My friend, the late V.N. Dandekar is known for path-breaking work on poverty. He was a member of a task force I chaired which set India’s poverty line in the seventies. Because of the quality of his work, even now it has not been possible to change the line, long after it outlived its utility. He was also a great raconteur and a classical singer and with his two Patialas in the evening, great company. His presidential address to the Indian Economics Association in the early 1970s is still a classic on food distribution; and not much that is new has been said since. But he begins it by asking his listeners to suspend their sense of what is practical to go on a mental journey: to let him provide their policy fantasy. We will start by dreaming that our political leaders now, after the trust vote, know that you cannot solve any big problem by constantly giving in to small entrenched power groups and you must reach out to solutions on a larger plane. I genuinely believe it is possible to control prices and to grow fast and that would be a good ticket to go in for elections next year. Both Montek and the finance minister are right in saying that growth will reach 8 per cent this year. Inflation does not affect growth in a big way instantly, for it takes a while to adjust to the fact that the economy has crossed a point at which “costs and prices are chasing each other” as a famous macro-economist put it. India is in that phase and it is wrong to say that this is a price rise of a few items, and globally triggered. Right now companies will pass on the costs, and consumers will be runners-up; but soon the shoe will pinch. Those who say that inflation is there all over ignore that the inflation rate in most OECD countries is half ours and in China less than 7 per cent. This relative splurge will hit us soon, most certainly next year. You can’t have costs and interest rates twice China’s and run the growth Olympics. The answer is reform and frugality. Monetary policy alone cannot do it. RBI has gone hoarse in talking of the fiscal overhang. The FM reportedly said that he may consider taxing “luxuries” later this year. He doesn’t have the time. The package has to come now if it is to impact by the end of the year. One possibility is to use excise or a new VAT rate. Also, there has to be a severe cut on inessential expenditure. Some prices will have to be raised. We argued last week for a mild increase in the price of nitrogen and consequent raise in other fertilisers on account of nutrient-based pricing. There were complaints but heavens didn’t fall with the energy price rise, and more is called for. With that, improve supply. This is the time, for example, for public private partnerships in public transport. An excellent idea is to start in the BIRTS corridors. If these are accompanied by non-inflationary reform and restructuring, such as a close look at distribution and at financial sector reform, a double digit growth rate for industry and 4 per cent in agriculture is possible if we have the guts to deal with the problems head on. We will grow this year but have also to grow next year; if you are the fourth largest economy of the world you cannot lose 2009-2010. For, slow growth means you lose out to number five. When Rahul Gandhi was told that nuclear power was only 3 per cent, he said it would in the future be 70 per cent. In the growth race you need the stamina of a long distance runner. Thorium-based fast breeder nuclear reactors are the only way of completing the fuel cycle and powering the youth of India as they move to capture their destiny. When I met Rajiv Gandhi the day he handed over power in December 1989, he looked me in the eye and said, Yoginder, our stakes are for the next quarter century. Perhaps that is the reason the enemies of India had to get rid of him. Time to get out of the fantasy but the message must go out that rewards will go only to those who solve real and long-haul problems. The writer, a former Union minister, is chairman, Institute of Rural Management, Anandexpress@expressindia.com
