IE: Your views on the weakening rupee and the increasing fiscal deficit…
Dr. Arvind Virmani (AV): Fiscal deficit as a proportion of GDP is actually declining. However, in the current environment, a reduction in the deficit should come from a reduction in government consumption expenditure rather than an increase in taxes. The consumption investment balance of the fiscal needs to be adjusted towards the later.
IE: How do you boost investors confidence?
AV: The sharp fall in the growth of gross domestic investment needs to be corrected by boosting both domestic and foreign investment.
IE: The Food Security Bill is going to increase the fiscal deficit further. Are you surprised by the lack of alarm in politicians on the impact of this on the economy?
AV: In my 25 years of service, in government, I have never seen politicians alarmed by the increase in fiscal deficit due to welfare spending! The relevant question is whether economists in the government are alarmed and how forcefully they have pressed their case.
IE: Do you support the Food Security Bill (FSB) in its current form? What are the alternatives?
AV: In my view the cost-benefit ratio from the FSB is very low. I have proposed a Hunger Elimination Bill to address the real problem of ‘Hunger’ among 2 per cent of the population (http://dravirmani.blogspot.in/p/blog-page_25.html) and a comprehensive programme of sanitation and sewerage to address the child malnutrition problem for 45 per cent of children, based on my research. (https://sites.google.com/site/drarvindvirmani/social-welfare).
IE: Some states argue that they have their own food security measures. In addition, the Public Distribution System (PDS) has many drawbacks. How to address these?
AV: The PDS is supposed to supply wheat and rice to the population at reasonable and stable prices. It is unable to supply other more nutritious coarse cereals and suffers from the inability to effectively reach the 2 per cent that are hungry. We have waged a struggle for decades to improve the effectiveness of this system. It is difficult to see how the FSB will help improve the PDS, without doing which it can make little contribution.
IE: The Food Security Bill has come through an ordinance rather than a proper legislation in parliament. As an economist, do you think this is a governance deficit or a trust deficit?
AV: Being an economist does not provide any special expertise in answering a political question!
IE: In your view, what are the top two things that India needs to do to accelerate economic growth in the short term?
AV: One, stabilise the macro-economy and two, revive corporate investment (both domestic and foreign).