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Thursday, April 15, 2021

Rajiv Kumar: Unsustainable to fiscally support middle class… Our take is infrastructure spending to create more sustainable demand

Rajiv Kumar is at the centre of the govt's privatisation push and efforts to revive the pandemic-jolted economy. The Niti Aayog also liaisons with states to ensure effective implementation of the govt's economic policies.

By: Express News Service |
Updated: March 15, 2021 8:16:18 am
NITI Aayog Vice-Chairman Rajiv Kumar. (Illustration: Suvajit Dey)

Kumar talks about govt efforts to create space for private sector, says ball is in the other court on farm laws, clarifies that while NFSA coverage needs review, no decision yet, and says govt’s focus is on drivers of employment, not part-time jobs. The session was moderated by Senior Assistant Editor Sunny Verma.

SUNNY VERMA: The Niti Aayog will play a key role in the government’s privatisation push. Going forward, what are some of the challenges that you see in the process?

I’m so glad that you and I are both using the word privatisation, because it seemed to have been banned for a few decades from our nomenclature. The Prime Minister has made it very clear that it is back on the agenda… Offloading government equity in public sector units, including public sector banks, is not merely a means for revenue generation. It is also a means for giving greater space and opportunity to the private sector and starting the process of withdrawal of the government from sectors where it is not really required. So, the ambition has been laid out very clearly by the Prime Minister himself that except for the strategic sectors, the government should move out of all other sectors, and even within the strategic sectors, it should only retain some physical capacities and not monopolise the entire sector either. For example, it is not necessary at all in our view for the government to have a monopoly over the mining sector. In sub-sectors where it needs to be there, it will be there… So even in sectors which are kind of included in the definition of the strategic sectors, the government will seek to move out and bring in the private sector. Like I know, for example, that we are trying to figure out whether the private sector could move into the small nuclear reactor business, so that we can change the whole model there… The ambition is to make the private sector a much more vibrant, dynamic and trusted partner in India’s economic development and growth story.

SUNNY VERMA: In the banking sector, where the government has announced the decision to privatise two banks, what will be the strategy going forward? Will it be the weak banks or the strong banks? Have you started the process?

That’s a detail that we have not come to yet. What you do require is, of course, amendments to the Bank Nationalisation Act and the Banking Regulation Act. That will be the first major step in terms of stating the priorities or setting the approach of the government… We are at that stage at the moment. Once we have crossed that, we will also come to the other details such as criteria (for privatisation) etc.

SUNNY VERMA: Despite a lot of consultations, there has been no progress on the farm laws. What is the way forward there?

I don’t have an answer to this one. It is an honest admission because it all depends so much on all parties being willing to negotiate, and all parties willing to discuss and not take positions which are completely non-negotiable or stuck… The government has made it very clear, repeatedly, and the honourable agriculture minister has also said that we are ready for discussion. But to be totally inflexible is not within the realm of democracy… The government has displayed maximum flexibility. That’s where we are. The ball is firmly in the other court.

PRANAV MUKUL: Can the Electric Vehicle (EV) and hydrogen sectors co-exist, or will all investment into EVs be wasted once hydrogen takes over?

Let me first start by saying that the Niti Aayog has very solid engagement with all those concerned with green hydrogen as an energy or fuel source… The use of hydrogen in mobility is still some distance away. It requires decentralised production of green hydrogen, which is not so easy… So, I don’t think that the advent of green hydrogen is negating the advantages and benefits of electric mobility.

The second thing is that, 67% of the vehicles on our roads are two-wheelers. By shifting them to electric mobility, we will achieve a huge deal in terms of improving the environment. So, all the investments that are being made by the private sector in electric mobility are in the right direction, and they will all achieve commercial viability. I don’t see hydrogen overtaking in the short period… But yes, hydrogen is the fuel of the future. The report by TERI (on the role of Hydrogen in India) is worth reading. It says that thinking of hydrogen as a panacea is not the right way to think at this point in time. Even the Japanese, who were willing to showcase their hydrogen fleet in the 2020 Tokyo Olympics, are not thinking about switching wholesale into this. So, Niti Aayog is encouraging investments in electric mobility, and we have also announced a production-linked incentive (PLI) scheme for advance chemistry cell (ACC) battery manufacturing… There also the technology is changing. It is not just lithium-ion that we are talking about now. Other advanced industries are coming along. So, we are sure that in the foreseeable future, the two (EVs and hydrogen) will and can coexist.

