Shahid Faridi: What made you choose the professorship of a US university over working in India?
Arvind Panagariya: Personal life at times comes in conflict with professional lives. When I came in 2015, I was asked for how many years I would work in India. My answer was Chaar saal ke liye gya tha PhD krne aur 40 saal ke baad lauta hu. In the meantime I got married, have two children. So, the personal life in some ways decides the course of your life.
Shahid Faridi: There was this strong buzz in 2017 that after Raghuram Rajan’s departure, you may succeed him as the RBI Governor...
Arvind Panagariya: What happened was that because the press put out this story, that at one point, I myself actually got concerned. So, I asked someone from the PMO if something of the sort was being discussed because I was not suited for that job. The PMO made it clear that no such discussion was happening.
Dipak Mondal: Do you think that Niti Aayog has been able to achieve the goal?
Arvind Panagariya: I will not comment on anything (that happened) after me. If you want to speak about my time (as Niti Aayog V-C), I’d say so much was got done. I was there for two years and seven or eight months. First and foremost, this was a very large institution and a reorganisation was required. But the reorganization was a lot more than downsizing the capacity. We began with reducing 500 employees. Then, I was very keen on lateral entry. So, when the reorganisation plan got done, at my insistence, a provision was made for 1/3rd of the staff will come from lateral entrance. However, the way bureaucracy operates, it ultimately didn’t happen during my time.
Dipak Mondal: Was there any conflict with the ministries?
Arvind Panagariya: I should share my experience about the bullet train project. This was not moving at all and the regular ministry was dragging its feet. The Prime Ministers had agreed to form this committee. The committee’s three-four senior secretaries were on one side, and I was on the other. They couldn’t convince me and, in the end, I managed to convince them!
Monika Yadav: One of the things is slow private investment. Could we discuss this little more?
Arvind Panagariya: This is a fiction that’s going around that companies are not investing. This is what I was complaining, sometimes the narratives were built up. The total investment to GDP ratio is 34%. What is the government part of it? It is about 6% -- both combining the states and Centre. We think that the government invests a lot; actually it’s doesn’t. The Centre’s investment rose to about 3% of the GDP. The rest is all private.
Monika Yadav: If private investment is more than 25%, why is job creation a problem?
Arvind Panagariya: What we suffer is under-employment, a job that can be done by one person is being done by four. And why under-employment is bad is because where the capital is sitting, there are not many workers and where workers are sitting, there is not much capital.
Rakesh Kumar: The government has been pushing the PLI scheme in almost all sectors of manufacturing. Do you think it is the right strategy and it will help us increase the contribution of manufacturing to 20% of the GDP (from 14% now)?
Arvind Panagariya: Through a scheme like PLI, we can build a particular sector, for instance, in mobile industry. It is a good example of what you can achieve through import substitution and PLI. The real challenge, though, is not necessarily building a particular sector; the real challenge is building the manufacturing sector.
Amit Mukherjee: Do you think the two sectors – rural and private — are good enough to take the growth beyond 7%?
Arvind Panagariya: My thinking is that something needs to be done to policy. I have already mentioned that we need to open up the economy a bit more. There is this whole talk about ‘China Plus One.’ The ‘plus one’ is going to be a diversified set of countries -- Indonesia, Thailand, Vietnam and Bangladesh. But India has to be one of them. India has a lot of advantage over other countries.
Dipak Mondal: India is entering into many bilateral trade agreements. What do you think is a better strategy – to do bilateral agreement or to go for multilateral agreements?
Arvind Panagariya: If you ask me, I wouldn’t worry whether it is bilateral or multilateral. We have not done many (trade agreements) yet. I would like to see many. Only Australia and the UAE have been done, but the UK has not been done yet. It should have been done a year ago.
Dipak Mondal: There is a lot of debate over the poverty level in India. What is the poverty level of the country?
Arvind Panagariya: All these problems are arising because the measurements in surveys are not uniform.
You can get per capita expenditure from two sources -- the consumer expenditure surveys, as well as the national accounts. And so, that has stabilized around 50%. In PLFS, it is only 30%. So even if the actual real expenditure is higher, you are capturing only 30%. So, obviously the poverty rate that you are going to calculate for the same poverty line is going to look higher than it ought to be.
Rakesh Kumar: India has been trying to push the rupee trade with some countries. What are the challenges in making rupee trade popular?
Arvind Panagariya: See, the problem is that the rupee is not a convertible currency. The only way to do is that over a period of 5-7 years, some trade becomes balanced. But if it is not going to balance, and the accumulation of (one currency) is happening on the way, then whoever is accumulating will be happy with it.
Rajesh Kumar Thakur: Will we become a $5 trillion-dollar economy by 2029?
Arvind Panagariya: Yes, easily. It could happen in 2028. It is already $3.4 trillion. By the way, in nominal dollars, if I take from 2003-04 to 2022-23, in nominal dollars we have grown at 10%. People don’t realise it. And even if you allow 2% US inflation, we have grown at 8% in real dollar terms.