Dr Arvind Virmani is President of the Forum for Strategic Initiative (www.FSIdelhi.org) and of Chintan (www.chintanlive.org).
He served as a member of the Technical Advisory Committee of RBI on Monetary Policy from February 2013 to August 2016, as Mentor (Public Policy) to FICCI during 2015-16 and 2016-17
He was till end-2012, Executive Director at the International Monetary Fund (IMF), Washington DC, representing India (as its Ambassador to IMF), Bangladesh, Sri Lanka and Bhutan.
He has been an adviser to the Indian Government at the highest levels for 25 years, including as Chief Economic Adviser, Ministry of Finance and Principle Adviser, Planning Commission. During this period he advised on a host of economic policy reforms, as Chair of committees on Public Debt management and Customs duty reform, member of numerous committees and over a hundred policy papers and notes. He also served as Member, Telecom Regulatory Authority of India (TRAI) and the Appellate Tribunal for SEBI Act, Chairman, Board of Trustees of SBI Mutual Fund, and Director on the Boards of several financial institutions [LIC, PNB, Allahabad Bank and UTI (Trustee)].
He has published 33 journal articles and 20 book chapters in the areas of Macroeconomics, growth and finance, International trade & Tariffs and International relations. His books include, The Sudoku of India’s Growth (BS Books, 2009), From Uni-polar To Tri polar World: Multi-polar Transition Paradox (Academic Foundation, 2009), Propelling India From Socialist Stagnation To Global Power (2006), Accelerating Growth and Poverty Reduction – A Policy Framework for India’s Development (2004).
In an exclusive interaction with Nitish Raj of The Policy Times, Dr Arvind Virmani, Renowned Economist, President of the Forum for Strategic Initiative and Chintan and former CEA talks about demonitisation, GST, India’s economic hurdles, banking system and what can make India a superpower.
Q. Indian economy has shown an abatement post demonetisation. Was it really crucial for an economy which was growing at a considerable rate to bring something on the name of curbing corruption and black money?
AV: Economic Growth was slow during the 3-4 quarters prior to the demonetization due to the effects of two consecutive drought years of 2015 & 2016 & tightening monetary policy. The recovery expected from the normal monsoon of June-Sept 2017 was delayed because of the de-monetization. The negative effects of this action are now over, and the positives are beginning to appear.
Q. The highly-publicized GST have come as a setback to small merchants and traders. Are our policy-makers just trying to preserve the right of the giants?
AV: I proposed a National VAT, the precursor of the GST, 15 years ago (http://www.planningcommission.nic.in/reports/wrkpapers/wp_vat.pdf ) and have been involved in pushing its adoption since then. It is the biggest economic reform in the constitution since independence. It will play a major role in converting the economy from one known for bureaucratic corruption to a modern efficient tax paying economy. This however requires further simplification.
Q. Banking sector have been always criticized for favouring the industrialists and business tycoons. Is it just a common man perception or there is a reality attached with it?
AV: Public Sector banks (PSBs) control more than 70% of the Assets & loans of the banking sector since Nationalization in the 1970s. As the Govt (MOF & PMO) controls the PSBs the quality of lending depends on the quality of this control. It has often been used since nationalization to generate election funds by lending to large failing business Men. The current massive NPAs in PSBs are also a reflection of bad decisions from 2009-10 onwards.
Q. Even after so many years of independence, a car loan or personal loan is far easily available than education or home loan. Aren’t our policy makers serving bankers and corporates than common man of this country?
AV: Personal loans are given on the basis of expected recovery or risk of non-recovery, including the availability of effective collateral. There is a market for homes and used cars, which ensures that recovery is better even if the borrower’s income falls. Given these limitations the amount of education loans have increased rapidly since the 1990s reforms, & now compare well with similar loans in developed countries.
Q. Mutual Funds are one of the best mode of investments; still people don’t find it reliable. What steps should be initiated in order to make it reliable?
AV: SEBI was set up to regulate capital markets, including Mutual Funds. The quality of regulation has improved over time. With dematerialization of accounts, the quality of reporting has improved, though some of us older people have not dematerialized fully & not got its benefits
Q. How much NGOs have been able to change the government perception regarding societal issues? Are NGOs victims of political propaganda or vice versa?
AV: In my experience most NGOs are good at highlighting problems, but falter in proposing & helping promote solutions, that are applicable beyond the narrow geographical areas they have operated in or the very specific issues they are focused on.
Q. What are the practical hurdles for India to be an economic superpower?
AV: Real economic growth, measured in terms of per capital GDP at Purchasing Power Parity (PPP) is the foundation of both people’s welfare and of economic power. Accelerated economic growth provides the revenue to meet social welfare goals and to strengthen India’s economic power. Continues Economic policy reform to sustain high growth will make India a great power in 20 years (https://sites.google.com/site/drarvindvirmani/india-great-power ).
Q. How have you been involved recently?
AV: Since 2013 I have tried to interact with public and youth on social media to help increase the critical role of economic policy in economic welfare & growth. They can follow me on twitter at @dravirmani, on Facebook (writer) at https://www.facebook.com/arvindvirmani2/ & blog at http://dravirmani.blogspot.in/?m=1