The Hindu Business Line : `The critical issue now is implementation of schemes' — Dr Montek Singh Ahluwalia, Dy Chairman, Planning Commission

Home Page - Economy
Opinion - Interview

`The critical issue now is implementation of schemes' — Dr Montek Singh Ahluwalia, Dy Chairman, Planning Commission

G. Srinivasan

The office of the Deputy Chairman of Planning Commission, the country's pre-eminent policy-making body, has gone into the hands of an economist of proven calibre and a seasoned bureaucrat who never belonged to the country's so-called steel frame.

For Dr Montek Singh Ahluwalia, the assignment ahead of undertaking a mid-term appraisal of the Tenth Plan (2002-07) is a challenging one. He has the unenviable remit to undertake a review of the plethora of schemes of the National Democratic Alliance (NDA), carefully sift the irrelevant ones and integrate whatever meritorious ones onto the new schemes of priorities set forth in the National Common Minimum Programme (NCMP) of the United Progressive Alliance (UPA) Government led by the Congress Party.

For one who has had the varied experience of having worked in the Prime Minister's Office in Rajiv Gandhi's Government and Ministries of Commerce and Finance, and, subsequently in the Planning Commission as one its members during the NDA Government, Dr Ahluwalia has demonstrated his grasp of complex issues including reform of the country's creaking power sector, telecommunications, Y-2 K problem, employment and the macro economic fundamentals. Not averse to call a spade a spade, Dr Ahluwalia is widely acclaimed as a scholarly economist without the snobbishness associated with academics.

Dr Ahluwalia has distinguished himself as one of the successful non-IAS bureaucrats who could turn around the economy at a difficult time when he was the Finance Secretary under the Finance Ministership of Dr Manmohan Singh during the Narashima Rao Government in the reform period 1991-96 that freed the economy from the shackles of control and licence raj.

It is also an irony without parallel that, as one who was the key Indian negotiator of the structural adjustment loan with the International Monetary Fund for India in the early 1990s, Dr Ahluwalia was, after a decade, chosen in 2001 by the same Bretton Woods Institution to run its first ever-Independent Evaluation Office (IEO) of the Fund for three years from 2001 to 2004. He resigned from this position in July 2004 to take up a Cabinet-level position as Deputy Chairman of the country's plan panel. His career in the IMF was such a splendid experience so much so that the IMF's Executive Board paid tribute to Dr Ahluwalia with the IMF First Deputy Managing Director, Dr Anne Krueger, lavishing legitimate praise as "his would be a hard act to follow".

Asked about how he felt being the first Director of the IEO of the Fund's policy, after a decade when India went to the Fund for borrowing a jumbo loan of $5 billion in 1991, Dr Ahluwalia quipped: "In my view, when we went to the Fund in 1991,we were quite clear that the policy actions we wanted to take were out of our own convictions.

The Fund did not impose those conditions — we knew that this is what needed to be done. We told the Fund this is what we are going to do and asked them whether they could help. It may be that some people here at that time did not approve of the policy, but the government then was very clear and I have no doubt that those actions were necessary and experience since then has vindicated that judgement. When you outline your policy and ask the IMF to assist, the Fund, if it approves your approach, converts your policy intentions into conditionalities.

This only means that if you don't do what you say you are going to do, they won't give you the money. No borrower can expect to get money without agreeing to some condition. But the conditions are imposed on us if we believe that the policies are right ones in any case."

With such variegated activities marking his career, Dr Ahluwalia has come back to India to continue the unfinished economic reforms.

Despite the pulls and pressures governing coalition politics, his zeal for economic reforms to make a durable dent on poverty and unemployment, remain undimmed — the basic planks on which CMP's ideals are raised. Here, Dr Ahluwalia shares some of his thoughts and plans of action with Business Line for qualitative changes in the standards of living for the people.

On CMP and additional allocation of Rs 10,000 crore for schemes spelt out in the 2004-05 Budget:

The critical issue is implementation of the schemes now. The Finance Minister has said that we should look at not only Rs 10,000 crore but also what reallocations are possible in the existing scenario. Large-scale reallocations are not feasible in the middle of the year but we need to review the schemes so that for the next Budget we can really do some serious reallocations.

