Much will depend on tenure of govt

Says Devapriya Bhattacharya

Staff Correspondent: Prominent economist and honorable fellow of research organization CPD Dr. Devapriya Bhattacharyaspoke to about the interim government’s actions on the economy.
Question: The new government has taken responsibility for the critical situation of the country’s economy. What needs to be done to overcome the crisis?
Debapriya Bhattacharya: I think first of all, a white paper on the economic situation needs to be prepared. Creating a white paper will provide a clear idea. A guide to understand the critical situation in the economy right now and how to get out of the situation. White papers have many advantages. History needs, as they do, an acceptable assessment of the state in which the new government found the economy. In addition to analyzing the necessary data in the preparation of the white paper, the key stakeholders must be discussed. A democratic participation in the review and direction of state policy will be created through the process of deliberation. That would give a kind of democratic basis to policy making. If for some reason the government does not do it, then the professional civil society should come forward.
So, it is important to prepare a white paper.
Question: How should be the process of making white paper?
Debapriya Bhattacharya: The government must give a framework to produce the White Paper. The financial and commercial institutions of the government should be linked with the structure. These institutions will prepare position papers. For example, there is already a position paper of the Ministry of Energy regarding the liability situation. Similarly, position papers of other important ministries and organizations will be required. Also take the opinion of the participants. Here the private sector, foreign investors and development partners should be brought in. Opinions of small entrepreneurs and businessmen as well as large and medium private sector should be taken. A white paper should not take more than a month to prepare.
Question: What else can the new government do?
Debapriya Bhattacharya: A lot will depend on the tenure of the government. Irrespective of the tenure, one can commission data within a short period of time. Clear the space where there are discrepancies and gaps in data or where new needs have arisen. These three parties need to be involved – producers, users and evaluators of information. Arrangements should be made to protect government information. Data processing organizations should be allowed to work independently and professionally. Constitutional protection should also be provided.
Question: In some cases, special attention needs to be paid?
Debapriya Bhattacharya: Let me talk about two areas – banking and energy. These two act as the lungs of the economy. Banking Commission needs to be created. But what will be its extent will depend on the duration and capacity of the government. I don’t know whether the government will have time to diagnose the banking sector or to feed and treat it and drag it to results – I don’t know. But there should be a commission. Its first task will be to verify the accuracy of data in the banking sector. Determining the actual amount of defaulted loans will be a big task. Matters like provision deficiency and capital adequacy need to be scrutinized with transparency. The present laxity should be overcome by reviewing the representation and tenure of owners in the Bank Companies Act. A realistic ‘exit policy’ should be made without compromising the interest of depositors to recover defaulted loans. Loan waiver rules need to be reviewed. Independent directors of the bank should be appointed on the basis of transparency and professionalism.
Banks owned by powerful industrial groups or groups benefiting from state favors need to address the question of ownership with transparency. This is a very complex matter of political economy. There are major deficiencies in corporate governance, with respect to ownership and senior management. The responsibility of government bank supervision should be transferred from the Ministry of Finance to the Central Bank. A ‘blue ribbon’ committee consisting of experienced, learned and professionals may be formed, who will approve the recommendations for appointment of directors and chief executives in the bank. Apart from banks, such committees can be in the case of institutions like ACC, Election Commission and Human Rights Commission. This will stop the practice of hiring political favors.
A task force should be made for the energy sector. The task force can give a preliminary report on why 12 to 13 thousand MW has to be produced and imported at the same time despite having a capacity of 23 to 24 thousand MW. Rental, quick rental and exemption issues will also come up there.
Question: What is your advice on inflation and food security issues?
Debapriya Bhattacharya: For food security, the government should continue the open market sale system in an equitable and sustainable manner. For this, it is first necessary to assess the current food stock situation and plan the implementation of the Amon collection campaign. Farmers have to solve various problems. Accurate information on food production should be published and if there is a shortage, importation should be arranged. The supply system must be maintained. In this case it is very important to keep the port running uninterruptedly.
Question: You have previously reviewed the debt situation of the government. Say something now?
Debapriya Bhattacharya: Debt situation needs to be updated. Care must be taken to ensure that the agreements made by the previous government do not create obstacles in the coming of these funds. The IMF, World Bank and others should focus on the necessary reforms in terms of loans. Much of their money is linked to social security. In no case so that the allowance is not stopped, the scope is not narrowed.
Question: How do you think people expect the new government?
Debapriya Bhattacharya: Three things are important for the new government. These are – social aspirations, institutional realities at the field level and leadership capacity. What the new government can or cannot do on these three issues will depend on time. The duration will determine its scope. And there is a need to learn from the experience of such previous governments. However, the government must at least ensure a fair and participatory election. And the strongest is to write a new constitution. The government has to stop between these two. It will be understood only after the day, in what situation we are moving.