The Covid-19 pandemic crisis that has come upon us has been converted into an opportunity to create basis for response going forward. It’s clear that budgetary allocations for health spend has to be increased, says NITI Aayog Vice-Chairman Rajiv Kumar.
In a conversation with BusinessLine, Kumar said, “I want to really argue against those who consider this current situation as a recession… Economic recovery has begun already. First quarter of 2021-22 you will see economy getting back on track to the same growth levels we were in pre-Covid. You may see negative growth this fiscal, but growth in 2021-22 will rebound to be in excess of 15 per cent in nominal terms and more.” Excerpts:
Is there a case for sharp increase in allocation for health in next Budget? Will Covid-19 vaccine be “free” for Indians as indicated in recent poll promise for Bihar elections?
The pandemic has brought home the fact more starkly than ever before that we need to increase spend on health. It is clear that it has to be ramped up, but having said that one must also factor in the achievements of Ayushman Bharat.
The effort taken by this government in mainstreaming traditional medicine is laudable and several measures are taken by the AYUSH Ministry. You will see more initiatives being rolled out. On vaccine, I will leave it to the Finance Minister to decide and announce. Budget-making process has started and she will let us know the budgetary provision.
What is your take on the protests against farm reform laws? Where things went wrong?
I can’t put my finger where things went wrong. The fact remains that this government has been committed since 2014 to improve farmers’ welfare. Look at the increase in MSP, implementation of Swaminathan Committee report, PM Kisan, Pradhan Mantri Krishi Sinchai Yojana. There has been Swachh Bharat campaign in rural India, Ujjwala Yojana, etc. This is a rural-focused government and policy regime.
It is not that these Bills were enacted in a hurry and pushed down somebody’s throat —no. All the parties across the political spectrum have been in favour of these measures. See, the dependence of Punjab farmers on mandis is much higher than in other parts of the country and attempts were made to reach out to them.
The narrative that the government is out to close these mandis is false, and this narrative has not been countered enough. There is simply no intention to close any institution or mechanism. Only attempt was to give farmers a choice on where they want to sell. There is no question of asking or forcing them to sell at one place or not the other. The government has clarified and has assured that it is not in the business of doing anything that is going to hurt farmers’ interests.
What are your views on the proposed amendments to the Electricity Act: bringing DBT for electricity subsidy?
I am not aware of any proposal within the government of replacing electricity subsidy (in some sense an indirect subsidy) with DBT. There has been talk by academics that all subsidies should get converted into some form of Universal Basic Income. PM Kisan has put ₹24,000 crore without touching any input subsidy available to them. I don’t know where this talk (providing electricity subsidy as DBT) is coming from.
Your views on economy being in a technical recessions…
A technical recession happens when there is normal economic cycle and level of economic activity goes up and down as a result of exogenous (external) or endogenous policy action — monetary or fiscal. This is a natural disaster and this is negative economic impact arising due to it. This is not a technical recession. To talk or conclude this as recession is wrong use of definition of recession.
What is your take on economic recovery? As of September 30, we are staring at nearly ₹2-lakh crore overall tax shortfalls? Where should one draw comfort?
Economic recovery has begun already. First quarter of 2021-22 you will see economy getting back on track to the pre-Covid levels. You may see negative growth this fiscal, but growth in 2021-22 will rebound to be in excess of 15 per cent in nominal terms and more.
I also see the Third quarter GDP this fiscal coming back to previous year level — growth rate could be zero or slightly negative or slightly positive growth. Fourth quarter, it will surely be a positive growth rate.
Economic recovery is on its way, pandemic has wound itself down and people’s fear has come down. A number of high frequency indicators are pointing to this. I think recovery is on and will gain real momentum in beginning of next fiscal.
We should draw comfort in the private sector being resilient and entrepreneurship being resilient. People are getting back to business as usual. You should draw comfort from the Finance Minister’s recent remarks that she will not let worries about a widening budget deficit stop her from spending more to support the economy nor will existing stimulus spending be wound down in a hurry. Comfort must come from substantial number of large reforms undertaken in last nine months — these are not minor.
Number of major steps to improve the ease of doing business and investment climate has been taken. The other thing you should take comfort from is inflow of foreign capital has not been affected in the last nine months despite pandemic.
In April-September, FDI inflow is $40 billion as compared to $32 billion in the same period last year. India story remains good and you will continue to see both domestic and foreign investments come up in coming weeks.
Do we see more Productivity Linked Incentive (PLI) stimulus coming in next few weeks?
We have already rolled out PLI to 13 identified sectors. The focus now has to be on implementation and get the scheme off the ground. I hope there will be great supply response from these sectors.
Are there any steps on the anvil for boosting private consumption?
Private consumption decline in second quarter this fiscal was much less than first quarter. I have always said that a direct cash transfer to boost private consumption is not an efficient way and that is an one-off measure you take, where you won’t know how much will be consumed and how much will be saved given the uncertainty and lack of opportunity to spend. If you noticed, growth in bank deposits has been phenomenal in the last 6-7 months and some of the households have gone on to save more because of the times they are living in. My view is that it is better to ramp up government infra spending and pull in private infrastructure/investment and do the multiplier effect across the board. That is a far more sustainable strategy and helps improve supply response. I am not supporting all calls for dropping money from the helicopter — which would have caused more inflation in a situation where supply was unable to respond due to uneven pandemic restrictions.
What are your views on corporate ownership of banks and the recent RBI working group recommendation on it?
Bottom line is that our private debt-to-GDP ratio has increased from 20 per cent in mid-nineties to just 53 per cent now. This is far too low even for an emerging economy. The key issue is to improve credit flow to the private sector. The onus is on all those who oppose the entry of private corporate owned banks to explain how to improve debt-to-GDP ratio. It might well be that India has third largest number of banks. But the point still is not the rate as much as access to credit, which is the biggest constraint faced by our MSMEs who are forced to borrow at market rate at 2-3 per cent a month. I am not getting into the aspect of whether we need corporate-owned banks or not. From NITI Aayog, we are suggesting steps to improve the competitiveness in banking sector so that efficiencies, risk management capabilities, use of fintech to assess credit worthiness of the borrowers and incentive on part of banks to lend to good borrowers —all these should improve. I don’t think we need to get into any of this versus that (corporate ownership versus public ownership). Fortunately for us, reality is not such black and white.