The Economic Survey suggested the government opted for some key reforms. Chief Economic Advisor Kaushik Basu, in an interview with Vrishti Beniwal and Indivjal Dhasmana, said diesel de-regulation should happen in a calibrated manner. Edited excerpts:
Contents of the survey this year look different from last year’s, with the addition of two chapters and modifications in the sub-heads. Have you tried to offer something new?
The difference is deliberate — an effort to nudge us out of the comfort zone of doing each year what we did in the previous one. This survey has two new chapters. One deals with financing climate change. This is a major global issue and India is playing a key role in the evolution of an international policy. The other is on India’s status in the global economy. This touches on G20 and BRICS. It is a tribute to a dimension in which India has changed the most significantly in the last decade or two -its rise as a major global player.
Global crude prices have spiked. Would this pose a huge risk to growth and inflation next year? What should be the monetary policy stance?
In my view, crude prices pose a bigger risk to growth than to inflation. It is the fate all oil-importing economies share. Demand management through fiscal or monetary policy is severely constrained in cases of external commodity price shocks. But I believe India has managed this reasonably well.
The current account deficit (CAD) is likely to remain high. What is a comfort level for you? What are the options before the government to keep it low?
Is it time the government deregulated diesel prices, or at least increased duty on diesel cars?
Personally, I am in favour of deregulation; but maybe not at one go. Even without full deregulation, there are important intermediate measures we can take. These would partially shelter consumers from high international prices and, at the same time, expose them to price fluctuations so that they can adjust their consumption levels to the prices. The survey outlines one such scheme in detail.
The survey has said civil society movements and coalition politics have probably contributed to slackening of reforms. Since both are likely to remain, what is the way forward?
I like the fact that there is so much civil society activism in India. There are large wrongs and injustices in our society; and civil society has a critical role to play in protesting against these. It also has a role in giving directions for a more humane society. But it would be a mistake if it tries to micro-manage the finer details of policies. Economics and finance are far too complex today to be managed through populism. This can lead to very costly mistakes.