It was a relief that the finance ministry distanced itself from a silly proposal — contained in the draft Indian Financial Code — to have an official committee to undermine the autonomy of the Reserve Bank of India.

The world sat up to ask whether the finance ministry was taking away the RBI’s powers to use the bank rate as an instrument of monetary policy.

Amidst this, it was Arvind Panagriya, the vice-chairman of the NITI Aayog, who raised the level of the policy debate by laying on the table the issue of the growth rate and land-use policies. It is useful to carry these forward.

The how-to of growth It is correct to state that an annual growth rate of 8 per cent plus is feasible. The more important corollary is how? The NITI Aayog is silent on that.

Raising the growth rate by 2 percentage points will require an increase of at least 4 percentage points of GDP in investment even after assuming high productivity growth. This, if we discount the last two years as nightmares to be ignored, as the base and take 6 per cent as the underlying trend. This needs effort since investment rates have fallen by around 4 percentage points in the last few years.

The second point is to see to it that factor productivity growth, which at present is around 3 per cent, goes up to 5. The handling of labour action will be the acid test here. Finally, trade shares will have to rise to 4 per cent of GDP. This has already happened, although there is a possible slippage this year. The NITI Aayog must show the way on each issue after raising the growth agenda.

Panagriya’s entreaties to build a land-use plan are equally enticing. In our work on the rural urban continuum, we had for the first time shown that millions of Indians are moving to census towns, which the official development set-up doesn’t even call as towns. This was finally recognised in the now junked Twelfth Plan.

Distance depends on transport planning. For instance, 20 km on a metro is closer than 10 in a jeep on a non-existent road. Location, transport and habitation planning are inter-connected.

The States will like some information, particularly if inter-State connections are involved. Also they will need funds. Land-use planning is not just zoning of a town, but is the flip side of transport and location planning on a regional, rather than macro plane.

The focus has been shifted from a century old land law which provides for the State to acquire land for public purpose — in this case for private industry.

A land-use plan A company will want land close to its demand centres or resource requirement, even if it is good agricultural land. A land-use plan would send it to barren land with a transport link. But infrastructure will need money and the States will demand that. Also, powerful corporates may not like this, for land-use plans take time to yield market benefits.

Panagriya has let the cat out of the bag. I like this, for surely our objective is not to discourage industrial growth.

A year ago, a thousand tractors descended on Gandhinagar, Gujarat, from an area called Chuwal — the land of 44 villages which Kanhaiya Lal Munshi immortalised in his novel, Patan ni Prabhuta . I joined them with my friend, Sanat Mehta. I pleaded that we were not against industry but that the roads could be built in a manner so that the best lands are not ravaged. The suggestion was not popular but matters are working themselves out and I hope sense will prevail.

I could also argue that three decades ago I had built an inter-regional model to do all this and a few years ago it was cited in Chinese city plans, but that would be pushing lady luck too far, for planning has been abolished. But let’s build on Panagriya’s teasers. The proof of the pudding lies in the eating.

The writer is the chancellor of Central University of Gujarat, and a former Union minister

Related Topics