All the schemes have very good objectives — some are very effective and some are not so — sometimes a scheme may not be effective because the design is not quite right and by changing the design it can be effective. We have to discuss these issues with the Ministry concerned and we want to start those discussions early.

As part of the mid-term appraisal, we will undertake a review of the major schemes so that next year we have a better set of schemes. This is one part of the MTR.

However, MTR is not just about allocation. It is also about policy — what are the policies we need to follow to achieve the objectives of the CMP including its macro objectives such as growth rate, focus on agriculture, social sector, food for work programme and strengthening public private partnership. The outcome is not simply a function of the government spending expenditure but on the question of the policies we implement. This is going to be the core focus of the MTR.

We have started this and this week we are going to issue the list of consultative groups to be headed by each Member on various issues.

We want to have the mid-term appraisal report ready by December 2004 so that we can have a meeting of the National Development Council (NDC) in January 2005. I do not want to prejudge our conclusions at this stage.

We have a new government, which has indicated its broad priorities. We will see what is needed in the remaining two-and-half years of the current (Tenth) Plan and, especially, the next two Budgets to achieve the objectives. This will also lay the foundation for the Eleventh Plan too.

On State finances and Central Plan support to States:

There is an element of performance-related allocation within the Gadgil formula for Central support to State Plans. However, State finances are a serious problem. The Twelfth Finance Commission, headed by Dr C. Rangarajan, will deal with many of these problems, especially the issue of sustainable level of debt. If the States debt is judged to be unsustainable then it raises a problem for financing Plan, which should not be based on even more debt. This is going to present a real lot of challenge of how to handle that.

On power sector reforms:

I just finished a review meeting on power. I am persuaded that in the last two/three years, there is encouraging sign of improvement in some areas. However, much more needs to be done to reduce power theft in urban areas.

There are some recent announcements of free power, which suggest a reversal. Quite frankly, the people of India are willing to pay a reasonable price for services, provided we can assure them of quality. It is unfortunate that sometimes, under political compulsions, promises are made that these services will be given free.

That may look attractive in the short-run but all it does is to undermine the financial viability of the delivery system, which can only lead to deterioration both in the quantity and the quality.

I am not saying that we should not subsidise target groups. Any State government that wishes to subsidise the targeted groups should be able to do that by giving an explicit subsidy from the Budget. But I would suggest they should not do it by altering rational pricing in the case of free power. It is well-known that the majority of benefits go to the larger farmers.

It leads to overdrawal of groundwater, leading to the damage to soil. It has an iniquitous effect because it lowers the water table, which hurts smaller farmers who do not have deep drawing pumps.

I hope these problems will be better understood so that short-term temptations are resisted. Press has a key role to play in explaining the rationale of good policy. In a democratic country, you can work only through persuasion.

On export competitiveness in the globalised era:

There is no doubt that during the period of economic reforms in the last several years, there has been an improvement in the competitiveness, which is evident from the fact that India's export share in the world trade is going up. I have also no doubt that there is scope for further improvement.

Other countries, during this period, like China, which are not very different from us in terms of level of development, have increased their increase in the share of world trade much more. In my view, the key to export competitiveness at the moment lies in continuing the economic reform of Custom duty reduction, so that exporters can get their inputs close to the world prices.

Vast improvement is also needed in infrastructure and more than that in logistics that includes simplifying procedures in the business of getting goods in and getting them out. We have to cut down our delivery times drastically if we want to be credible as an exporting nation.

On employment creation for more:

If you want to create quality employment, it could be feasible only in an environment of 7-8 per cent growth.

Within this, it is very important that agriculture growth does well. One of the major shortcomings in recent years is that agricultural growth decelerated after the middle of 1990 from an average of 3.3 per cent to 2 per cent plus.

This reflects low growth of employment opportunity and perpetuation of under-development. For people in the rural areas, farm growth will increase the demand for rural employment, besides generating demand for non-agricultural job. We will look into this to ensure its reversal and the policies needed would be put in place.