File photo of Columbia University
A replacement for the Planning Commission must be "lean and thin", a top Indian-American economist has said, even as he listed fiscal consolidation and trade and FDI liberalisation as key areas the new Indian government should focus on to return to high growth.
Arvind Panagariya, Professor of Economics at Columbia University, termed as "brave" the decision by Prime Minister Narendra Modi to do away with the 1950-dated institution and said the body that takes its place should start "anew."
Addressing a gathering at the Chazen Institute of International Business here, he suggested that Mr Modi should put in "as lean and thin a team" for the Commission's replacement with 10-12 people and "lots of resources so that they can draw on the experts as necessary" and then periodically that team should meet with the Prime Minister and Finance Minister.
He added that the new body should have "in the background enough research agenda (on) how to design the reforms taking into the account the political economics."
Mr Panagariya, however, cautioned that the replacement of the Planning Commission should start "anew" as reforming the existing one would ultimately have the "same players" and that "needs to get changed."
Discussing the policy package that India should put in place to revive growth, Mr Panagariya said a "reform menu" for the country should include fiscal consolidation, trade and foreign investment liberalisation, amendment in the Land Acquisition Act, labour market reforms, privatisation and decentralisation of higher education.
He said while fiscal consolidation is underway, some movement has also happened in foreign investment under the new government which has opened the defence sector up to 49 per cent and insurance from 26 per cent to 49 per cent.
He, however, said in his view the government could have opened the insurance sector even more for foreign investment.
The economist also pointed out that there is need to reform the labour market as many of the labour laws are "incredibly constraining."
Making a strong case for amending the Land Acquisition Act, Mr Panagariya said the act is "incredibly draconian."
"If everything under the current law goes smoothly, (there are) no challenges by NGOs, courts, it will still take five years (to acquire land). Nobody will dare initiate land acquisition under those circumstances".
He listed infrastructure development and privatisation as key areas that require immediate government attention.
On higher education, Mr Panagariya expressed pessimism and said the sector seems to be going in the wrong direction.
"Indian system is highly centralised. What India needs is decentralisation" in the education sector.
Mr Panagariya said while these are the set of reforms that need to be done, there are issues that can go wrong and "implementation" is the key problem. He said while Gujarat as a state succeeded by improving governance and controlling corruption, "at the Centre we need policy changes."