At present, the Indian economy is passing through a phase of rural stress, credit crunch, lack of employment opportunity, etc. Across the world, one is witnessing a push-back of globalisation by nationalist and protectionist forces. Economist Dipak Nayyar, a professor emeritus, Jawaharlal Nehru University and former Vice Chancellor, Delhi University and former Chief Economic Advisor, Government of India, touches upon some of these important factors affecting the Indian economy in this interview with BE’s Kishore Kumar Biswas.
Q. The NDA-II government is being criticised its policies, especially certain economic policies. Please tell me what is the basic policy difference between the UPA and NDA governments?
A. In my opinion, the economic policy of UPA-II and NDA-II is almost identical. You would see that a lot of legislation for eco-nomic reforms and economic policies that have been put through by the NDA government are based on the drafts prepared during the UPA regime. So on economic policy, their difference is minimal.
On foreign policy, too, they are very similar. They both are reaching out to the United States. The Modi government is doing the same thing as the Manmohan Singh government. Actually, moving towards the US had started a long time back. It had been in UPA-I, UPA-II, NDA-I and II and even earlier. It has continued in the same direction. Similarly, engaging neighbours like those from South East Asia or Russia, has continued. Degrees of success, of course, vary but it has continued. Presently, the attempt to balance out China is also a policy continuity.
Q. Well, you mentioned China. It is reported that the Chinese government views the Modi government as a more globalisation-friendly government. On the other hand, there is a tendency in many countries to restrict globalisation. What is your take on this?
A. The point is that the world is retreating a little from globalisation, particularly in industrialised countries. China and India, on the other hand, believe that they have benefited from globalisation. Therefore, South Asian countries and Prime Minister Narendra Modi are supportive of this process. Former Prime Minister Manmohan Singh was also the same. So in economic policy, both the governments are similar.
Q. The rural sector is facing a crisis while at the same time, the government is increasing the allocation of funds to the sector through schemes like the MGNREGA. What needs to be done so that the sector actually benefits?
A. In India, there is a deep crisis in agriculture. For more than 25 years, the output per capita in the rural sector is one-tenth of the GDP per capita in the non-agricultural sector. There is also growing agrarian stress in the country. But the irony is that the entire discourse or debate in the economy, in the present or the past government, proceeded as if there does not exist anything as agriculture and if it exists, it doesn’t matter. There is a degree of populism like in MGNREGA. But MGNREGA is a palliative. It can not be a solution. You can continue it. But the only way to eradicate poverty is to create employment.
Q. A section thinks we need to improve the ease of living conditions in rural areas than only looking at the ease of doing business. What's your view?
A. Absolutely. But you have to recognise that the crisis runs deep. The reason for agrarian stress is not that there is no increase in sowing or output or employment. The risk is in getting increasing privatising. Risk is borne more and more by the farmers. So the earlier extension services like seeds, credit, fertiliser, and extension support, all of which have reduced from the period of economic reforms of the 1990s. So the farmers are getting more and more vulnerable. There is no social protection. There is also crop insurance. The UPA-II government introduced it; it's not enough. The present government has strengthened it a little bit. But it is again not enough. So, it is the vulnerability of the farmers that has aggravated the crisis.
Q. So the immediate task is to minimise the vulnerability of the farmers?
A. Of course, because it is a democracy. Farmers’ share is low. But they are large in number.