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Q. What prompted you to come back to India and take up this job? A. It was too exciting an offer to even have second thoughts about. I considered it a privilege to be invited and there was no question about my returning. Q. How did it come about? Did you get a call from the Prime Minister? A. I had called to congratulate Dr. Manmohan Singh when he became the Prime Minister. When he asked whether I was interested in coming back, I said 'I'll come back and do whatever you want me to do'. Q. In your first press conference you had said that you are planning to convert the UPA government's Common Minimum Programme (CMP) into reality. How are you going to go about that? Secondly, does working under a coalition government impose some kind of restriction? A. The Government has adopted the CMP as a broad statement of objectives, and it is obviously our job to design an implementable programme to achieve those objectives. The mid-term review of the Tenth Plan, which we have now launched, provides an opportunity to shape policies towards this end. As for coalitions, yes they do pose their own constraints, but this should not be exaggerated. We are a very pluralist society, so even when you have a single party in power, many different interests are reflected within the party raising the same problems of balancing. Besides, this is not the first time we have had a coalition. Q. But the pulls and pressures will be more, right? A. Yes, they are more. But it's not as if in one case there are no pulls and pressures and in the other case, you only have pulls and pressures. The real issue is how much commonality of interest is there. If there is a sufficiently common shared perception, substantial progress can be made. Q. Is that clarity there? A. The CMP provides a broad framework of objectives, which I think has wide support. It talks of achieving growth of 7 to 8 per cent, strengthening policies towards agriculture, including irrigation and water management, giving a push in critical areas such as health and education, and in employment generation. Translating these broad objectives into a workable policy means identifying the constraints involved and the trade-offs they force. Q. How do you manage this trade-off? Do you meet the leaders? A. The Commission is not the forum where discussions with different political leaders take place - there are other forums for this. Ours is the technical job of determining what is feasible. If everything is not immediately feasible we have to determine how to strike a balance. In addition to discussions with political leaders, there has to be a broad public understanding of the issues and the reasons why some trade-offs are unavoidable. We need to put across a set of policies which will make reasonable people feel that, yes, this is a sensible way of making progress towards the objectives that were laid out given the real constraints we face. If all objectives could be achieved without any problems, there would be no great challenge about policy-making. Q. You were saying how you are planning to go about making the CMP a reality... A. I would not like to prejudge the outcome of the Mid-Term Review. We are going through a very comprehensive process of discussing with ministries, consulting state governments, and also consulting outside experts. It is only as a consequence of this exercise that we will firm up specific suggestions. Q. How do you propose to consult outsiders? A. We have identified a number of areas where policy needs to be reviewed and restructured. Individual members of the Commission will take responsibility for guiding the Mid-Term Review process in these areas. We have set up consultative groups for each area, which include outside experts, academics, practitioners, representatives of the private sector, NGOs, trade unions etcetera. We will invite these groups to provide inputs, and also to react to what emerges from the internal governmental review process. Q. Is it different from the task forces that you have already set up? A. The half-a-dozen task forces set up recently consist of a group of secretaries chaired by the planning secretary to look at very specific points that are contained in the CMP. Their conclusions will be an input into the broader review. Having got the views of outside experts, we will then firm up the internal Planning Commission view, which will be presented to the full Planning Commission chaired by the Prime Minister: It includes some other ministers such as finance, defence, agriculture, railways and communications. The review will then go to the Cabinet, and once the Cabinet has approved, it goes to the National Development Council, which includes all the chief ministers. The views of the states are very important and they often have a different perspective from the Central government. Q. How has liberalisation changed the role of the government? A. Economic liberalisation has meant that the role of the state needs to be redefined. There are many things that the state used to do----controlling industrial investments, prices, choice of technology, import decisions etcetera----which are best left to entrepreneurs to decide in competitive markets. However, that doesn't mean that the state doesn't have a major role. It does in many areas. Q. Even in economic activity? A. Yes, certainly. First of all, there is general agreement that there is a need for government intervention in social areas such as basic health and education, and these areas are also economic in the sense that long-term economic growth depends on how much improvement we can achieve in health and education. They may not affect economic growth rates in the next two or three years, but they definitely will over the longer term. There are other areas which are more traditionally viewed as economic --- infrastructure for example - where the state has a major role despite liberalisation. Here you have a spectrum. At one end of the spectrum, there are sectors such as rural infrastructure, primary schools, primary healthcare rural roads, major and medium irrigation