‘Widespread response to SEZs proves there is some oomph in the idea’

Ahluwalia, a St Stephen\’s and Oxford alumnus and the first director of the IMF\’s Independent Evaluation Office, was tasked by the PM to turn the Planning Commission into a bustling intellectual workshop for big policy ideas. The jury has to be necessarily out on how far Ahluwalia, who had free-wheeling interaction with Express staffers over lunch, will succeed in transforming an institution many had predicted would wither away along with Indian socialism. But betting on Montek is not a high-risk strategy. Ask the prime minister.

SHEKHAR GUPTA: You have been in the government for two and a half years and, according to one view, are responsible for all that has gone wrong with our economy in the last 15 years. Is that true Montek?

Absolutely (laughs)!

SHEKHAR GUPTA: The Planning Commission seems to be the busiest part of the government these days, busy drawing plans, meeting ministers or ministers scuttling them. You can also be seen receiving many garlands and shawls from chief ministers. However, it also shows that state governments are becoming powerful. Leverages are also being used for different demands because it is no longer a one-party distribution mechanism. The Commission has also more political significance than before. Do you agree?

It is dangerous to disagree with you but anyhow I have no objections and can live with what has been said.

SHEKHAR GUPTA: How do you think the media covers today’s economic and political debates?

The role of media is important because a government organisation’s credibility is low and the best way for us to get the message across is through independent media. And the media has largely made tactical criticism but not strategic opposition. One problem the government has is how the media coverage plays internationally. The international media has a positive bias but what often comes out is a complete babble of confusion in the sense that stories are focused on who is contradicting whom.

The counter to this is responsible journalism, especially by home media. One interesting example is issues like farmer suicide. The media focus has been negative so the good things being done do not come out. This leads to cynicism among the people.

RAVISH TIWARI: Since there are no “backward” states, only mismanaged states, how do you plan to help them cultivate a culture of managing themselves better?

The problem here is essentially to what extent must the government’s resources compensate for backwardness of a state and to what extent must they be used to incentivise better performance. It has become common to ask for money. Poor states ask for anti-poverty schemes instead of asking for incentives to improve the infrastructure. Bihar and Eastern UP are very ill-connected, though there are some current projects. In Andhra Pradesh, it was cheaper to import marble from abroad than from Rajasthan due to high transport costs. It is more costly to bring steel from the eastern part of the country to the western part than it is to ship it from South Korea to San Francisco. These are the things that impact competitiveness but never once did any of the backward states say that you should be doing something about this. This is a strategic mistake on their part but it is changing.

RITU SARIN: Are you worried about the continuous funding of mega developmental projects like the National Rural Employment Guarantee (NREG) programme?

There is no doubt that the total demand for funds exceeds what is possible to provide in the Budget. But I would be less concerned at the moment about whether we are meeting the rollout requirements or about people being convinced that these schemes are delivering good results. Because from an intellectual point of view, so many schemes are wasteful. But the day it became clear that a particular scheme is doing a good job I don’t think it will be difficult to put money into it.

PAMELA PHILIPOSE: You have had some time to look at your flagship scheme NREG. What is your overview of it?

I am being painted too often as a skeptic on NREG and there are some issues there. But I am quite happy to say some good things about it. The degree of transparency in the programme is fantastic. The website itself gives an enormous amount of information from the state level to the district and village levels. It tells you how much money was released by the Central government, tells you about water, sanitation and other things and also about who are registered, village by village.

What this system doesn’t tell you is whether or not the projects are well-constructed or well-designed. A check dam to stop water in a gully could be washed off if not designed or located properly.

RITU SARIN: What about political messages in projects? The Golden Quadrilateral was the earlier Prime Minister’s pet project.

The Golden Quadrilateral remains the primary source of attention since all the traffic is there. Later, the north-south road was also added. The useful thing here has been that finally there is an earmarked cess on diesel and petrol going to roads. It is good example of zeroing in on a high-visibility infrastructure project. Though there are leakages of government money, with monitoring reasonably good infrastructure will get built. The other programmes are far more complex as they require people’s participation, which the government is not good at in comparison to NGOs. How to marry this is the real challenge.

