“The assessment of the present government must be based not on what it has inherited from the past but the policy actions it has initiated during the last two years”. After a decade long pause, the government has put the economy to the path of reforms to achieve high growth trajectory. The government has made substantial progress in removing past mistakes of counter-productive regulations but the task remains incomplete. The challenges such as restoration of the health of banks and accelerated growth in manufacturing as envisaged by the Make in India programme to achieve accelerated job growth remains.However the direction of progress is right. There are significant lags between policy actions and outcomes. Therefore, over time we will see sustained growth and poverty decline”. This was reiterated by Eminent Economist and Vice Chairman of NITI Aayog Prof. Arvind Panagariya.
He was delivering a public lecture on “The Economy at Two Years under Prime Minster Narendra Modi” organized by the NITI Aayog Chair, University of Rajasthan.
Defending the creation of NITI Aayog as replacement of Planning Commission, he said that the role of planning is also poised for a change. NITI Aayog is now working on a 15-year vision plan complemented by a seven-year strategy and three-year short-run macro framework plan.
Giving the background of the economy he said that in 2004, the NDA handed over to the UPA, an economy that had grown at 8% during 2003-04. Taking advantage of the revenues that the higher growth had made possible, UPA I expanded social programs but it did not take measures necessary to sustain the high growth over a longer period of time. UPA I worked well but policy paralysis during UPA II hurt the economy badly and as a result the economy descended into what appeared to be a crisis during its last two years and people were of the opinion that the economy has reached to level of 1991 crisis.
Today, the economy is far healthier compared to the last year of UPA II in all macroeconomic parameters.
A major initial task of the government was to end the paralysis in the functioning of the government including environment ministry. This was successfully done with the clearance of numerous projects. However, the full recovery of sectors such as steel, power generation, electricity distribution and construction will take longer as at inheritance, they were in crisis and sector-level adjustments takes longer than macroeconomic variables. There is complete turnaround in infrastructure sectors such as transport and energy.
He discussed various reforms undertaken by the government such as increased transparency in auction of coal and other natural resources; FDI reforms; labour reforms allowing women to work at night shifts and increased overtime hours per week; tax simplification and reforms; law to ease the exit of firms (Insolvency and Bankruptcy Act, 2015). For the first time, the government has made a concerted effort at sustainable urbanization with its new schemes of smart city etc
Discussing social sector reforms he said that programs such as the Public Distribution System (PDS), Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and subsidized sales of fertilizer and liquid petroleum gas (LPG) cylinders have been subject to massive leakages through the use of multiple and ghost accounts.
During his welcome address Prof. V.V. Singh, Director NITI Aayog chair expressed that the purpose of the lecture is to clear the air regarding the reforms initiated by the Government in last two years. Dr Meeta Mathur conducted the Lecture and delivered the vote of thanks.