Deputy chairman of the Planning Commission Montek Singh Ahluwalia is in the hot seat. He has Prime Minister Manmohan Singh’s unstinted support — which the Left parties hate — and remains convinced that the reforms process have had a beneficial impact on the Indian economy. Ahluwalia wants India to continue its liberalisation and globalisation drive and move even closer to a market-oriented economy. In a free-wheeling interview, Ahluwalia told Shivam Vij and Shantanu Guha Ray that social sectors like health and education will get a leg up in the 11th Plan even as some other sectors may see a reduction in fund allocation. This interview is the last of Tehelka’s India vs Bharat series

The two-year average could be below 9 percent but there is a lot of bounce in the economy

What makes you to say inflation is in the comfort zone?

I expect inflation will remain low for the rest of the year; its now just a little above 4 percent and I think it’ll actually go down on average if it stays at 4 percent for the year. I think the fear that the effort to bring in some monetary management to control inflation will lead to a serious disruption of the growth rate is not valid. My expectation is that growth this year will be a little lower than last year, when it was around 9.4 percent; I’m projecting 8.5, just to be conservative. The target is to achieve an average of 9 percent for the 11th Plan period that begins this year. So this year is 8.5 percent and doing a little better next year, the two-year average could be below 9 percent but there is lot of bounce in the economy.

What helped the government control inflation?

Inflation was brought down by a series of steps over several months. There was clear evidence that money supply expansion was taking place at a very rapid rate. The Reserve Bank took several steps to bring monetary expansion under control. Normally, monetary policy has a lag of anywhere between three-six months; that’s more or less what we have seen in practice. We also took steps to cool inflation in specific areas where supply was a problem — for instance food and also pulses. Duty rates were reduced and food grains were imported so that we could supplement available supplies with imports.

But will the figure of those above the poverty line increase?

That will come out in the 11th Plan period. We would like to see a decline in the percentage of population below the poverty line going down to about 15 percent.

Let’s focus on agriculture. Why does it remain perennially in a zone of tension? When can we think of a double figure growth?

Yes, I think we can achieve that. We have gone into this at great length during the ndc meeting and the key point is that the gap in productivity — between the level of productivity that can be achieved with the existing level of technology, providing we use optimal cultivation practices, and what is currently being achieved in the field. And the increase could be anywhere between 50-100 percent. The question is how do we get farmers to move from one level of technological efficiency to another? The farmers do not really believe that the government extension service provides any worthwhile information. In areas where the food security mission is being launched, we will launch a large number of free farmer demonstration programmes. You need to build confidence. That’s happening slowly. About 18-20 state governments have amended the Agricultural Produce Marketing Committee Act, which allows people to buy directly from the farmer instead of only at the mandi. But they haven’t notified the rules, so what looks like a reform is not actually implemented on ground. What we need is a state-specific agricultural plan. It’s unfortunate that while everyone talks of agriculture, the technical and scientific focus at the state level has declined.

AGRICULTURE:‘The question is how do we get farmers to move from one level of technological efficiency to another?’

This looks like the age-old state vs Centre tension...

This is a big issue. Central assistance programmes provide assistance of 75 percent against 25 percent of the states’ share; by the time the states have contributed their share of these Centrally-driven schemes, many of them claim they used up many of the available recourses. Therefore the lack of flexibility means the state programme becomes the sum of the Central programmes from which they can draw assistance. The Central programmes are well intentioned, but many say they would be better off if you were to give us holistically what is best for you to double your production level and we will provide you the assistance.

Why doesn’t the government do it then?

This has been one the arguments; that’s why the new, yet-unnamed scheme is an additional Central scheme for agriculture. It says, you come with your agricultural plan and if it’s good, we will provide the assistance — provided you are making your resources available at least according to the baseline expenditure. If you are willing to provide the same level as your base year, and the ideal plan you have after you use whatever Central assistance is available and require x amount extra, then the Centre can assist you with that extra.

Given these complex issues, do you think a larger participation of the private sector would help?