where the bulk of investment has to be done by the states and on which one cannot expect a commercial return though even here one can imagine user charges to cover operating costs in some areas (example: irrigation). At the other end of the spectrum, you have telecommunications, ports and electric power, where quite a lot of the investment can be done by the private sector based on tariffs, which provide a reasonable commercial return. But even in these cases, the state can be a competing supplier of services and also play a major role as a regulator balancing the interests of consumers and producers. The regulator also has to ensure fair treatment among producers, between public sector suppliers and private sector suppliers, between incumbents and new players etcetera. The CMP emphasises the importance of public-private partnership in infrastructure, and we propose to devote considerable time and effort to this aspect of policy. Q. What about involving panchayats? A. This is a very important issue, especially as the focus of policy switches to provision of local services such as rural roads and watershed management, primary education and health. These services have to be provided at the local level and panchayats and NGOs are the main institutions that can provide public participation. However, the states feel that if the Centre wants to help, it should provide the money to the states and let them finance and manage the schemes at the local level. At present, much of the Central government assistance for such schemes flows through what are called centrally-sponsored schemes run by Central government ministries dealing with the relevant areas. The funds often go to the implementing agencies at the local level, but the extent of involvement of the panchayats in critical decisions varies. Q. Doesn't the Centre have a role there? Can't the Centre actually set the guidelines? A. Yes it does. The funds in these schemes have to be spent according to Central government guidelines, but the states complain that these are often too rigid and inflexible. They favour the Centre limiting its role to providing the resources to the states, which are after all sovereign in the areas, and letting them manage the process, with the Centre monitoring progress. Q. Which could be disastrous... A. Well, I want to keep an open mind on this, but there is concern that with the states' finances being very severely strained, it may be difficult to ensure that these funds really get to the schemes intended. There is a strong temptation to use the funds for other urgent purposes. Q. Can't you directly go the panchayats by bypassing the state government? A. The Constitution envisages that the Centre should devolve resources to the states and the states in turn to lower level institutions. There is no explicit provision for the Centre to give funds to lower level bodies. But ways have been found in the past----through the creation of the district rural development associations (DRDAs), which are technically set up as societies that enable Central money to go to these societies and be used by a combination of the district administration and the panchayati Raj institutions. But the states would prefer that the funds go to the state budgets and then be transferred to lower level implementing bodies. This is a complex issue, and I don't have a readymade solution----we need to consider all possible alternatives. Q. How difficult is monitoring the funding? A. It is difficult. The Centre doesn't and shouldn't have a huge army of people doing the monitoring of the various projects. We must rely on the state administration, which sends us utilisation certificates, indicating that expenditure has been made in accordance with the guidelines. Here and there you can conduct random checking and we have done that in the past. The result has always been the usual mixture. There are many violations of the guidelines, but in any system, there will be some violations. The ground level administration will take advantage of flexibility and claim that it is not a violation of the guidelines, whereas auditors will say it is. The real issue is not whether there are departures from the guidelines here and there, but whether the system is really achieving what was intended. My perception is that in many areas, it isn't. You can spend money on schools and even hire teachers, but if the teachers don't attend the school, or do a good job of teaching, which is the case in many areas it won't achieve the objective. This is where community involvement, and making the functionaries responsible to the local government bodies, can help. Q. So can't we have a single Centrally-sponsored scheme? A. The problem is that the areas we want to promote relate to several different Central ministries. For example, if the focus is on rural drinking water, then that is the responsibility of a particular department, but if we are concerned about water management more broadly, including ground water recharge, that is another department. Watershed management related public works, which affect the ground water level, are the concern of the Department of Rural Development, but irrigation projects or canal irrigation is the concern of the Ministry of Water Resources. Having said that, there is no doubt that there are too many such schemes with overlapping objectives and it is important to clean up the system. I have no doubt that even within the existing constraints, there is a possibility of cleaning up the system. We hope to do something about it. Q. What plans do you have about cleaning up the system? A. It is too early to have specific plans. But I am convinced that if you want to increase the efficiency of the system, you have to increase the sense of involvement and ownership at the lower level in order to achieve our objective. For example, where panchayats have set up their own schools and hired their own staff, there has been a distinct improvement. Similarly watershed management works best where there is community involvement and the community understands what is being done and participates in the design. These