ABHISHEK ANGAD: The Niti Aayog has recommended reducing the rural and urban coverage under the National Food Security Act, 2013, to 60 per cent and 40 per cent, respectively, which it estimates can result in annual savings of up to Rs 47,229 crore. In states like Jharkhand, the NFSA caters to 86% of the rural population. How will these people get food on their plates in the future?

There is no such final recommendation by the Niti Aayog… The fact of the matter, however, is that the Department of Food and Public Distribution had approached us to think about examining the rationale for the (NFSA) coverage that exists today, which is 75% rural and 50% urban, and also to figure out how much coverage should be there in each state… Because this (the new recommendation) cannot be a pan-India policy given the different situation each state is in… What should also be examined is the Central Issue Prices (of foodgrains). Given the inflation, rise in incomes, the different per capita incomes of different states… the CIP should be different. We must recognise the complex, very diverse economy that we are. There are very few pan-India policies which are applicable… we need to distinguish, differentiate… But there is no final recommendation. Also, the data for the population is still based on the 2011 Census. It is nearly 10 years old. We will get the new data soon. Whatever the NFSA (coverage was) in 2012, cannot be written in stone, it has to be reviewed as we go along. But to repeat, there is no final recommendation at all from the Niti Aayog at this point in time.

PRASANTA SAHU: What is Niti Aayog’s view on measures to improve private investments, which is crucial for reviving economic growth?

Well, there is a lot to be done to improve the sentiment. Some of it will of course change with the behaviour of the pandemic and how the global economy turns out in the post-pandemic period. I think the approach that we have taken, which was also reflected in the Budget, and as the honourable Finance Minister said, that the government will do the lifting as far as the infrastructure sector is concerned… We feel that this has sufficient multiplier effects to encourage the private sector to come forth with their own investments. And as you have seen, there is already an uptick in the credit of the auto industry…

On the taxation front, I think it’s very clear that a lot has been done to rationalise and simplify the tax compliance burden, the digitisation of tax administration, the lifting of the ceilings on how far you can appeal, etc. It has all been done to improve the compliance burden. We now have one of the lowest corporate rates of taxation in the country. So I think the government has been doing what we think is needed to improve the business climate, which in turn will improve the investor climate… And, the government has always said that it will be the private investor which will generate the momentum and sustain it for India to achieve the required rate of growth.

HARISH DAMODARAN: How do you draft policies in the Niti Aayog at a time when there doesn’t seem to be much data available?

I agree that you require good data to make good policies. There is this periodicity of our data generation that is enshrined… So we have to wait for (information). Within the government there are some other administrative ministry data that come by, and that are used in some sense as approximations of the survey data, which is, if you like, more authentic… For example, for agriculture output, there is satellite imagery and we get data from the space application department… For (data on) energy, we have created a detailed geo-tagged energy map, to know about all the sources that we have… So all of that data keep coming along.

The other thing that we have started doing in the Niti Aayog is the use of ‘high frequency data’ to get a handle on what’s happening in the economy. But, we are all now awaiting the next Census data. It will be the first completely digitised Census… The MoSPI (Ministry of Statistics and Programme Implementation) is already in the business of modernising data collection. They are doing a big project in which they are being assisted by the World Bank.

At the Niti Aayog, we have created the National Data and Analytics Platform (NDAP), where we are putting together all the data that’s available from the administrative machinery… All of these things put together will enable us, to a certain extent, to design policies… But the leadership is very cognizant of the fact that we need to modernise our data systems, we need to improve the quality and consistency and the credibility of all our data, and there is a lot of work in progress at this point.

P VAIDYANATHAN IYER: The pandemic has led to an increase in inequalities in the country. Don’t you think the Budget should have done something for the people at the bottom of the pyramid?

We identified the most vulnerable and tried to take care of their necessary consumption through the National Food Security Act, PM Kisan Samman Nidhi etc. If you want to extend this to the middle class, which we refer to as the common man, we are not clear in our minds whether we can fiscally support it despite the hike in the expenditure and fiscal deficit. That would put an unsustainable burden…, which I don’t think would be useful. The second thing is that until now, we don’t know the nature of the supply response to any sharp increase in effective consumer demand… And our own take has been that by spending much more in improving the infrastructure… we will generate a far more sustainable demand, and then employment generation even for those at the bottom of the pyramid. The needs of those who are genuinely at the bottom of the pyramid have been met through several schemes, including the hike in the Budget for MGNREGA. Last year, it (the MGNREGA budget ) was hiked from Rs 60,000 crore to Rs 1,00,000 crore. So the talk that I hear about distributing helicopter money is not something we have assigned to. In our view, it’s a much better use of limited fiscal resources to try and generate sustainable demand.

