Seminar on Indian Economy

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The Vivekananda International Foundation organized a day long seminar, critically examining various aspects and undercurrents of the Indian Economy, on 10^th December 2013. The main speakers at the seminar included Shri Vijai Kapoor, former Lt. Governor of Delhi, Dr. Surjit Bhalla, Chairman, Oxus Investments, Dr. V. Anantha Nageswaran, former Head of Asia Strategy & Visiting Fellow VIF, Dr. Bibek Debroy, renowned economist and author, Dr. Arvind Virmani, former Chief Economic Advisor to the Finance Ministry, and Shri Sandip Sabharwal, Consultant and Investment Advisor.

Ambassador P P Shukla, Joint Director, VIF, opened the first session by welcoming the speakers, and pitching in the agenda for the seminar. The idea was to understand the problems facing the Indian economy, and to develop a consistent set of policies to ensure stable long-term policies on the right of centre. Shri Vijai Kapoor began with his assessment of the challenges that India faces in its political economy. Shri Kapoor held the reasons of the country’s economic slowdown to be political and institutional, underlining some of the wrong economic choices that the political class has taken in the last decade. Among other issues, Shri Kapoor stressed the failure of the Legislature and the Executive to take important decisions, and this had allowed the Judiciary to expand its role in governance. Shri Kapoor suggested certain viable solutions, including that of the establishment of a mechanism to remove systemic obstacles.
The session thereafter focused on the fiscal situation of the country and Dr. Surjit Bhalla made his presentation, building the arguments on the lines indicated by Shri Kapoor. Dr. Bhalla, after critical examination, came to the conclusion that the economic policies of the present government are deeply flawed. He also argued that the RBI, instead of checking, only worsened the situation, though most of the blame for the present situation rests with the Government. According to Dr. Bhalla, factors such as an increase in the procurement prices (especially for food), exponential rise of subsidies which financed consumption rather than infrastructure, and continual increase in the number of laws rather than faithful implementation of the existing ones, among others, were responsible for the worsening of our economy since 2009.

Dr. V Anantha Nageswaran followed the session with his presentation on the current account situation in India. Studying the third quarter report of the current account deficit released by the RBI, Dr. Nageswaran highlighted that the reduction of the deficit does not take into account the seven-fold increase in gold smuggling in the last one year, which if taken into consideration would bring our current account deficit to high levels. Dr. Nageswaran, assessing the data on household savings and investment, observed a remarkable increase in the gap between financial savings and investments in real infrastructure, which has resulted in a fall in financial capital formation. Examining the role of the government, Dr. Nageswaran argued that the Government in the last ten years has been the biggest confiscator of the financial savings available in the banking sector, with an annual compound increase of 37% in its market borrowings.

The second session of the seminar began with the presentation of Dr. Bibek Debroy, who focused on infrastructure build up in the country. He observed that there had been a complete collapse of decision making in the last five years, Dr. Debroy argued that the cabinet has ignored the collective responsibility of mitigating any misunderstanding or disputes that may arise between various ministries which deals with matters of economic interests of the nation. He argued that various regions of the nations are at different stages of progress, as far as the infrastructure build up is concerned. Therefore, Dr. Debroy argued, that any centralized policy, plan or legislation will be successful only at certain places, while contributing nothing at others. He called for a way to decentralize programs and to give more weight to the states and the districts for the innovation and execution of infrastructure programs. While some aspects of infrastructure had been successful, such as Telecom, others had been failures. In particular, he apprehended difficulties ahead caused by the Land Acquisition legislation.

The next presentation of the seminar was made by Dr. Arvind Virmani and it focused on the issues of economic governance, with reference to systemic corruption. While tracing its roots to the days of License Permit Quota Raj, Dr. Virmani argued that corruption has reached all of our institutions and it has consequentially and systematically brought down the power to do good. The expansion of governance via increase in the number of policies, laws, and programs has endangered the economic productivity of the country. Dr. Virmani, having explained various aspects and dimensions of corruption and administrative problems, suggested certain solution, some of which were the elimination of central government from private business activities, and better cooperation between the government and private sector for quasi public goods and services.

The last presentation was delivered by Shri Sandip Sabharwal, who talked about reviving investment, especially from the private sector. Shri Sabharwal began his presentation by analyzing the reasons for the collapse in private investments. While there are certain obvious reasons, as has been discussed through out the seminar, there are also the not-so-obvious reasons which require a careful examination. Some of the reasons highlighted by Shri Sabharwal were the over optimistic and aggressive project bidding by the private sector, which later blamed the government for its failures; urge to grow order books rather than focussing in equal measure on profit margins and cash flows. Shri Sabharwal highlighted that these assumption or hope based decision making by the private sector can certainly be kept in check, which would help us realize positive growth rates, if the other obvious political and institutional reasons are dealt with.

All the presentations were followed by brief sessions of Q&A, enabling a clearer understanding of the subjects examined. Dr. S. Narayan, former Secretary to the Prime Minister and former Finance Secretary, concluded the seminar by summing up the outline of all the issues addressed by the speakers, which according to him, succinctly captured the broad economic scenario of the country. He also deplored the fact that decision-making was at a stand-still. He expressed support for the idea of removing systemic obstacles, and stressed the need to tackle two other issues urgently: prices and employment. He added that the country also needed a second green revolution.
A proposal to compile the presentation delivered by all the speakers at the seminar into a book was made and agreed upon.