Foreign investment and disinvestment vital for growth says Pant

Aren’t your targets over-ambitious? Current savings levels are around 23 percent of GDP, yet you’ve assumed a much higher target.
Not really. The key here is to reduce government’s dissavings. This is around 4 percent of GDP today. It was zero at one time. The tax-to-GDP ratio was 10.4 in 1992-93 when I was the head of the Tenth Finance Commission — it’s 8.3 today, and this is reversible. The last plan, you know, saw 3 droughts, the south-east Asian crisis and the global slowdown, so it was natural for taxes to do badly.

You’ve stepped up public investment levels — isn’t this going back to the old days of socialism?
We can keep debating about what needs to be done to bring back private investments, but the fact is that they haven’t grown. We need to bring back demand. The national highways programme, for instance, is a good project and has lead to a recovery in steel and cement demand already. Employment growth has fallen — we need to increase that. We’d planned for 14,000MW of private power in the last plan, but only 695 MW came in — clearly we can’t afford to not have more power plants.

In any case, our strategy is to increase investments for only the first two years, and in areas like agriculture and irrigation where the returns are very high. We have large areas which are single-crop areas in east India — if we increase irrigation, these can easily become double-crop areas. Imagine what this will do to growth and income levels. In Assam, Nabard was in charge of a project to dig 70,000 shallow tubewells — in just 18 months, from being a rice-deficit state, Assam’s become rice-surplus.

Will this lead to increased fiscal deficits?
Not if the tax targets are met.

But isn’t much of plan expenditure a waste, in the sense of the huge leakages? The mid-term review highlighted this.
We all know the problems, the question is what to do about it. We’ve taken up pilot projects in 25 districts and allocated Rs 15 crore to each of them. An officer of the Planning Commission will go to these areas, and try to find out what the people want, and then will make concrete projects from this. We’re also trying to involve NGOs for monitoring. We’ve got some watershed programmes in Bihar and have involved organisations like IL&FS in this, to get some management inputs. Once this works, we’ll learn valuable lessons and will try and replicate it elsewhere.

Cutting subsidies is critical, but there’s little really happening on the ground.
Well, there’s a broad consensus, but the actual implementation is a different thing. I’m not saying it’s easy, but there’s some change already. In power, for instance, the states themselves are signing MoUs with the ministry and some attempt is being made to make the SEBs viable. We’ve a long way to go of course.