Ahead of the Union Budget 2013, Dr. Prannoy Roy speaks to Nobel laureate Amartya Sen and Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, on the India growth story.
Here is the full transcript of the interview:
Audience - Krishna: Sir, I'm from St. Stephen's College. Talking about the Food Security Bill, we have seen a decline in the country's agriculture growth to around 3 per cent from 4 per cent levels. However, the growth rate is around 11 per cent in states. Why don't we embrace that model? It might be better. Also, as Professor Sen rightly pointed out, one-third of the population is without electricity. Another point I would like to make here is that there are young people like me who live in villages ... you are giving them scholarships by direct cash transfer scheme ... why don't you provide us with electricity, so we are on a par? Why doesn't the Centre do something with electricity on the lines of cash transfer scheme?
Montek Singh Ahluwalia: Look, there is no question of providing power in terms of infrastructure. It's one of the most important things one can do for the people, for households, for villages and also for small businesses. The Central government is very clear about that ... But you know the actual responsibility to distribute power is not with the Central government, but with the states ... Many states have achieved a very high degree of coverage in rural areas. However, some have. So, I think it also depends. It's unfortunately true that probably everywhere there are some who have access to power, while others don't. But the percentage of coverage is very, very high. But then, better managed states have achieved a very high coverage in rural areas.
Dr. Roy: But Montek, is it not going a bit too far that six decades after Independence you are saying there are few states, I mean there must be 200 million people, without electricity. Isn't that what you should be tackling? That's the question.
Montek S Ahluwalia: No, no, I am not denying.
Prof. Amartya Sen: A third of the population is without electricity. We don't keep looking at the deficiencies. I keep grumbling about it ... 48 per cent of the population doesn't have toilets in their home.
Montek S Ahluwalia: Yes, by the way, toilet thing is a real, real big problem.
Dr. Roy: It is ... it is. It is a major cause of school dropouts. Amartya just speak.
Prof. Amartya Sen: ... I keep emphasizing that we have to really understand the nature of the problem of which universities in India suffer. Lionel Trilling has a wonderful book called 'The Moral Obligation To Be Intelligent'. It has a concrete title. It's quite hard to be intelligent. Moral obligation to be informed, that I think is a moral obligation and I'm thinking even when we are talking about the growth rate. You know some states, for example Bihar, have seen a success story in the last five years. Gujarat I would say is a success story that would catch headlines, even though the rise in growth in Bihar, which was about 2 per cent and is now 10 per cent, is much more dramatic. Maharashtra is going the same way; and Gujarat and Uttarakhand are growing faster. Tamil Naidu and Kerala, which have done a lot in social services, are seeing a growth rate close to Gujarat's. But if we look at the newspapers ... that's not what their story will come to. I think it's completely important to recognize what is happening ... and as Montek was saying the better performing states, the worst performing states ... these are the things we have to discuss. He was reluctant to name the states. I can understand the Deputy Chairman of the Planning Commission does not want to be in hot water. That is certainly true.
Montek Singh Ahluwalia: No, they are all dear to me ....
Prof. Amartya Sen: Of course, but the some should be dearer.
Audience - Jagriti: I'm Jagriti from Delhi School of Economics. My question is to Montek sir. Sir, you just said you will be happy when the money goes to women and girl-child. But sir, in a lot of cases where people have been displaced, we have seen that money given as compensation goes to the men and not to the women because of all the societal conditions that we have. So, how do we cover up the space between policy and implementation? The policies are of course there, but the implementation has to be done. So, there is a space ... how do you cover that up?
Montek Singh Ahluwalia: That, by the way, is the easiest to insure. One of the things that the identity number will also include is the biometrics, etc, the sex of the person. So, you could absolutely make sure that the bank accounts, to which this money is going, are bank accounts held by women ... and there would be no possibility of error in that one. By the way, a lot of people feel that if men are thinking to steal the money meant for their children, will they sort of force their wife to scoff at the money ... Actually, I have talked to social workers on this ....
Dr. Roy: Men are like that in India.