kind of experiments can be multiplied. Q. So what you are saying is that the answer lies in giving the panchayats more power? A. Yes that is essential. The real question is how to do it in a way that the states will find it acceptable as well. Q. Presently you seem to be working on two parallel things. One is on the Mid-Term Review of the Tenth Plan as well as determining the priorities for the Rs 10,000 crore allocated to you under the Budget... A. The Rs 10,000 crore will be allocated to schemes reflecting the CMP priorities. We expect to complete our discussions on this and make the allocation by the end of August. The mid-term appraisal is a much larger task. We need to put in place policy correctives in many areas. The National CMP says that our growth targets should be 7 to 8 per cent. Many of the social objectives of the CMP depend upon achieving healthy growth in revenues, which in turn depends on achieving the 7 to 8 per cent growth. Employment generation, particularly high quality employment, also depends upon achieving the 7 to 8 per cent growth. However, despite the 8.1 per cent growth achieved last year, the average growth in the first two years of the Plan has been about 6 per cent. What is more, agricultural growth has actually slowed down after the mid-1990s, and this needs to be reversed. We hope to use the Mid-Term Review to come up with policies that will address these problems. Q. How easy or difficult do you feel about achieving a 7 per cent growth, given the fact that achieving these targets will basically mean more reforms at the state level? A. The NCMP recognises the need for such reforms. It emphasises empowering local level bodies, which will improve service delivery. In connection with revival of agriculture, the CMP says that all constraints on incomes of farmers will be removed. There are many such constraints imposed by state governments----constraints on movements of crops, marketing etcetera. Faster agricultural growth also means moving from cereal production into horticulture and this poses challenges in both technology and marketing. The seeds needed will be much more sensitive to agro-climatic variations. As far as marketing is concerned, horticulture means dealing with a perishable commodity, which requires a completely different form of marketing, with a supply chain suitable for perishable crops and feedback to farmers on what will sell. Many states have outdated agricultural produce marketing acts, which impose a host of restrictions on the kind of marketing arrangements that farmers can use. That needs to be reviewed. Q. But how do you get the states to enact a model act? A. The Central ministry has prepared a model act, but we cannot force the states to change. We could try to persuade them and also create incentives, which might help. Some states have made some changes. Q. Floods and droughts have been a perennial problem in India from time immemorial. Does the Planning Commission have any clear plan on this issue? A. This is a very important issue. We need a holistic strategy of water resources management including optimum exploitation of surface water resources----rivers, dams and canals----combined with policies that would allow for rain water harvesting, recharge of groundwater. We also need policies that will promote rational use of groundwater instead of the uncontrolled overdrawal that we have today. Environmental issues such as afforestation are also relevant. Irrational pricing policies in this sector clearly add to the problems. Charging zero or very low price for canal water leads to a large demand for this water and whoever has access to canal water in the upper reaches will use it to grow water-intensive crops, while others at the tail end may not get even the minimum required. Similarly, massive underpricing of electricity for agriculture leads farmers to use pumps to overexploit the ground water and this has caused serious problems in many parts of the country. It is also highly unfair and unequal because the resulting fall in the water table means the farmer who doesn't have a pump set, and relies on a dug well----typically the smaller farmer----will find that he is losing water to his neighbour. All these problems cannot be solved in the Mid-Term Review. But we should recognise that we need a longer-term strategy to deal with this. We are a water-scarce country with a per capita availability of water much lower than that of most other countries. The situation can only grow worse because the population is still rising, while our water resources cannot increase. So we will become even more water-scarce over the years. This underscores the overwhelming importance of evolving viable policies in this area and making people aware of the urgency of the matter. Q. So you believe that spreading awareness is enough? A. Of course it is not enough. But in a democratic country, spreading awareness is a necessary first step. I don't think the public is sufficiently aware of the nature of the water crisis and also the lack of a framework for dealing with the problems. When rivers flow from one state to another, we do not have sufficiently clear principles that we can both politically and legally enforce. On groundwater, the law today says that if I own one acre of land, I have an absolute right on all the water under that land that I can pump up, even though when I pump up the water, I deplete the aquifer which hurts my neighbour. Now, if electric power is also underpriced as it is, there is a strong incentive to over-exploit the ground water. But if power is priced more reasonably, then the chances of misuse go down. This linkage between irrational pricing and lack of demand management is not widely understood. Q. How relevant is the Planning Commission today, in this day and age of liberalisation and globalisation? A. The name 'Planning Commission' is viewed by many people as being old-fashioned, reminding people of a centrally planned socialist economy that no longer exists anywhere else in the world. The Chinese have renamed their Planning Commission. But changing a name is surely