Absolutely. When you move from a foodgrain focus to a more diversified agriculture, marketing has to change; it’s easy to arrange a marketing effort for a foodgrain crop once you’ve fixed a reasonable price. It’s impossible to do that for horticulture. Grading of quality with better grade getting higher price cannot be done by the public sector; you need two kinds of markets: one, you need modern markets and modern marketing agents; the other is that you need contract farming. Reliable, big marketing companies are generally interested in maintaining their supply chain. You must allow contract farming and try and get rid of the prejudice against it. If you want to avoid the private sector, another option is cooperatives, like Amul…

HEALTHCARE:‘The total number of doctors in rural areas is about 27,000, less than the annual production of doctors’

But then Safal failed…

The original experiment with Amul was heavily supported with subsidised milk, so they had a very long period to build up that credibility. Safal didn’t have this. The other factor is that the need for marketing in milk was much stronger than in vegetables.

Health, education, infrastructure — where are these key sectors heading?

I think what is happening is that we are finally becoming sensitive to the fact that we haven’t been providing good health service. It was as bad 10 years ago, but people didn’t know what they were not getting. Demands today have gone up. Secondly, in the efforts to spread services we haven’t actually thought of the constraints of governance. The total number of doctors in rural areas is about 27,000, which is less than the annual production of doctors.

Why not put certain conditions of serving in rural base for some years?

We need an entire structure for the public health system. A lot of it has to do with public health — sanitation, immunisation. There is a neglect in those areas. While habitations are becoming crowded, and problems of transmission of diseases are intensifying, there is no corresponding response. So there may be sections of the community that have been made more vulnerable than before, and the solution to that doesn’t lie in having doctors to treat you; the solution lies in building sanitation and rural water supply.

INFRASTRUCTURE DEVELOPMENT: ’In the efforts to spread services, we haven’t actually thought of the contraints of governance’

Accountability is a big problem — doctors avoid duties, teachers miss classes, medicines are stolen…

I don’t want to say we are doing very well; we are just beginning. In education we are much better off. The Sarva Shiksha Abhiyan is the successor of a programme begun several years ago. The number of children being given midday meals has improved hugely; in many areas it is working very well. In infrastructure there’s a lot of good news. The policy we are following is combining public investment with public-private partnership. Public investment has to be where private sector doesn’t go — irrigation, rural growth, roads in remote areas, the Northeast etc. Everywhere else we are trying public-private partnership. The only sector, where in 10 years there has been a comprehensive change, is telecom. In the area of rural roads we are doing a good job. Thousands of kilometres of rural roads have been built based on the fact that we have a cess on diesel and petrol. The railways have seen a marked improvement in quality, diversity of products and even public-private partnership efforts.

But power remains messy...

The fundamental reason is that the management control of the railways is with the Centre. In the power sector the problem is mainly that it is not financially viable and not in the control of the Centre. Only the state governments can set it right.

With distribution losses, state governments face peculiar problems — if you stop theft you become unpopular.

Losses in transmission and distribution in the last three or four years have gone down substantially. Currently, distribution losses are going down at the rate of 1 percent a year, so it will take 18 years to reach 15 percent. We should try to do it at five or at most seven years.

We would be better off, if we could take $50 billion of our financial assets and turn them into infrastructure assets

SEZs is a dirty word today...

The logic of an SEZ is very clear. We have poor infrastructure, so if somebody wants to set up SEZs which have better infrastructure, it will kick-start an industrialisation process. The land issue was not a Central but a state government issue. It has become controversial and the Centre agrees that the system of land acquisition we have is not really fair, so we are looking at it afresh. So for SEZs where the land is government land, there is no problem. Where you have acquired the land and there’s no acquisition by the State, no problem. But we will not contemplate SEZs where you are using a land acquisition act which has run into some legitimate criticism.

Doesn’t the Centre advise the states on these issues?

In an active political democracy, the state governments should know whatever they do will raise political issues. Some will be handled easily and some will be not. The Centre is not a nanny to all state governments. They will have to handle it themselves.

What about Corporate India dealing directly with farmers?

There’s no bar on that.

You want the rbi to invest excess foreign reserves. Is that viable for us?

We have a $200 billion-plus worth of financial assets; if we could take $50 billion of it and turn it into infrastructure assets, we would be better off. We don’t need such large reserves to manage the forex situation because we don’t use reserves as permanent insulation, so the reserves are excessive.

Is the government seeking an out-of-court settlement in the Union Carbide case?

The concern now is that of remediation. Dow has spoken to us; a couple of ngos have been in touch. Dow wants to invest in India, a case has been registered that Dow should be held responsible for remediation, but Dow says they were not responsible for the accident. The court will pronounce a verdict on this and decide whether Dow will do the remediation. But I do not know of any out-of-court settlement.