A replacement for the Planning Commission must be "lean and thin", a top
Indian-American economist has said, even as he listed fiscal
consolidation, and trade and FDI liberalisation, as key areas the
government should focus on to return to high growth.
Arvind Panagariya, Professor of Economics at Columbia University,
termed as "brave" the decision by Prime Minister Narendra Modi to do
away with the 1950-dated institution and said the body that takes its
place should start "anew".
Addressing a gathering at the Chazen Institute of International
Business here, he suggested that Mr Modi should put in "as lean and thin
a team" for the planning body's replacement with 10-12 people and "lots
of resources so that they can draw on the experts as necessary" and
then periodically that team should meet with the Prime Minister and
Finance Minister.
He further said the new body should have "in the background enough
research agenda (on) how to design the reforms taking into the account
the political economics".
Mr Panagariya, however, cautioned that the replacement of the Planning
Commission should start "anew" as reforming the existing one would
ultimately have the "same players" and that "needs to get changed".
Discussing the policy package that India should put in place to revive growth, he said a "reform menu" for
the country should include fiscal consolidation, trade and foreign
investment liberalisation, amendment in the Land Acquisition Act, labour
market reforms, privatisation and decentralisation of higher education.
He said while fiscal consolidation is underway, some movement has also
happened in foreign investment under the new government which has opened
the defence sector up to 49 per cent and insurance from 26 per cent to
49 per cent.
He, however, said that in his view, the government could have opened
the insurance sector even more for foreign investment. Mr Panagariya
also pointed out that there is need to reform the labour market as many
of the labour laws are "incredibly constraining".
Making a strong case for amending the Land Acquisition Act, the economist said the act is "incredibly draconian".
"If everything under the current law goes smoothly, (there are) no
challenges by NGOs, courts, it will still take five years (to acquire
land). Nobody will dare initiate land acquisition under those
circumstances."
He listed infrastructure development and privatisation as key areas that require immediate government attention.
On higher education, he expressed pessimism and said the sector seems to be going in the wrong direction.
"Indian system is highly centralised. What India needs is decentralisation" in the education sector, he added.
Mr Panagariya further said while these are the set of reforms that need
to be done, there are issues that can go wrong and "implementation" is
the key problem.
While Gujarat as a state succeeded by improving governance and
controlling corruption, "at the Centre, we need policy changes", the
economist added.
