Agri reforms not to impact growth: Former Niti Ayog chief

Tribune News Service

New Delhi, September 22

While agriculture reforms will redistribute agriculture income in the favour of farmers, they would do very little for economic growth, former NITI Aayog Vice Chairman Arvind Panagariya said here on Tuesday.

With only 15 per cent share in GDP, agriculture, at its best performance, would contribute merely 0.6 per cent to the GDP growth. With average farm size being less than a hectare, doubling or even trebling farmer income will make little difference, he argued while speaking at the 47th National Management Convention of All India Management Association (AIMA).

Panagariya was critical of the slogan of “Atmanirbhar Bharat”, observing that it was a rhetorical flourish aimed at the domestic audience, mainly farmers. It actually meant people looking after themselves instead of expecting handouts from the government. However, import substitution activity, now being underlined under Atmanirbhar Bharat, has been going on for three years, which is not helpful.

“Keeping imports out protects the disability of domestic companies by making foreign competitors less able. Instead, India needs to raise its productivity and lower its costs,” he said.

Meanwhile, the State Bank of India Chairman Rajnish Kumar said interest rate cuts had not led to increase in investment, despite the banks passing on the rate cuts to the customers.

Credit growth had been slow this year as capital expenditure was not happening at the usual pace. During the last crisis in 2008, banks had increased lending by diluting norms for which the country had paid a high price. So banks were being prudent this time, he said while pointing out that infrastructure spending was the way to restore economic growth. India has a five-year pipeline of infrastructure projects worth Rs 100 lakh crore, which alone could boost the economy because construction creates jobs and demand.

Panagariya also wanted the Modi government to quickly recapitalise banks and the RBI to relax its obsession with the inflation rate. The higher inflation rate in April-June was because of a supply shock and he expected the rate to drop when supply returns. RBI should instead work harder to prevent appreciation of the rupee in order to prevent erosion of the value of India’s exports.

For him, the most critical step required to bring back growth in the Indian economy was to recapitalise banks. Economic growth has slid in the past couple of years because of the stress in the financial sector which has filtered into the general economy. “Restructuring loans will only delay NPAs and bankruptcies and not prevent those,” he said.

The economy paid heavily for the delay in Insolvency and Bankruptcy Code, according to him, and a credit collapse will happen again if the problem is not addressed immediately.

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