As the country debates a 8 per cent growth rate, farm loan waivers in Chhattisgarh and Madhya Pradesh have added to the discussion. The NBFC credit crunch, bottoming out of inflation, change at the top in the Reserve Bank of India (RBI), a jobless growth, the investment cycle and consumption pick-up are facing the country that aspires to be in the top league. Niti Aayog vice-chairman Rajiv Kumar, in an interview with Anjana Das, seeks to define and offer road map to tackle them in a comprehensive manner. Excerpts:
Agricultural loan waivers are a big draw now. Do they help in improving the farmers’ lot?
Farm loan waiver is not a solution to the agrarian crisis. Modernisation of agriculture is the real issue. The first step must be taken the earliest. The steps include modernisation of the farming community, more value addition, and diversification, better cropping methods and reduction in cost of production for farmers. I hope states, including those that are announcing the farm loan waiver, will take these steps as early as possible. State governments would have to take these steps simultaneously otherwise the stress will come back to haunt farmers.
Why a double-digit growth stays out of our reach?
The foundation is being laid and we can take it forward. With all reform measures by the current government and its focus on physical and social infrastructure and modernisation of agriculture modernisation, the foundation of a double-digit growth has been laid. By 2022-23, we should be able to achieve double-digit growth and sustain it as well.
The current phase is criticised as growth without jobs. Are we entering a phase where actual employment is going to happen?
It must and it has to. Here the role of agri processing industries, exports, infrastructure and real estates are critical. But most importantly, It’s the SME sector’s growth that will generate employment by shifting small industries from the unorganised to the organised sector. Because of the goods and services tax (GST), the MSME sector is getting formalised and that’s where the jobs are being created.
Has the revival on the consumption and investment fronts begun?
Investment revival has begun. The credit off-take of commercial banks is now around 15 per cent. If the Reserve Bank of India (RBI) takes steps to create a special window for NBFCs, which will help them once again start financing MSMEs, the economy will get a huge investment boost. On the consumption side, the growth is quite robust. But we must see higher levels.
Why a special window for NBFCs?
I have always argued for a window, especially after the IL&FS crisis. NBFCs are being forced to stretch their balance sheets, which is not a good development. The NBFC sector is required to attain its dynamism of the past four years when it quadrupled assets under its management.
Is there a liquidity crisis?
I don’t want to use the word crisis. But there is a liquidity constraint, which NBFCs are facing. It should be taken care of.
Whats are your expectations from the new RBI governor given a very low phase (2 per cent) of inflation?
I hope he will (cut the interest rate). He must realise that the real rate of interest in India is perhaps the highest in the world. Thus, he should be considering that very seriously.
The finance minister speaks of a number of unreformed sectors, which must be reformed if we are to get out of the 7-8 per cent growth rate. What’s your take?
Agriculture is one of the unreformed sectors. As we have pointed out in the 'Strategy for New India @ 75' document, not all states have abolished APMCs, neither all of them have adopted the APLM Act. The
tenancy model law has also not been adopted. Then there are local government's municipal financing, which needs to be reformed. Finally, I must confess the process of providing credit to the SME sector needs a huge overhaul.
Is there a case for bringing down GST rates on cement for reviving the housing and construction sector?
I would not get into the specific sector questions. It’s left to the GST council. The real estate sector has begun to recover. I see it doing better in the future.
What about GST rate cuts in non-luxury goods?
The prime minister has said that and we endorse it. The point is 97 per cent of the items are already in the under-18 per cent bracket. As far as the impact of such cuts on the fiscal maths is concerned, I think the GST net is much more wider than what we think of.