India will achieve $5 trillion GDP by 2024: Rajiv Kumar

Notwithstanding the current economic slowdown, India will achieve $5 trillion GDP by 2024 and also be the globe's fourth-largest economy by that time, according to Niti Aayog Vice Chairman Rajiv Kumar. He, however, says that the automobile sector slump needs a review.

In conversation with Anand Mishra and Annapurna Singh of DH.

After taking over as NITI Ayog VC, you had said Modi 2.0 government will bring big bang reforms? What are those?

What was done in the first term itself were big bang reforms. Insolvency and Bankruptcy Code, GST, Real Estate Regulatory Authority, Benami, Companies Act. More than any other, the public delivery system is the biggest reform that has gone unnoticed.

The new big bang reforms in the second term, which has gone completely unnoticed is that this year's Budget has a separate document that includes an item-based evaluation in which all the 327 government schemes will be evaluated. This evaluation will be the basis for allocation of funds to them in the next Budget. This shift to outcome based budgeting is the biggest reform in terms of the government's efficiency and the efficiency of public expenditure. The biggest reform is shutting down some three lakh shell companies. The formalisation of economy is itself is one of the biggest reforms. As you go further, you will see reforms unfold sector after sector. There is a clear indication that we want to improve the ease of doing business.

You said the doors have been left open for the private sector but the whole issue that the private sector is not coming forth?

See, there are cumulative things. More than Rs 12 lakh crore of the GDP was locked in the twin balance-sheet problems – of banks and corporate sector. Then ILFS happened. All that has crippled the economy and the ability of the private sector to come forward.

Private sector has been complaining that there is no policy predictability even now. And, what about some Rs 12,000 crore of FPIs' money that has been washed out in July itself after a Budget announcement?

Let us see. My own assessment is that the government is fully cognizant of the issues that are inhibiting private investment and will take steps to address those.

Before Lok Sabha polls, Rahul Gandhi said that if Congress came to power it would scrap Niti Ayog. Earlier Modi government had wound up Planning Commission. Do you think that national planning or policy think tank has become a political football?

The fact is NITI has established a role for itself. It was missing in the previous government. NITI has made policy making more evidence-based and more based on new frontier thinking. You can see in last many years many things have happened because of NITI Aayog. whether the National Medical Commission Bill or Ayushmaan Bharat or reforms in natural gas or oil sector reforms, Nutrition Mission, Atal Tinkering Labs ... we are acting with the states as partners to make the states compete with each other. NITI has clearly shown that there was a vacuum in the previous government for fresh thinking, new ideas and the Planning Commission had become a hand out body on a political basis. I think, this is Prime Minister's idea which is a good one. And let me tell you, this is there in every country. For example, in China, they have the State Planning Council. They abolished that and replaced that with National Development Research Council, which does exactly the same things. We have a bilateral MoU with them.

India needs 8% economic growth for the next five years to reach $5 trillion by 2024-25. Given the kind of slowdown we are in, this year it looks bleak, your view?

This year is special because of financial sector problems but from the next year, it should be 8.5%. And, I don't see any reason why it should not happen. The entire foundation has been laid for India to race ahead in a more sustainable and cleaner manner. Some steps are needed, which would be taken but I think, like China, we have to reach 8.5% to 9% if we want to fulfill our own aspirations of growth and creation of employment. But by the end this government's five-year term, India would be the fourth largest economy after US, China and Germany.

But most of the high frequency indicators are showing slowing growth. Take, for example, auto sector..

These things are there. But you must also see the other factors. Global economy is in a turmoil. Back home, this is the sixth year in a row when we have a sub-normal monsoon. These things will have their repercussion on demand. So let this year pass... I am convinced, things will pick up from the next year. In auto sector, I am told it is for several reasons. One is NBFCs, which were the major source of finance. They are in problem. Secondly, clearly, the nature of the demand among young people is changing due to the availability of public transport and also because of 'Uberisation' of transport. Young people not want to drive and also because of urban congestion, they like to take public transport. And I have seen in this younger generation now because of Electronic Vehicles, having car is not as much a status symbol as it used to be when I was growing up. Nonetheless, the automobile sector, I think, needs a review and let us see what we can do.

There is a risk aversion among the banks towards lending to NBFCs. Only the robust NBFCs are being provided funds?

This is why in the Budget, we have announced for the Rs 1,20,000 crore to be set aside to tide over the losses of banks. If the banks know that the government is taking care of the losses that they can make, they must start lending. Maybe, what you also need is something like Fannie Mae and Freddie Mac like US bodies which act as mortgage guarantee corporation. May be the government can think on those lines.

CAG said fiscal deficit could be 5.85% in FY19. Did it point to government's off-budget financing to keep fiscal deficit at check, which may be dangerous?

My own take has been that the focus only on the fiscal deficit sometimes does not give you the right picture. it is the revenue deficit that matters the most and we need to bring that to zero. Fiscal deficit can be used as a counter cyclical measure to keep a tab on falling demand or rising inflation. However, there has to be some notional limit of fiscal deficit. The government cannot go berserk. There has to be a balanced approach.

On the exit of former vice chairman Arvind Panagariya and former RBI Governor Raghuram Rajan, you had said that the Indian-American economists were fading away as part of the ongoing transformation in the government. Do you still hold that view?

The critical point in all of this that your reference point should be this country. When you are making policy, your evidence should be entirely on this country. The ground reality should be your reference point. Second point is how do you measure your success? On the basis of peer groups outside India or you measure that in terms of what you are able to do for the country and the third is that you have to be prepared to give up all ideologies to make sure that you achieve your target. You may have a great belief that in zero intervention over foreign exchange, but may be you need some intervention at some time so that your rupee does not become so strong that your exports get hurt. Set your objective clearly and then act accordingly without really importing ideas or making a reference point outside the country.

Before Lok Sabha polls, you got into a row over your remarks over Congress' Nyay scheme. Later, you explained to Election Commission that you made the remarks as an individual economist?

Government is a team. You are a team player. So when I said that, I said as an economist. I am clear in my mind that my individual opinion much less important that the opinion of the government.