not the substantive issue. The real issue is what is the planning function in today's world. Operating in a market economy does not mean there is no role for strategic planning----all the world's major corporations recognise the role of strategic planning. On the same logic, there has to be some part of the government looking after long-term issues, which are not focussed on by individual ministries, caught-up as they are in the day-to-day function. Long-term issues often involve rethinking and perhaps even radically altering current approaches and this is unlikely to achieved within a ministry, which is actually implementing the current approach. There are also inter-ministerial issues that need to be resolved. Day to-day problems of inter-ministerial coordination are handled by the Cabinet Secretariat, but the longer term implication for Ministry A of what Ministry B may have to do in the long term, also needs some inter-ministerial planning framework. A second role is that of internal critical assessment. Ministries put forward policies to achieve the objectives from their own individual positions. But it is useful to have someone outside the ministry to take a critical look at these policies. We cannot and should not try to interfere in ministries or micro-manage but we can and should go back to the government and tell them that particular policies are not working The third role performed by the Commission is to negotiate the size of Plan expenditure with the finance ministry, and to allocate these funds between the Centre and the states and the inter-se distribution across states. If you abolish the Planning Commission, this allocation role would still have to be performed, perhaps by an expanded finance ministry, but they would be doing exactly the same thing. Combining allocation with long-term strategic thinking makes sense. Q. Do you believe that five-year plans are still relevant today? A. Five years is not a bad planning horizon though there is nothing sacrosanct about it. In a fast changing world, policies should be under continuous review, but in practice it helps to have a time frame. It is really no good having 20-year plans. We don't know enough about the future. We need sometime between three and six years. Q. Are you worried about the economy? A. The monsoon, fortunately, has recovered quite a bit, though the situation is not fully normal. Nevertheless, the worries that people had two weeks ago should be significantly softened. However, oil prices remain at a high level and that is a problem, though not just for India, but a problem for the whole world. However, we have major challenges ahead in the medium term. We have to do better than in the past to achieve growth rates between 7 and 8 per cent. The biggest hurdle to achieving 7 to 8 per cent growth is infrastructure. Our infrastructure is just not of the quality that is needed to support rapid growth in a globalising world. This problem is not going to be solved by fiddling with a few incentives. This area needs the involvement of many ministries and the Commission has an important role to play. We need to bring about a change in policy that will involve a combination of more public investment in some areas like irrigation and rural roads while we encourage public-private partnership in other areas. We have done that quite successfully with telecommunications but not in power. We need to sort out the problems in the power sector. We have also had success in the ports sector and we are now attempting this for airports. What is required for public-private partnership to work is the right kind of policy framework and a sound regulatory system. Q. How do you look at the changing role of the Planning Commission? From the role of a centralised planner to doing indicative planning... A. Frankly, the Planning Commission was never a highly centralised decision maker. Even in the heyday of centralised control, the control decisions of investment licensing, import licensing etcetera were taken by the ministries and not the Commission. I have already explained what I think the role of the Commission should be and I hope we can do the job. Q. When you leave the Planning Commission, what kind of an impression would you want to be remembered to have as? A. We would liked to be remembered as a group that put forward and pushed a set of policies that helped in achieving the growth targets of the NCMP, that helped in expanding the scale of social services and improving service efficiency and which helped in making private-public partnership feasible. Personally, I think if we can truthfully say this, we would have done a very good job. Q. Is it the beginning of the era of the rule of the economists? A. I don't think it would be right to say that economists rule the country nor should they. What we need is greater professional input in the design of policy, in which all kinds of professionals, economists certainly but also, managers, technologists, entrepreneurs, lawyers can be actively involved. And the government should not just listen to internal views but also solicit inputs from outside, which is happening to some extent. The resulting policies also have to be sold politically, which is where political and not just professional skills are overwhelmingly important. In successful countries, policies are made by a combination of professionals, politicians, lawyers, academics etcetera, and the political process creates a consensus in favour of good policies. That is what we should aim at.
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Here
he is, the man himself, Montek Singh Ahluwalia. The
celebrated deputy chairman of the Planning Commission. Just what his role
is, as outlined by Prime Minister Manmohan Singh, is something that has
been the subject of intense speculation in a country that more or less
abandoned the Central Planning model in the early 1990s to make space for
Free Market forces. Ahluwalia and Singh played a momentous role in that
decision. What happens now? In a wide-ranging interview, Ahluwalia
explains what he and the Planning Commission have on their mind.