Montek Singh Ahluwalia: No, no. Let me make this point before you go further.
Dr. Roy: Okay, finish it.
Montek Singh Ahluwalia: Social workers from SEWA, who have a very low opinion of the men in the families they deal with, say that if you give a man the money, he spends it on drinking. If you give the money to the woman, he does not bash her up and collect it! So, now ....
Dr. Roy: Thank goodness for the small mercies, that's really a man ....
Montek Singh Ahluwalia: All I am trying to say is if you deliver it ... look there can be no system that cannot be vitiated.
Dr. Roy: No, a wonderful man ....
Prof. Amartya Sen: The whole country has been through the trauma recently and the whole vulnerability of women in the society and the ghastly face of the Indian man has been kind of exposed and discussed. How does that interface with all this and how do you view it? This is a problem that goes beyond Aadhar. It's a cultural issue that we are facing. It is a cultural issue with complexity. I have three things to say statistically on that. One is that we should not. But if we were to go by the vague statistic, India is about, I think it's like a one-fifteenth of that in the United Kingdom or the United States or Europe ... so that the rape capital doesn't fall off the data, but a lot of people will tell you that it is actually probably ten times higher.
Dr. Roy: Under-reported!
Prof. Amartya Sen: But even with the 10 times higher figure, it is still lower than Europe and America. I don't think that's the problem. The problem here is that Indian women have much greater difficulties in getting help from the police, in moving the court quick enough to get a judgement fast enough. These are the problems where they fail, definitely. The second point to note is that there is a problem with not just the rapist ... rapists exist in most countries in the world, but the fact that the people went past when Nirbhaya was lying there with her friend and also wounded ... that people went past without helping. That shows something about the callousness ... which is really why. The third point is that there is a cultural element but it is a much more complex cultural element. For example, there are regional contrasts. ... I am not being a 'Calcutta nationalist' here, though I have just landed from Calcutta. The fact that the figures from Delhi are nine times that from Calcutta indicates the difference. Similarly, Calcutta has the lowest murder rate in the world. This indicates that there is a much more complex story. If we look at such things as sex-selective abortion of female foetuses, split the country into two parts, into the north and the west ... all states have a lower ratio of children, we have to calculate girl children ratio over the proportionate of boy-children. Everywhere in the world there are more boys born than girls; like 94, 95 girls to 100 boys, standard. The European ratio is 94.5. If you take the ratio of say Italy, Spain, Portugal and Greece you will get a ratio, which is more than all western states having deficit, calculated on Census 2006, and then adjusting to the mortality rate just like we have done. On the other hand, in every state of south and east, with one exception, is above the European level, and so I think again, why? It is not a traditional distinction between the north and the south, the Deccan and the north. It's not. We have a lot of cultural issues, but I think the cultural issues will have to be discussed and you know nowhere is that kind of commitment to be larger than where we are right now. On the other hand, that cannot prevent us from discussing those issues on which we could do something like the policing, the judicial system. I think the Justice Verma Committee began the discussion extremely well bringing out a whole lot of issues that have been neglected. These are the things, which we can do something about. The shame, I mean the fact that all these people - men and women - came up protesting about the maltreatment of this woman is a glory. What is not glorious is the fact that a people passed by ... it is not to our glory that Dalit women have been violated and raped again and again. They had relatively little noise. In fact, hardly any noise, little item ... That is not to our glory that we protest, but not to our glory we don't protest when Dalit women get raped and violated. So, I think we have to tell the story in its complexity and as I have been trying to emphasize earlier that the presence of one problem doesn't make the other problem go away. So, we have to do something about policing, about the judicial system. We have to do something about consensuses ... At the same time also think about the other issue - why the treatment meted out to Dalit women has been so different and so forth? Those problems and why the cultural divide, why do the cities divide so much so sharply between from one place to another ....
Dr. Roy: There have been so many issues. How many of you feel that something will happen now, and Delhi or India would be a safer place? How many people believe it would be safer? And how many of people feel it will not be safer? That's about 80 per cent who feel nothing is going to happen.
