher growth rate, we will be able to bring in a certain measure of prosperity to the bulk of the population. India will be transformed into a modern economy from its current largely traditional structure.
Food, fertiliser and oil subsidies need to be rationalised and targeted better. How to do it? Should the government junk Aadhaar and look for a new model to target subsidies or should the existing plans based on Aadhaar be implemented better?
Subsidies such as those on cooking gas, fertiliser, electricity and water that principally go to the non-poor population should be phased out with a gradual move towards cash transfers to the poor. Aadhaar must be completed and should eventually be used to unify the existing highly fragmented transfer programmes. Meanwhile, we should not shy away from alternative instruments ranging from conventional postal money orders to modern mobile-based technologies.
The investment climate is grim. What can be done to improve it?
An effective PMO, corrective action on retrospective taxation, promise to bring transparency in taxation so that investors are not surprised after having made investment and some shift towards capital expenditures (mainly infrastructure) in the 2014-15 budget are some measures the government could take to reassure investors.
Clearances to projects have been slow. The UPA government tried to solve the issues through the CCI but it has failed to improve the situation. How to change the scenario here, so that growth is back to the 8% level?
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