Economic growth may not exceed 6.8% without reforms: Bibek Debroy

The Planning Commission has been replaced by NITI Aayog, which promises to be fundamentally different from the earlier body in structure, role and powers. Bibek Debroy, a full-time member of the Aayog, tells Sanjeeb Mukherjee and Indivjal Dhasmana that NITI Aayog will like to take the planning process to the district level, at least. He says the agency’s focus is not to improve India’s ranking on ease of doing  business in the World Bank report, but to improve climate for overall citizens, including businesses. Edited excerpts:  

The 12th five year plan is said to be the last such plan in India. Is that correct? 

There is an institutional shift not only in name but also in the things that we need to be doing. There is a division in the Commission called the Perspective Planning Division, which looked at what could be the shape of India in the next 20-25 years in terms of say ease of doing business indicators, or human development indicators. Ideally, we would like to take this exercise down to the level of blocks or even villages. But data may be problem, so we would like to take this exercise to at least the district level. We want to be able to say that to take India to where we want in the next 20-25 years this is what we need to do at the district level. Also, right now I personally feel or for that matter NITI Aayog feels that we should not be calculating poverty. 

So, you are saying that the structured format of the five-year plan is over. Plan documents need to get Cabinet clearance, followed by approval from the National Development Council. Chapters were formulated based on discussions and suggestions from the working groups. 

No, we will have working groups and all that, but it is not the constitution of working groups that matters, it is the purpose for which these have been used. So if we have a taskforce in agriculture, what is purpose of that taskforce. It will identify the things that India needs to do in agriculture and what are the best ways of doing it. For example take the 2014-15 Economic Survey. There is a volume One and there is a Volume Two. The Volume Two looks at the Indian economy sector by sector, and the data. This was the structure of traditional Plan document. And, Volume One is broad outlines and roadmap. Our stuff (the plan document) will be more of Volume One in nature and not the Volume Two. 

Isn’t this the original idea on which the Planning Commission was conceptualised, before it got into matters like allocations and determining poverty numbers etc?

Yes, you are correct, the only difference was you didn’t have the local bodies then, at least constitutionally you did not have the local bodies.

Suppose you are tracking the ease of doing business, you would like to track the number of procedures that a company has to go through in government offices to get clearances etc. How will that work from bottom onwards?

Ease of doing business indicators are run by the World Bank. The World Bank comes and does perception surveys in Delhi and Mumbai and that is how India’s ease of doing business rank emerges. Are we as NITI, not as the government, interested in whether the rank is moving up from 150? If I were to just target that, logically what should I do? I should improve the business climate in Mumbai and Delhi, and immediately India’s ranking will shoot up. It does not matter what happens to the rest of India, as a logical extension to the World Bank’s views. We are of course interested in improving business climate, as opposed to ranks. So, here is a state and we believe that these laws in the state are causing problems, not only for businesses, but also for citizens. It is not just business focus, not for NITI Aayog. So, we will examine those. So, improving climate is important for us, but not the number. If we improve the climate, automatically the number will improve. 

IMF has projected India’s economy to grow at 7.5% per cent in 2015-16, against the Budget assumption of 8.5%. Do you think IMF has rightly assessed India’s economy?

I am still more comfortable with old GDP numbers in terms of projections because you need something to be occurring for a certain period of time. In terms of old GDP series, I would say we should get 6.5% in 2015-16. So far, I can see some pick up in the road sector. I can see some pick up in terms of unclogging of investment projects that were stuck in the pipeline. I see some positivity in terms of sentiments, something that is very elusive and intangible, so I am not going to use it as an argument. I would be very surprised if growth is significantly below 6.5%. 

In fact, IMF has given a growth projections for the next five years on the basis of the old GDP definition. It projected India’s economy to register annual growth rate in the range of 6.3% to 6.7% in the next five years. That is much lower than the average annual GDP expansion clocked during five years preceding the global economic slowdown of 2008. How do you assess this projection?

I don’t think we can get back to double digit growth rates until the world economy improves. That period was when the world economy was surging. I also think there is plenty of slack within the system domestically. But, we can get growth of 8-8.5%. This does not mean that increase is going to happen overnight. It is going to happen incrementally, gradually inching up. But, to get to 8.5% growth rate, there is a long list of reforms to be done. 

There are some reforms which require change in legislation, there is only a limited amount that can be done through executive decisions. If you say unless these reforms are done, India is going to be stuck in a band of 6.3-6.8%, I have no quarrels with that.