Prof. Amartya Sen: It's a very negative vote.
Dr. Roy: Very negative vote. Those issues you raised are so obvious, so clear.
Prof. Amartya Sen: But I think, what we have to do is to distinguish. You ask an aggregate question. I think that the Verma Committee suggested many of them including policing and judiciary. Many of their proposals can be carried out quickly enough and I don't think that 80 per cent of the people who have been sceptical by saying that it can't be. I think the scepticism can eliminate that problem. I don't think we can eliminate that problem and I don't think rape is not unheard of in the United States and Europe and so on. I think it's a question of a much higher record; it's a much higher number. I wrote 'The Idea of Justice', where I tried to argue that the idea of justice is a tremendous enemy of public access. We always debated about the slavery ... shouldn't we do something about the subject. Even after the abolishment of slavery, even after the women get the vote and are not maltreated, it used to be the injustice we probably met. So, I don't think the problem will go away. The question is how much more can we improve. Right now, with determination if we tried ... the answer to that is quite positive. Let's test it, how many people think that we can make a difference?
Dr. Roy: How many people think that we can make a difference?
Prof. Amartya Sen: By being an activist on it, by this issue being aired and by looking at it. So, that's the number ... so, how many people think we cannot make a difference?
Dr. Roy: So, you can make a difference by going out like you did in Jantar Mantar, India Gate. That had an impact and you are willing to do that again?
Audience: Yes sir.
Dr. Roy: So, how many think they can go out again and again until something happens? ... Excellent. Now let's just move onto something completely different ... On the slight note of despondency and gloom in the industrial sector that is not going as fast and investment is slowing down. Anybody got a question on industry?
Audience member: Sir, there are two scales of development, one through development of roads, in the field of power as well as manufacturing sector. On this front, the government almost failed whereas on the other side it is focusing on schemes like cash transfers. But these are the reasons for stubborn inflation and high fiscal deficit. So, what do you think? Is it appropriate for the future we want?
Prof. Amartya Sen: For you Montek.
Montek Singh Ahluwalia: For me, you shouldn't pose these things as options and I am quite willing to have you say that government has failed, if it makes you feel good. The basic issue is that if you want growth you have to have lot more for infrastructure. There is nobody that I am aware of, anyone in the government who doesn't agree with that. If you think we are not spending enough money on infrastructure, it's probably right. But we've got other things to do and the strategy that we followed is that wherever we can get the private sector to come, like through public-private partnership, we shall try to do that, so the government's money can be spent more in the backward parts of the country. Now, for example, you know in the remote parts of Arunachal Pradesh, I mean we are building a road that is the Trans Arunachal Highway. That's a very expensive road, no private sector guys are going to do that. But if you want to build roads from Mumbai to Delhi, Delhi to Amritsar, or whatever, you can get a lot of private sector activity. The same thing is obviously true in telecom. I mean telecom is a very critical infrastructure. It's an area, which has seen phenomenal improvement. It's hugely expanded telecom accessibility, mainly in the mobile area. All of that virtually has happened through the private sector. So the idea that nothing is happening on the infrastructure sector front is not true. I mean I totally agree not enough is happening. You know people compare India with China and that is good for us and we ought to compare ourselves with China because then we will realize how much we are not doing. Amartya talked about that in the area of health, in the area of malnourishment. It is very clear. But you know in the case of infrastructure the Chinese have built things they need for the next 10 years. We are sort of lagging behind, but one very important reason why they have been able to do this is that the investment rate in China is 50. In India we brought it to about 36. So, if you think of the difference 36 per cent versus 50 per cent ... that's an extra 14 per cent of the GDP, which is a lot of money to be put into infrastructure. We need to invest ... we need to create an environment where investment will take place. But I will only say that. By the way, if you look around, and certainly if you look around, I have been traveling, in the countryside, there is no question that the quality of roads has improved enormously if you compare it with the situation 10 years ago. I am not trying to make comparisons with the airports and things because they are ....
Prof. Amartya Sen: Airports are aam aadmi.