P VAIDYANATHAN IYER: In the first term of this government (2014-19), disinvestment didn’t really happen because there was no buy-in from most ministries. What is the government doing now which will give investors some kind of confidence?

In the past, the Niti Aayog had recommended candidates for disinvestment. But it could not happen because of different reasons. I think the biggest change now is that the political leadership at the highest level has made it clear that this (disinvestment) is the government’s priority and that this will happen. Therefore, arguments against that will be taken with a lot of scepticism. The onus of continuing with public sector enterprises lies with ministries which own or manage them rather than on those who are wanting to privatise them. That is the big difference. Nonetheless, we at Niti Aayog have a strong cell here and we are working to try and understand how to overcome some of the constraints that have come in the way in the past. Significant amount of work is being done and you will see the results in the coming weeks.

P VAIDYANATHAN IYER: Arun Shourie is facing charges for decisions taken as Atal Bihari Vaj-payee’s disinvestment minister. Secretaries with impeccable reputations are being probed. So, how do you deal with this invisible fear?

The fear of the CAG, CVC and CBI is receding. Once the bureaucracy knows that the political leadership will take the responsibility for the decision that it takes, and the Cabinet is behind whatever new decisions are being taken, they are safeguarded. The government is clear on the road going ahead. And we will do all the necessary homework required to ensure that nothing slips in through commission or omission, which may hurt any person or agency.

P VAIDYANATHAN IYER: US think-tank Freedom House has downgraded India to ‘partly free’ in its report. How do you interpret the development?

I have not been able to give it enough attention. I leave it to the better observers of this situation to comment upon it. I don’t know whether the report has factored in the government’s resolve to give greater freedom and opportunity to private entrepreneurs and investors, and its commitment to see start-ups get all the assistance they need. I can only speak on the economic side and I don’t see freedoms being curtailed or opportunities being shrunk.

SUNNY VERMA: Do you think it is time for both the Centre as well as states to cut tax levied on petroleum?

The Finance Minister has already stated that the Central government is willing to discuss this with the state governments. She has also talked about bringing fuels under the GST. All the options are open for the Central government and there is willingness to discuss it… At least in the last one year, taxes have not been raised significantly. If at all, they were done earlier, when the prices were declining. The government, as announced by the Finance Minister, stands ready to discuss all of these with the state governments.

AANCHAL MAGAZINE: There was considerable job loss during the pandemic. What measures is the government taking on that front?

Going by the CMIE (Centre for Monitoring Indian Economy) data, a lot of those losses had been recouped by December and January. There was not much additional unemployment… To that extent, it seems that we are at least back at the pre-pandemic level in terms of employment… The government can improve the investment climate because employment will come through higher investment, especially in labour-intensive and export-oriented sectors… I don’t see employment being disassociated from investment and growth. I think that’s where we need to focus. You can’t create a greenhouse for employment generation because that just doesn’t sustain. The Niti Aayog is working with every state for reducing the compliance and regulatory burden… That is the only way to help the small, medium and large enterprises to expand their capacity to invest and generate employment. The government’s approach has been to focus on the drivers of employment rather than generating some part-time employment in the public sector, except the MGNREGA.

ANIL SASI: There is certain fear in the industry of taxmen. What is your assessment of the situation?

Why does the fear exist when, for example, the tax compliance has been made so much more digitised and non-personalised. People should have much greater faith in the tax system… I have a lot of friends in industry and there are two groups of people — one who think that positives are happening and take advantage of it. But then there are others who think that taxmen are after them. I don’t know which is the stronger voice at the moment. But there has to be a rule of law, which has to be accepted. The assumption that you can get away with whatever you can get away with, is something which should change in our country. And I think that is where the government’s efforts are. Those who are honest and comply will have the best possible way to go forward. They will find that the government is ready to promote them to the extent possible. And those who don’t want to do that, it’s only fair that they get the scrutiny that they deserve.

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