NDA may not reverse FDI in multi-brand: Arvind Panagariya

Written By Unknown on Senin, 26 Mei 2014 | 22.24

Columbia University professor and renowned economist Arvind Panagariya

Surojit Gupta, TNN | May 26, 2014, 04.00AM IST
Columbia University professor and renowned economist Arvind Panagariya, who is seen as a front runner for a key advisory post in the Narendra Modi government, outlines the current policy priorities. He calls for undoing some of the draconian policies pursued by the UPA and says the current land acquisition act must be revamped. Excerpts:

What should be the three priority areas for the new government to revive the economy?

End the paralysis in decision-making in the Central government, end the policy uncertainty for investors including retrospective taxation and other surprises visited upon entrepreneurs by the authorities, and replace the current draconian land acquisition act by a more pragmatic one.

Do you think it is possible to bring down interest rates against the backdrop of high inflation?

The real issue is whether we are willing to tolerate 8-10% inflation or insist on bringing inflation below 5%. If the latter, the answer has to be in the negative. On the other hand, if we show more tolerance for inflation, it is possible to ease up on monetary policy and let the interest rates fall.

Should the Modi government rework the massive welfare programmes such as the MNREGA?

Definitely. In the current form, both Public Distribution System (PDS) and MNREGA are failing miserably in meeting their objectives, with vast leakages along the distribution chain.

Do you expect the NDA government to rethink its stand on allowing foreign retailers in multi-brand retail?

I do not expect the NDA to reverse the liberalization of FDI in multi-brand retail introduced by the UPA.

Will it be feasible for the new administration to focus on an expansionary fiscal policy to give a boost to the economy?

The new government should hold Central government fiscal deficit below 4.5% of the GDP. An effort must be made to raise capital expenditure and cut subsidies on petrol, diesel, cooking gas and kerosene.

The PPP projects have had a mixed track record. Is there a need to rework them? What is the way out in the infrastructure sector?

The top priority here should be ensuring adequate coal supply. This can be rapidly accomplished by allowing private players to do coal mining so that we quickly introduce the latest technologies. Additionally, railway links should be quickly established to remote mines in Chhattisgarh, Jharkhand and Odisha. To speed up other infrastructure projects, the first step will have to be replacement of the current land acquisition act by one that better balances the interests of public and landowners.

Should the NDA government pursue privatization of state-run companies? What would be the policy prescription on this key issue?

In my personal view, yes, though this need not be a top policy priority. Immediately, what the government will perhaps need to do is some disinvestment to raise revenues. But in not too distant future, the loss-making PSUs that have no chance of revival should be sold to private parties or closed down quickly. In the longer run, the government must return to the first NDA government's privatization agenda. The government has plenty of tasks to perform and manufacturing products should not be one of them.

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