Montek Singh Ahluwalia: Aam aadmi, the best government programme in my view, in the sense that it's not only tackling a critical issue, also doing it well is the Pradhan Mantri Sadak Gram Yojna, which actually brings about connectivity to the roads network. It is definitely demonstrating that it is actually doing an extraordinary job.
Dr. Roy: Just going back to the original point. Amartya, does it worry you at all that there is a slowdown in the industrial growth, in investment? The mood of negativism in the industry! Does it worry you at all, and why is it?
Prof. Amartya Sen: Well, I think one would have to be insane not to be worried, in the sense that growth is a good thing. It generates private income, it generates public resources which can be spent ... but why it isn't a very good way of spending time. I have to find out why it's happening. I think the answer to a great extent lies in two parts, of which Montek rightly emphasizes, namely the physical infrastructure problem ... but there is also a huge social infrastructure problem. It was amazing that India was managing such high goals set for growth rate, with the kind of healthcare and education system that we happen to have. If you look at something called the Asian Development Model, beginning with Japan in 1860 after the major exploitation, it has been driven by human capabilities formation .... Korea, South Korea, Taiwan, Hong Kong, Singapore, Thailand and China in a big way follow that too. We are too out into this trying to have high growth rate without doing any of these things. Now it's not that this lesson was never known in India. I mean the time of debate we look at the time of the Constituent Assembly, committee like the Roy Committee. We were just discussing why one can't have economic growth without any health and education. Going further back, when Jamshedji was setting up TATA in Jamshedpur, what were his thoughts? He arrived there, he set up the industry, the government was helpful ... so, as Jamshedji argues, I have to be the municipality as well. So, the free education, free healthcare for all and not just for the worker, but the whole locality ... So, that is what I would call the Asian approach and that has been the basis of high growth rate in all these countries. Physical infrastructure is extremely important too and I really think that a lot more improvement has to be done. But I think the neglect of social infrastructure we are performing on, down to well-being, which is true, but huge complementary priority. What I get very upset about is when we ought to follow China or we when we ought to follow what's happening, with the very foggy notion of exactly what the Chinese do. They try to weigh the activity by better health; by better education; they also have good votes.
Dr. Roy: So, you are saying that the fact that we haven't invested in our social infrastructure and health and education puts a limit on our overall growth rate?
Prof. Amartya Sen: No. I think we can expand it ... and that of course requires, and we come back to the question from where we had begun, fiscal thing. We can spend more on health, education and food if we could withdraw some of the subsidies, as Montek said which have come up, and which are politically difficult to evolve. I am delighted that they are trying to do something even as the Election is approaching, because that is the way to expand growth along with the physical infrastructure. That is the entire lesson of Asia which somehow India missed in a way Tata didn't ... in a way our pioneers haven't.
Audience - Shrilekha: Good evening sir, I am Shrilekha from Miranda House. I agree with you sir that the government is doing its bit, but then there is a good amount of work by NGOs put in for the implementation of the schemes, etc. How can we ensure the uniformity of implementation of where there is no NGO-like implementation of the schemes?
Dr. Roy: You are saying that NGOs are helping in the implementation ... Montek, is that your experience?
Montek Singh Ahluwalia: Well, our view is that NGOs can and do play very important and wide roles. There is no way that we can pick NGOs. What we do is that we encourage state governments and the local authorities, like the Panchayats and so on. We encourage them to get NGOs involved. We know that there are several good stories where NGOs have in fact mobilised people, brought in some capacity-building and have created motivation. I mean we can do that, that is wonderful but you know that the Central government can't actually pick and choose NGOs and dictate terms. It's really like that ... most of it needs to be done at the government-level ... needs to be done by the state government and local authorities. So, in fact all that the Central government does is give some money. Many of the demands that people make should be made to state governments, and more importantly, we should be documenting where it is working because I think the good news is that it is working very well in many areas, but I think it is not working so well where there isn't a problem. There are large areas where there aren't any NGOs. For example, it is probably true in the central part of the country that NGOs are few and far between, whereas in the south and in the west there are a lot more.