TENZING LAMSANG: Talking of leaks, thousands of crores of rupees are being poured into schemes like the NREG and Bharat Nirman, but half of that is lost before reaching the target. Does this leakage of funds account for the fact that past Five Year Plans have not been meeting their targets?

The point you raised is valid but let me be a bit defensive here. The bottom line is that the 10th Plan ending with a growth of 7.2 per cent is better than the two previous ones.

However, there are 250 centrally sponsored schemes of which the money is focused on only about 25. It is politically difficult to abolish the rest, but if the Central government can focus its top skills and resources on the 12 best schemes then we will have a revolution.

SONU JAIN: On being asked about how much of the GDP must be allocated, PC Chidambaram talked of plugging the holes before allocating more resources.

He did not say it but it was mentioned in his letter to me, which talked of leaking pipes (of funding). But if it takes years to repair a leak then it does not make sense to stop the water completely when the intention is to pump in more water. Most leaks do take years to plug. So both of us have the same view — to use the end of the 10th Plan to weed out schemes that have outlived their usefulness.

SHEKHAR GUPTA: When you are dealing with chief ministers or state-level politicians sitting in the Central ministry, do you feel that the questions you get from them have qualitatively improved?

Indisputably yes. Nationally. In the last two years, the Railways has shown an outstanding performance. Under Lalu Prasad’s leadership, not only are the operating indicators improving but also the thinking.

SONU JAIN: Is there resentment among your staff and the Planning Commission about getting people from outside?

Well, I don’t think there is any such resentment and no member of the Commission has complained so far. In fact, if I was running a consultancy firm I would hire many of them. The job at hand is tremendously large. For example, if you want to do a simultaneous evaluation of schemes in 250 districts and if the Planning Commission did nothing else during that period, even that would not be enough.

We have started to take in interns from those who have done their graduation and are preparing for post-graduation. They come in for two-three months and we give them a modest stipend. The response has been good. They may not be bringing in any expertise but may bring a fresh approach and learn more about what their government is doing or not doing.

KANDULA SUBRAMANIAM: You said in January last year that the National Highway Authority (NHAI) would be restructured and given more autonomy? Is this the model for other sectors?

The NHAI restructuring was necessary in order to introduce expertise to the body. We are now going to the Cabinet and hopefully it should be over in a month or so. We require people with financial expertise and not just the usual engineers, so a lot of restructuring is needed to be done there. If you are going to have a Rs 2,00,000 crore programme then delegating it to a NHAI board doesn’t make any sense.

KANDULA SUBRAMANIAM: Why are projects in rural and backward areas not attracting private capital?

Private capital goes only to projects where there is existing investor traffic. So projects in backward areas must be done by the public sector. There is no point trying to build private-sector roads in the Northeast.

UNNI RAJEN SHANKER: How important are the Special Economic Zones (SEZs) to India’s economic reforms?

I supported the idea of SEZs but there are two difficulties. The first is the loss of tax revenue, related to misuse. The second issue is land, which is a tough one. Land is actually a state government issue but the idea of not using land for industry is nonsensical, especially in the light of our aim to reduce people in agriculture to 10 per cent and doubling productivity. You don’t need all the land for crops — productivity in China is double and our population is not going to double. Land scams are a serious issue but the state governments can declare a transparent policy and then move forward on SEZs.

Problems apart, the widespread response to SEZs proves that there is some oomph in the idea.

MANINI CHATTERJEE: A report in a paper said that in spite of 15 years of reforms, there has been no real decline in poverty.

In our survey, poverty is declining by 0.8 per cent every year, which is still not enough in such a high-growth era. Though it is not true that there has been no decline at all, the government is far from satisfied with these figures.

HARCHARAN SINGH: What would be a sensible definition of Poverty Line in India?

I would not use the definition of Poverty Line that we used in 1973. The proportion of malnourished children in the National Family Health Survey in 1998 was 47 per cent. This might have come down to 40 or 39 per cent in the latest figures, which are not yet out. But malnutrition is not just the lack of income but can also be linked to health, sanitation and gender, as girl children are less well fed. What’s needed is a multidimensional approach. Today’s Poverty Line does not take into account transport costs and so, over all, you probably will need more income to be above it.