In an interview to ET Now, Aiyar said he was guilty of positing that the government was not doing enough to help boost India’s spending power to counter the economic impact of the pandemic. It was wrong to say that the economy would not revive without stronger/more fiscal stimuli, he said.
Aiyar, however, also pointed out why the economy might have a hard time achieving sustainable growth despite all its inherent strengths. India’s problem is land acquisition, the evidence of which can be seen in the fate of the dedicated rail freight corridors — the Delhi-Mumbai one as well as the Punjab-Kolkata one — that hangs in balance even after 15 years.
What kind of development are we going to get when political funk prevents projects from going forward, he asked.
India has to overcome the land issue but it is not an easy thing to overcome, Aiyar said. By way of proof he mentioned the Ratnagiri refinery case where the project failed to take off because of the govt’s inability to acquire land. “The whole idea has been given up because the government does not have the guts to acquire the land for a refinery,” he added.
Aiyar cited Modi’s dream bullet train project to drive home his point: “Mr Modi said he was going to have this bullet train between Ahmedabad and Mumbai, but he just cannot acquire the land for that.”
India must find new ways — especially at the state government level — to acquire land quickly, and at a reasonable price if it wants a shot at sustainable growth, he said.
According to Aiyar, paying land owners more money is one way to solve the problem, but India needs to find a way to do it quickly. As for labour, which is a state subject, Aiyar credited PM Modi with successfully decentralising power of liberalisation by engaging states meaningfully. He, however, was quick to add that no tangible results on that front have yet been seen.
Political opposition is making things all the more difficult in India, Aiyar noted. This, and several other factors are the reason why we still don’t have too many industrialists willing to put up factories that can each employ 25,000 to 40,000 workers — like the giants that Bangladesh has — he observed.
Aiyar also dwelt on India’s poor record of spending on infra, a sector that economists think requires large investments, especially at this stage. Given the current low interest rate regime, it is an excellent time for India to go big on infra spending but its track record hardly inspires confidence, he said.
“We need to invest in infrastructure in a big way but before we can invest in infrastructure, we need to improve our capacity to invest,” Aiyar noted.
India already has big infrastructure projects but these never seem to get completed, he said. “We have been independent for 75 years, but we still cannot build a railway line to Srinagar.”
How pathetic can you get, especially when China can set up rail lines to Tibet and we can’t even get to the valley of Srinagar, he asked.