“Re­forms process very slow”

Governance Now - - CONTENTS -

Yash­want Sinha speaks on his new book, eco­nomic re­forms and po­lit­i­cal op­por­tunism

Last year the na­tion marked the 25th an­niver­sary of the launch of eco­nomic lib­er­al­i­sa­tion. Back in those tu­mul­tuous days, Yash­want Sinha was an im­por­tant part of the drama­tis per­sonae in­volved in the re­forms process. As fi­nance min­is­ter in the short-lived Chan­dra Shekhar gov­ern­ment, he steered the econ­omy dur­ing a crit­i­cal phase, and later, as fi­nance min­is­ter in the NDA gov­ern­ment, he gave the re­form nar­ra­tive a bi­par­ti­san support. In July, Sinha, along with co-ed­i­tor Vinay K Sri­vas­tava, pub­lished a col­lec­tion of es­says on the re­form saga, ti­tled The Fu­ture of in­dian econ­omy: past re­forms and chal­lenges ahead (Rupa Pub­li­ca­tions). Sinha spoke to Swati Chan­dra about the eclec­tic an­thol­ogy as well as about the econ­omy. Edited ex­cerpts:

How was the idea of this book con­ceived?

it was con­ceived by my co-ed­i­tor vinay K sri­vas­tava, who is an aca­demi­cian. i thought it was a good idea. There have been sev­eral books writ­ten on eco­nomic re­forms in the last 25 years but these were by sin­gle au­thors. a com­pi­la­tion of views by dif­fer­ent ex­perts to cover most as­pects of eco­nomic re­forms was the idea be­hind this book. i have also con­trib­uted an es­say that deals with peo­ple’s ac­cep­tance of eco­nomic re­forms. i and vinay have done an in­tro­duc­tory es­say as well. over­all, the book is a very good progress re­port of the 25 years of eco­nomic re­forms and brings to­gether do­main knowl­edge from var­i­ous ex­perts.

You have writ­ten that an ‘East India Com­pany syn­drome’ is re­spon­si­ble for op­po­si­tion to re­forms.

The over­all theme of my es­say is the ac­cept­abil­ity of the re­forms in india. i have said that peo­ple who have op­posed the re­forms in the last 25 years have been gen­er­ally men­tion­ing a set of ar­gu­ments and one of those ar­gu­ments has been the fear of eco­nomic coloni­sa­tion, which is what the east india com­pany

did. it is easy to mis­lead peo­ple by say­ing that, ‘Look, this is what the com­pany did; this is how india came un­der the Bri­tish rule through com­merce.’ so com­merce has emerged as a tool of not only ex­ploita­tion by the more pow­er­ful but it has also emerged as a tool of po­lit­i­cal mas­tery over a coun­try or re­gion.

i men­tioned this to em­pha­sise that it is easy to raise this point at an emo­tional level and mis­lead peo­ple. and at the same time, i have also said that for­eign in­vest­ment is not the sum to­tal of the eco­nomic re­forms. in many cases, the com­mit­ment of a gov­ern­ment to eco­nomic re­forms is gen­er­ally mea­sured with the rest of the de­vel­oped world.

What are the ‘chal­lenges ahead’ – the sub­ti­tle of the book?

They are many. The first is to make the eco­nomic re­forms ac­cept­able by the peo­ple. if we do not do that, there will be op­po­si­tion by the po­lit­i­cal par­ties, in par­lia­ment, by the states, and more im­por­tantly, at the level of peo­ple at large.

The other point is how we de­fine eco­nomic re­forms. I de­fine it as any step which will fuel eco­nomic growth or give im­pe­tus to eco­nomic growth. now, there are bank­ing re­forms, which makes the life of cor­po­rates easy. There are re­forms in the area of ease of do­ing busi­ness. There are re­forms in the cap­i­tal mar­ket which help in­vestors. There are re­forms in tax­a­tion. But these do not touch the lives of com­mon cit­i­zens di­rectly. We are sit­ting in a beau­ti­ful sec­tor of noida, but a few miles away from here, there are peo­ple liv­ing with­out proper in­fra­struc­ture. so it is very easy to go to peo­ple liv­ing un­der those con­di­tions and say, ‘eco­nomic re­forms are bad and did noth­ing for you.’ They will be per­suaded and will support par­ties which are anti-re­forms.