Audience - Siddhartha: I'm Siddhartha Jain from MFS. My question is that India in its past decades has seen all the highs and lows as per GDP growth rate and inflation .... From a student's point of view, I would like to know, just as an estimate of five years from now, what would be a realistic aim for India to have in terms of GDP growth rate, inflation figures as well as the fiscal deficit? A realistic estimate ....
Montek Singh Ahluwalia: I can tell you that the government works that one out. Whether we achieve that or not is another matter. The current position has been made clear by the Finance Minister. In my view, at the end of the 12th Plan there is no reason on earth why the fiscal deficit can't be brought down to 3 per cent of the GDP, because it was below that in 2007. We are not talking about a pie in the sky. As far as the growth rate is concerned, yes, the current growth is very low but we shouldn't be getting too excited for the few years of exceptional growth. You shouldn't get too depressed by the downturn. This is a downturn. The average growth rate in the last 10 years is somewhere around seven and a half per cent.
Dr. Roy: When are we coming out of this downturn?
Montek Singh Ahluwalia: That's a more difficult question, I will come to that.
Audience - Charchita: Hi sir, I'm Charchita from IAFT. We have talked about interest rate ... on the one hand we see that the RBI is not interested in cutting the interest rate because inflation is a big concern. On the other hand, we see that inflation is moderating to a level of say around 9-10 per cent, which is not exactly a comfort level. So, isn't it a double-edged sword? What direction are we moving in? Where do we go now? Because the industry is seeking different things and probably the actual aam aadmi wants something else.
Montek Singh Ahluwalia: Well, that's a very good question ... he said 'what do I regard as an ideal inflation rate' ... You know the opinion varies on it. If you ask the Reserve Bank they will say 3 -4 per cent. If you ask the Finance Ministry, they will say 5-6 per cent. If you ask the Planning Commission, they will say we should have more of developmental expenditure, they will say 6-7 per cent is not bad. So, well, it is above all of those. The Industry wants low interest rates. I mean we all want low interest rates. RBI governor can lower short-term interest rate and it's not going to have any impact on long-term interest rates, if inflation expectations are not influenced by and further more if the fiscal deficit remains as high as it is. I think 90 per cent of public discussion on the interest rate is unbelievably ill-informed. It's all focused on what the governor of the Reserve Bank is going to do. Quite honestly, if all the other things remain as they are ... I would strongly recommend them to do it straight away.
Dr. Roy: Montek, are you saying that the debates on news channels are ill-informed?
Montek Singh Ahluwalia: Since I am on a news channel you probably may shut me off. But I do believe, on the specific subject of the interest rate, quality of debates ... both in news channels and in the print are exceptionally poor. I would say exceptionally poor because in these industries they don't contribute to proper understanding of this, because they keep saying if only Reserve Bank governor lowers the interest rate ... I mean that's not the case.
Dr. Roy: Amartya, you have listened a lot ... this is the best and brightest of India, this is the hope for the future. Does it worry you a bit that it's all about percentages and GDP and statistics. I mean what would you like to say to them?
Prof. Amartya Sen: Well, I think statistics is such a bad thing to be interested in. I think one thing that's worse than being obsessed with statistics is to be ignorant about statistics, and so I think it's quite wide. I only wish statistics deal with a major interest ultimately, rather than the derivative one in which I would put even the inflation rate, even the GDP growth rate, and even the fiscal deficit. These are all important, but they are important because we are concerned with the quality of life of human beings. How long we live. How educated the population is; whether we have hungry children or not. Whether women are treated with respect or not ... and there are some numbers which are very close to that. But they are still concerned with methods of delivery. One of them is saying immunisation. Why it is that India has such a low rate of immunisation. It is remarkably low. Ours is 70 per cent lower. Bangladesh is 95 per cent, a much poorer country, half our per capita income. Now, these are the statistics that I would be concerned with because these are concerned ultimately with human life. All the others are important ... yes, fiscal deficit is important, inflation is important, growth is important and they are important and particularly very important because they give us resources through which we can, in our lives, generate resources for public education, public healthcare and so on. I think I am not concerned about people liking statistics, but I would be much more if the question about percentages were concerned with the nature of human lives. What's our ultimate objective? We often forget that it is so important that it becomes part of our vocal view. When I say 'I salute you', at one level it means I pay you respect. But what does that salute mean? It means good health. Sa-salute. Salute, Italians still actually have it, which means wishing each other good health. Now that the fact that our greeting itself is a reflection of health indicates how the language reflects philosophy; it's a philosophy whereby health comes, education comes. I think it's not the question of statistics, but of what statistics is?
