Economic Survey 2015-2016 Economy

‘We should disinvest Ashoka Hotel but how do you value the land there?'

Chief Economic Advisor Arvind Subramanian spoke to The Hindu about the Economic Survey 2015-16 and its implications. Edited excerpts.

Doesn’t the Economic Survey projection of 7-7.75% GDP growth next year against the 7.6% advance estimate of the Central Statistics Office suggest stagnancy?

The average is one of stagnancy but the range is to leave open the possibility that there can be a small improvement or there can be a deceleration as well. Some of which could be due to exogenous developments.

What can India do to overcome the external situation?

The cocktail of external vulnerabilities puts some bounds on growth that is achievable.

This is not an advance apology but more a simple reality of us becoming more intertwined with the world. We have to recalibrate expectations based on that and also have standards of assessment that reflect that. But what we can do that agenda is there to be done. I’ve been candid in acknowledging where the setbacks and disappointments have been.

There’s no question that we need to retrieve those three or four big ones.

Your list of unfinished agenda includes strategic disinvestment. Till when will the government go on running the Ashoka Hotels and the Air-Indias?

Hotels out. Government has no business to run hotels. Hotels we need to work on and that should happen. In the case of companies like Air-India the labour is a very big issue. In the case of hotels, the land thing is the big issue. We should not underestimate how when land gets involved it is a complete mess because how do you value it and then it goes in to litigation.

We should disinvest Ashoka Hotel but how do you value the land there…I think 50 years we will be in litigation to sort that problem.

Does government need to bring back the focus from the current political discourse to the economy?

There is economics behind the Jat agitation and even the opposition to the land law does show that people no longer see agriculture as a viable source of long term income. That’s the bottom line. You are anxious about the value of land and finding other sources of social and economic advancement. That is playing itself out.

Two things need to happen: You need to restore fortunes of agriculture but we know that cannot be a permanent solution so simultaneously you need to ensure job opportunities elsewhere.

Are salaries, especially after the 7th Pay Commission award, relative to work expectations of non-bureaucratic government jobs part of the reason?

There is a connection. A lot of this is manifesting in terms of the desire for government jobs. If and when the Pay Commission gets implemented it might aggravate the problem. In the next Economic Survey we will take a look at the structure of pay in government.

There is the question of bringing back administrative reforms in the government. Government drivers get paid so much…there are the shocking statistics on the number of people who apply for the available jobs.

Does it also show impatience over Prime Minister Narendra Modi’s promise of jobs in the private sector?

The problem in India is not unemployment but how many formal sector jobs…by definition that will take a lot of time…with companies like Apple and Foxconn coming in you are creating a dynamic where potentially you can create the scale that had eluded us in the past.

That will happen as a result of jugaad but also a result of the states changing their laws.

More and more firms are reallocating to tier II cities as a response to the high costs of housing in India and …then when plants get relocated to where women live there are other externalities… day care for children, safety is not an issue…labour force participation goes up. This is happening without explicit government intervention and is a jugaad.

According to the Survey only 5.5% of Indians who earn pay taxes and only 15.5% of the net national income is reported to the tax authorities. In the context of the current political debate would you say that those who do not pay their taxes are anti-nationals and not doing their duty towards the country?

That is not quite right.

To get people to pay taxes, people should believe in the legitimacy of the state that they are getting value for money.

If you want to say that it is anti-national, the flip side of it is that maybe the government in turn isn’t keeping its side of the bargain and that is why this is happening. We need to work on both sides of the bargain.

You build legitimacy in the state by state providing better services not giving these bounties for the rich and start monetarily inducing people to pay taxes.…We don’t know even for those who are paying taxes how much they are underreporting their income.

India is the only major economy that doesn’t have an inheritance-based wealth tax. Would you recommend it?

There is a lot of merit in an inheritance tax. India should have it provided it is set at reasonable limits. Why should you perpetuate inter-generational inequality…it is so self-perpetuating.

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Printable version | Apr 8, 2020 12:07:11 PM |

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