one of the ma­jor gov­er­nance fail­ures in the last 70 years is that we have not been able to solve two pri­mary is­sues. one is to pro­vide liveli­hood, and two is to pro­vide qual­ity of life to the peo­ple. There are many vil­lages which

do not have roads, drink­ing wa­ter fa­cil­ity, bet­ter health and ed­u­ca­tion. peo­ple who are still liv­ing un­der such con­di­tions are nat­u­rally dis­sat­is­fied with the whole process of eco­nomic re­forms and they turn against it. so, the pre­scrip­tion should be that along with tak­ing steps that fuel growth, the gov­ern­ment must take steps which will di­rectly im­pact the lives of the peo­ple. i have been em­pha­sis­ing on iden­ti­fy­ing the ba­sic needs of the peo­ple. This de­bate on ba­sic needs has been on since the 1930s, when the congress con­sti­tuted a com­mit­tee un­der nehru to de­cide what the ba­sic needs were and de­cide a plan to meet the needs of the peo­ple. There were sev­eral plans af­ter plans and we have now reached a stage where the plan­ning com­mis­sion has been abol­ished, but the ba­sic needs of peo­ple are still not met. We have achieved a very high growth rate, but has the mar­ket di­rectly con­trib­uted to the wel­fare of the peo­ple? no. This re­spon­si­bil­ity of liveli­hood pro­vi­sion and qual­ity of life im­prove­ment steps should be the di­rect re­spon­si­bil­ity of the cen­tre and the states.

At the book launch, you said that most par­ties are op­por­tunis­tic when it comes to re­forms. Is it the case with GST and Aad­haar?

Yes, def­i­nitely. The two ma­jor po­lit­i­cal par­ties, the BJP and the congress, have been chang­ing their stands de­pend­ing upon whether they are in the gov­ern­ment or in the op­po­si­tion. There are par­ties who have an ide­o­log­i­cal op­po­si­tion to re­forms. We have ide­o­log­i­cal dif­fer­ences with them and that is un­der­stood. But with ma­jor po­lit­i­cal par­ties, it is not ide­o­log­i­cal but po­lit­i­cal.

The in­sur­ance sec­tor re­form is a very good ex­am­ple of this. When chi­dambaram was the fi­nance min­is­ter in 1996-98, he brought a bill on the in­sur­ance sec­tor. Within his own coali­tion, there were par­ties which op­posed it. We were for in­ter­nal lib­er­al­i­sa­tion of the in­sur­ance sec­tor but not for for­eign di­rect in­vest­ment. When he moved the bill, the so­cial­ists and the com­mu­nists op­posed it in par­lia­ment and the bill was with­drawn. soon af­ter, when i be­came Fm and con­sulted ex­perts, i found that the in­ter­nal lib­er­al­i­sa­tion po­si­tion was not valid. Be­cause we needed huge in­vest­ment and rs 100 crore should have been the min­i­mum eq­uity of the com­pany. There were very few com­pa­nies which were in a po­si­tion to invest this much. Then i was con­vinced that we needed for­eign in­vest­ment. so i pre­pared a bill and took it to the cabi­net and it was fi­nally in­tro­duced in par­lia­ment. That bill had a pro­vi­sion for 49 per­cent for­eign in­vest­ment and 51 per­cent in­dian in­vest­ment and the rest of the pro­vi­sions were built on this ba­sis. it was the congress then that started op­pos­ing the bill say­ing that we will not al­low for­eign in­vest­ment more than 26 per­cent. We did not have ma­jor­ity in the ra­jya sabha and thus we had to make com­pro­mises. This was one com­pro­mise that nda made and we de­cided on 26 per­cent for­eign in­vest­ment. This is how the bill was passed. But just four years down the line, when upa-i came to power, chi­dambaram got en­light­en­ment like Gau­tam Bud­dha and they brought a bill in par­lia­ment propos­ing that for­eign in­vest­ment should be capped at 49 per­cent. The bill re­mained stalled and even saw the 2008 re­ces­sion pe­riod. We gave a re­port stat­ing that we don’t ap­prove the idea of rais­ing for­eign in­vest­ment to 49 per­cent. When­ever i was con­sulted, i used to give views on what could have been done. how­ever, the BJP lead­er­ship at that time did not even ac­cept my for­mula and the bill re­mained pend­ing. When we came to power in 2014, we were in such a hurry that we did this through an or­di­nance. so where was the com­mit­ment of the BJP when we were in the op­po­si­tion?

com­ing to the GST, it was sup­ported by the BJP in the party man­i­festo in 2009 but two states ruled by BJP were not in favour of it. We have also passed the aad­haar bill as a money bill. so, views change de­pend­ing on whether you are in the gov­ern­ment or in the op­po­si­tion. This is the pat­tern of the in­dian pol­i­tics.

Is there any ad­van­tage in mak­ing Aad­haar a su­per ID?

