Anatomy of Growth

MON­TEK SINGH AH­LUWALIA & ARVIND PANA­GARIYA

India Today - - WINNING - by Jayant Sri­ram For more on the ses­sion, go to www.in­di­a­to­day.in/ mon­tek-pana­gariya

The forth­com­ing elec­tion is seen as a bat­tle be­tween two con­trast­ing eco­nomic philoso­phies. Un­der the UPA, nearly half of In­dia is now en­ti­tled, the­o­ret­i­cally at least, to free wa­ter, elec­tric­ity, jobs, ed­u­ca­tion and health­care. The wel­fare mea­sures con­tinue to be rolled out de­spite the coun­try record­ing a growth rate of less than 5 per cent over the last two years. Should In­dia now fo­cus on steer­ing its way back to a high growth rate of over 9 per cent or should its pri­or­ity be pro­vid­ing a bet­ter life for its mul­ti­tudes of poor?

Two of the world’s best econ­o­mists crossed swords over this ar­gu­ment: Columbia Univer­sity pro­fes­sor Arvind Pana­gariya, a vo­cal sup­porter of BJP prime min­is­te­rial can­di­date Naren­dra Modi’s brand of eco­nom­ics, spoke for the high-growth ap­proach while Mon­tek Singh Ah­luwalia, the Deputy Chair­man of the Plan­ning Com­mis­sion, de­fended UPA’s model. Though it was billed as a con­test be­tween two con­trar­ian view­points, the two econ­o­mists’ ar­gu­ments were nu­anced. Both broadly agreed on what In­dia needed, dif­fer­ing only over how it should be done. “We have a pas­sion for growth be­cause we have com­pas­sion for the poor,” Pana­gariya said, point­ing out that growth was the best in­stru­ment to re­duce poverty. The crux of his ar­gu­ment was this: In the past 20 years, per capita in­come nearly quadru­pled and poverty re­duced dras­ti­cally in In­dia. Equally, if In­dia were to grow at the rate it had over the past

decade, even ac­count­ing for a slow­down over the past two years, it would be the world’s third largest econ­omy in 15 years and that would be the end of poverty as we know it. So, he said, In­dia should aim to re­turn its econ­omy to a 9 per cent growth track. Pana­gariya con­ceded that so­cial ex­pen­di­ture on health and ed­u­ca­tion is im­por­tant, but said it is bet­ter to raise in­come and give people the chance to choose be­tween pri­vate and pub­lic providers.

Ah­luwalia, on the other hand, ar­gued that ev­ery­one in the Govern­ment is push­ing for high growth but em­pha­sis­ing that it should be in­clu­sive. In other words, he ar­gued, a high growth rate will be no good un­less it im­proves agri­cul­tural pro­duc­tiv­ity, en­cour­ages de­vel­op­ment of all re­gions, in­clud­ing the BIMARU states, and gen­er­ates em­ploy­ment for all. Ah­luwalia in­sisted that though many in busi­ness cir­cles look at MNREGA as un­em­ploy­ment in­sur­ance, it’s ac­tu­ally aimed at build­ing pro­duc­tive as­sets for agri­cul­ture. Sim­i­larly, he said, wel­fare schemes in health and ed­u­ca­tion sec­tors are in­vest­ments to en­sure people have eas­ier ac­cess to these ser­vices. Ex­cerpts from a lively con­ver­sa­tion: Arvind Pana­gariya Say­ing that you be­lieve in growth is not enough. What have you done in the last 10 years to spur growth? You just haven’t done any­thing. Just al­low­ing the pri­vate sec­tor to op­er­ate in ed­u­ca­tion and health­care is not the equiv­a­lent of fa­cil­i­tat­ing, be­ing an en­abler, for the pri­vate sec­tor to op­er­ate suc­cess­fully. You’ve got to give power to the people. Mon­tek Singh Ah­luwalia You got a lot of ap­plause for ask­ing me what we have done in the last 10 years to spur growth. But you yourself said that in the last 10 years, we have had the high­est growth ever. Are you go­ing to say... Pana­gariya I didn’t say it was thanks to you. Ah­luwalia Ahh! So what are you say­ing? Pana­gariya This is a re­sult of P.V. Narasimha Rao and Atal Bi­hari Va­jpyee’s poli­cies. You tell me five pol­icy mea­sures that you have taken to make this hap­pen. Ah­luwalia You shouldn’t be al­lowed to get away with the propo­si­tion that the en­tire per­for­mance of the last 10 years is be­cause of de­ci­sions taken in the pre­vi­ous 20 years. Pana­gariya The govern­ment’s af­fi­davit to the Supreme Court says about half the roads built in the last 20 years were built by the NDA govern­ment. Ah­luwalia No, Let’s be clear about this. Half the roads built were com­mis­sioned in the last year of the NDA govern­ment. I think the im­por­tant thing is that if you com­pare the last 10 years with any pre­vi­ous 10 years, the dif­fer­ence in

Just al­low­ing the pri­vate sec­tor to op­er­ate in ed­u­ca­tion and health­care is not the equiv­a­lent of fa­cil­i­tat­ing. You’ve got to give power to the people.

PANA­GARIYA

You should not be al­lowed to get away with the propo­si­tion that the per­for­mance of the last 10 years is be­cause of de­ci­sions taken in the pre­vi­ous 20.

AH­LUWALIA

growth is huge. Then, people say, ‘Oh, UPA 1 did a good job, but UPA 2 didn’t’. If you com­pare UPA 2 with NDA, we fare bet­ter ex­cept in one di­men­sion—in­fla­tion. An im­por­tant rea­son for this is that the pe­riod of NDA rule was of low global in­fla­tion and dur­ing the pe­riod of our govern­ment, global in­fla­tion has been very high. De­spite this, most people only fo­cus on the last year and say that it’s been a bad year. Pana­gariya I am sorry Mon­tek, I don’t agree. Take your man­u­fac­tur­ing pol­icy, which you say will re­sult in man­u­fac­tur­ing con­tribut­ing a 25 per cent share to GDP. What are the pol­icy re­forms you are will­ing to do to en­sure this? This is not new. You know about labour re­form and labour mar­ket rigidi­ties. You spoke about these when you sat in the Op­po­si­tion. Ah­luwalia I agree with this. These re­forms are needed. Pana­gariya On em­ploy­ment, you, Mon­tek, did a fan­tas­tic re­port some years ago that I wrote col­umns about, but then in the last 10 years, you have never said any­thing about labour mar­ket re­form. Ah­luwalia That’s not true. The Govern­ment’s po­si­tion, re­peated by the Prime Min­is­ter, is that labour mar­ket flex­i­bil­ity is nec­es­sary. We have, how­ever, said that this is a sen­si­tive is­sue, on which we need to build po­lit­i­cal con­sen­sus. But in the past 10 years, we haven’t been able to build con­sen­sus and that is the prob­lem.

RO­HIT CHAWLA

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