Dr. Roy: Now we will have the last two questions from the two of best institutions, one from the Miranda House and one from Delhi School of Economics.
Audience - Ritika: Good evening, sir. I am Ritika Bhatt. I am from Amity Ghaziabad. My question is related to education sector. In the last year's Budget we saw that the education sector was put on a kind of back burner as in the outlays in the Union Budget. It went up marginally from 4.67 per cent to 4.9 per cent only. My question is can we expect something different from this Budget and shouldn't it be something substantial rather than being only on paper? There shouldn't be any implementation glitches also, when the fact is that the government spending in the sector of education is only 3.7 per cent of the GDP, which is way below the benchmark rate of 6 per cent. Don't you think we should do something more substantial in this regard? Thank you.
Montek Singh Ahluwalia: I agree with you. I am not going to comment on this year's Budget for obvious reasons. We have been trying to expand the expenditure by the Central government on education. I think we should do more. There is no question about that, but you know you have to recognise that actually the principal responsibility rests with the state. It is the budgets of the respective state governments that are going to determine the quality of that education. The interesting thing is that we say that to states all the time .... You know that both health and education, I mean almost three-fourth of the money spent on these sectors is with the state governments. Central government should try to do more. And we are trying to do that. But unless you get a comparable effort on the part of state governments it's not going to have an impact. Whatsoever, so we need to focus on that. We cannot force them ... that's an important issue.
Audience - Mahesh: Hello sir, I am Mahesh from MDI Gurgaon. I hail from Andhra Pradesh. In 2008-09, the state government launched a series of schemes, lots of freebies; and eventually in 2009 they won the elections and in 2010 the Planning Commission interfered and shot down all the plans and all the freebies, saying that they were not financially viable ... this is something that you interfered in. So, my first question is when does the Planning Commission interfere ... does it necessarily make for good politics?
Prof. Amartya Sen: I think bad economics cannot be easily combined with politics because good politics demands good information and good analysis; and good economics is part of that. But good politics also demands better social understanding, better cultural understanding. But he is raising a very special question about Planning Commission, which I leave for the Deputy chairman to handle.
Dr. Roy: The general point is that the freebies are offered at election time, which gets you votes.
Prof. Amartya Sen: But I think there is a slight problem in saying something that gets you the vote, must be not a good thing to do, well, democracy is about that. It's about getting votes and also guaranteeing human rights and it's also about giving people an opportunity to speak and argue. But it is also about getting votes and getting elected ... This might get undermined in a dictatorship, but in a democracy you are in the business of trying to get votes and pleasing people, because people are ultimately your judge ....
Montek Singh Ahluwalia: Just a fact. Possibly to my great regret ...regret that Planning Commission cannot force state governments to give up freebies. If some state governments give freebies... we have no power on that. Actually, our interaction is limited to first of all giving them money, which they welcome. Secondly, giving them advice, which some of them welcome, but most of them are unwilling to accept. Thirdly, where Central government schemes are involved, working with the Central government on the guidelines under which this money can be spent ... there we very often speak for the state government, trying to persuade our own ministries that they shouldn't do it in a one-sided manner. So, when state governments say their freebies have been cut because of the Planning Commission they are completely wrong. There has never been a case where this has happened.
Dr. Roy: Okay everybody, I think there are just so many questions to be asked but there is no time left unfortunately. I am sure both of them are very happy to answer any question you have by email. I think they deserve a round of applause. Thank you very much. Thank you all.