There are many prob­lems in the aad­haar. i will men­tion a few. in nda, we came up with an idea of cit­i­zens’ iden­tity card and later the need for na­tional pop­u­la­tion reg­is­ter was re­alised af­ter the cen­sus of 2001. The upa-ii started aad­haar with­out a law; so, many peo­ple chal­lenged it. They brought a bill and it was so de­fec­tive that the com­mit­tee on fi­nance re­jected it. Sec­ond, you can’t pro­ceed on two tracks. There was npr as well as aad­haar, mean­ing 50 per­cent of the pop­u­la­tion was to be cov­ered un­der npr and an­other 50 per­cent was to be cov­ered un­der aad­haar. mean­while, even chi­dambaram as home min­is­ter had raised doubts on the data col­lec­tion and pro­tec­tion is­sues. Thirdly, it was al­ready in pub­lic do­main through me­dia re­ports that it was be­ing mis­used. it was men­tioned that it will be avail­able to all residents, not cit­i­zens, (that would also in­clude) il­le­gal im­mi­grants. no­body talks about npr any­more. it is aad­haar all the way now. it has a leg­isla­tive sanc­tion and is be­ing made com­pul­sory. i my­self could not link pan with aad­haar as my name on the pan was Yash­want sinha and on the aad­haar it was shri Yash­want Sinha. Later I got a new Aad­haar card made – this too hap­pened with a lot of dif­fi­cul­ties as the scan­ner was not able to read my fin­ger­prints. What I am say­ing is that with bio­met­ric de­tails there are prob­lems. a labourer who works with his hands has his fin­ger­prints blurred. so it is not a 100 per­cent proof of iden­tity through­out life. There are

“The most im­por­tant step that we need to take is to im­prove the econ­omy: if the econ­omy picks up, then the NPA prob­lem will be gen­er­ally taken care of... Now, we are grow­ing at over 7 per­cent. Ob­vi­ously it’s not suf­fi­cient; we need to grow faster.”

se­ri­ous pri­vacy is­sues and one does not know whether it will suc­ceed or not.

Is the process of re­forms in India slow?

The process of re­forms has been very slow, un­like in china – es­pe­cially, the eco­nomic re­forms which re­quire leg­isla­tive changes and states’ con­sen­sus. The re­sults have also been slow. There­fore in 25 years we have not been able to reach where other coun­tries have reached [in the same pe­riod].

If you were part of the gov­ern­ment, which re­forms would you have pri­ori­tised?

We have not been able to do any­thing on Fdi in re­tail, labour re­forms, pri­vati­sa­tion of psus, psu banks, the whole area of sub­si­dies, open mar­kets, a com­mon mar­ket for agri­cul­ture, other agri­cul­tural re­forms, and land ac­qui­si­tion.

Then there are is­sues which are larger than eco­nomic re­forms: say, ad­min­is­tra­tive re­forms. do we have the ad­min­is­tra­tive struc­ture and ma­chin­ery to support the eco­nomic re­forms process? no. We are try­ing to do that through the old creaky ma­chin­ery that we in­her­ited from the Bri­tish. Then comes the need for ju­di­cial re­forms. There have been in­stances of ju­di­cial in­ter­fer­ence in eco­nomic re­forms. at the drop of a hat one can go to the court and get a stay or­der. There are many heads where we have not made any progress and these should be the sub­ject for fu­ture re­forms.

What do you think of the bank NPA prob­lem? Is the gov­ern­ment work­ing in the right di­rec­tion to deal with it?

it is largely the out­come of the ad­min­is­tra­tive and pol­icy paral­y­sis of the upa gov­ern­ment. as a re­sult, a very large num­ber of projects were stalled in var­i­ous sec­tors, be mining, power or road, and where npas have ac­cu­mu­lated. When i was the spokesper­son of the BJP on eco­nomic is­sues un­til 2014, peo­ple would ask me what you will do if you come to power and my stan­dard re­ply was the first thing that we would do is to get rid of the pol­icy and ad­min­is­tra­tive paral­y­sis and take pol­icy steps to clear the back­log of stalled projects so that we could move faster. how­ever, in the last three years, a lot of progress has been made but it has not been suf­fi­cient to clear the NPA prob­lem. I re­cently saw a re­port stat­ing that the bank credit growth has hit a 20-year low. There is no money in banks. The npa prob­lem should have been re­solved much, much ear­lier. When i was the fi­nance min­is­ter dur­ing 199091, it was a much big­ger prob­lem. We took a num­ber of steps. The most im­por­tant step that we need to take is to im­prove the econ­omy: if econ­omy picks up then the npa prob­lem will be gen­er­ally taken care of. if econ­omy re­mains in a slow mode then it is dif­fi­cult. Now, we are grow­ing at over 7 per­cent. Ob­vi­ously it’s not suf­fi­cient, we need to grow faster. so the stalled projects and the npa prob­lem are still ma­jor prob­lems in the econ­omy.

swati@gov­er­nan­cenow.com

The Fu­ture of In­dian Econ­omy, past re­forms and chal­lenges ahead Rupa, 361 pages, ₹795

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