Panagariya favours consolidating all benefits into one cash transfer scheme

Former NITI Aayog Vice-Chairman Arvind Panagariya believes that while offering cash transfer schemes the government of the day must keep the ‘fiscal’ in mind.

Panagariya feels that ‘some day you have to sit down and assess how much you are providing to each household through various schemes as there is a limit to taxing people’.

BusinessLine caught up with Panagariya who was in India recently. Talking about welfare schemes and promises being made by political parties as the country goes into general elections, he said each scheme has an independent value, ‘but you cannot keep adding new schemes’, given the fiscal constraint. Excerpts:

The level of transfer has to respect the fiscal. I have been talking about cash transfer since the time the UPA started NREGA and then they started the National Food Security Act. If we had used the NREGA money, if we had used the National Food Security Act money, substantial cash transfers could have happened by now.

Now you want to keep NREGA, you want to keep National Food Security Act, then there is already PM Kisan and on top of that you want to introduce such a large cash transfer then where is the fiscal going to go?

If it was up to me I would consolidate a lot of these benefit transfers into one — some in kind and some in cash. With Aadhaar we can calculate everybody’s total benefit from various schemes and therefore a consolidation into a single cash payment is feasible.

I never questioned the quality of Indian data. What I used to say is that those alleging jobless growth did so without any survey-based data. That was the time that employment task force was appointed which I was part of and gave the report on.

The Periodic Labour Force Survey (PLFS) is also now in place and this will produce employment data on an annual basis for the country and on a quarterly basis for urban areas. The way the survey is set up, if somebody wants to calculate quarterly growth in employment for the country as a whole from the unit level data, they can do it.

I continue to believe that we will continue to do 7 per cent plus. I am an optimist and I believe we can easily get to 8 per cent in the near future because the impact of the present government’s reforms are yet to be fully felt. Some impact may have happened, but full impact is yet to be seen. Reforms like GST, bankruptcy legislation, cleaning up of non-performing assets (NPAs) ought to yield returns in the coming years.

Currently, because the NPA clean up is still in progress, credit growth has recovered at best partially. Therefore, immediately we may not get very far from 7 per cent. But, I think in one or two years’ time once the NPA clean up is substantially done, we can look forward to 8 per cent plus growth.

The Supreme Court declared the circular ultra vires meaning that it went beyond the legal authority available to the RBI. In its view, the circular made the initiation of bankruptcy proceedings automatic whereas the amended Banking Regulation Act authorises the RBI to act on a case-by-case basis only.

What the circular did was to require that if a default occurs on a loan of ₹2,000 crore or more and lenders are unable to implement a resolution plan within 180 days, they must automatically initiate the bankruptcy process. The Supreme Court is of the view that this automaticity went beyond the authority conferred by the legislation on the RBI. But, the SC decision impacts only the February 12 circular and bankruptcy cases initiated under it. It does not impact in any way the IBC or the 2018 amendment to Banking Regulation Act. What this means is that cases put through bankruptcy proceedings upon direction by the RBI on a case-by-case basis under the Banking Regulation Act including the original 12 ones accounting for a quarter of the then existing NPAs remain un-impacted.

What the RBI will need to do is rewrite the regulation in a way that it is fully compliant with Sections 35A and 35AA of the Banking Regulation Act. The RBI Governor has said that he intends to do precisely that.

I have seen this play over and over again: Every year, critics of the government say that fiscal deficit is in danger of being breached. But, for four straight years, this government has remained within its goal. So I trust the Finance Minister when he says that he will not breach the target. One thing about this government is that if it feels that it needs to breach the target, it will explicitly state so.

Fiscal discipline is extremely important. I believe in the traditional saying that you shouldn’t live beyond your means. Just as we are better off not incurring large debts in managing our personal finances, nations are better off not incurring unduly large debts. There can be a debate on the precise level of deficit and the speed at which you want to reduce the debt but only within limits.

Privatisation did not reach a conclusion not because the government didn’t want it. The Cabinet had in fact approved of more than two-dozen PSUs for disinvestment. At the end of the day the Department of Investment and Public Management could not deliver. The process got stuck.

Likewise for Air India, the policy was very clear. The Prime Minister wanted it. NITI Aayog wrote the initial plan but somewhere along the way conditions on sales were attached that resulted in no bids for the carrier. I was of the view that we should go for 100 per cent disinvestment of Air India. But then at some stage, our bureaucrats decided to keep 26 per cent stake of the government, which contributed in a major way to nobody bidding for the airline.

If the present government returns, as I expect, Air India and other PSU disinvestments will return to the policy agenda.

Finally, let me mention that alongside privatisation, the NITI Aayog had also initiated a process of closure of sick units. I understand that this initiative has been hugely successful with more than a dozen sick PSUs closed down with workers having been awarded VRS.

My focus was higher education, where no reforms had happened and till 2014 no progress had happened. A day before I demitted office on August 31, 2017, I submitted two reports – while employment task force report was in news, the other one on higher education was not reported much.

Interestingly, HRD Minister Prakash Javadekar has successfully translated that report into action. A key recommendation of the report was to give autonomy to the universities and colleges that were performing well. Based on the assessments done by National Assessment and Accreditation Council this has already happened with nearly 200 plus colleges and several universities awarded autonomy.

Independently the Minister had done another reform, autonomy to IIMs.

Another area of substantial progress has been the Rashtriya Uchchatar Shiksha Abhiyan, which is devoted to improving outcomes in state universities and colleges. The real mother of all these reforms will, of course, be replacement of the University Grants Commission Act by a new Higher Education Commission Act. But for that we must await the new government.

My sense from outside has been that we have not had as much success on skill development as we should have had. I think the government needs to look at what model to adopt. There is need for matching of demand and supply of skills. You can open institutions for skill development, but that would mean creating the supply. We need to see whether industry actually demands those skills. If there is mismatch then you are providing skills but jobs employing those skills are not there. I am not an expert in this area but feel we need to study it more carefully.