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The Dr Jagdish Shettigar Chat

Dr Jagdish Shettigar, one of the BJP's key economic strategists appeared on the Rediff Chat, to defend the government on the contentious price rise issue. This is what he said:

Dr Jagdish Shettigar (Wed Nov 4 1998 7:29 IST)
Hello, everyone. I am here to answer doubts you have about the BJP's economic policies, especially the measures we have taken and with special reference to the current problem of rise in the price of essential commodities. If you any questions, kindly be frank.

Narasimhan (Wed Nov 4 1998 7:14 IST)
Dr Shettigar: Don't you think the BJP government has very badly managed the economy of India in the past seven months? Is there no finance ministry working to control prices and check inflation?

Dr Jagdish Shettigar (Wed Nov 4 1998 7:38 IST)
Narasimhan: It is wrong to say that we have mismanaged the economy since our taking on the responsibility of government. In fact, we have taken many concrete steps, be it relating to the power, telecom or information technology. Our major policy package came in the form of the Budget where the burning economic problems of that time like the slowdown in industrial growth were tackled. At this stage, I will not go to details.

In fact, as per the report prepared by the CII, they are satisfied with the 46 major economic decisions taken by the government within four months of our coming to power. Besides, there has also been a package of policies announced by the prime minister three months back while addressing the CII, and again recently at the annual general meeting of FICCI.

Coming to the specific problem of the prices of essential commodities, we are very much concerned and the government is fully aware of the problem. To start with, the prices of essential items like vegetables, onions, potatoes, tomatoes started mainly with the fall in the production either due to crop failure like in the case of onion or change of crop pattern like in the case of tomato in Himachal Pradesh. In fact, the shortage was as much as 30 to 40 per cent. This was the main reason for escalating prices.

The situation got deteriorated due to hoarding by traders and also by panic buying consumers. As far as the government is concerned, we started with suspension of exports and ultimately now we have banned the export of these items and started importing the items. They have also been placed under the open general system in order to facilitate even private importers to import these items. Besides, the government also reduced customs duties on these items. So it is wrong to say that the government has not taken the necessary action.

Ramola (Wed Nov 4 1998 7:18 IST)
Mr Shettigar: The Congress is stating that the failure of the crops is not the only reason for the price hike in essential commodities but the most important thing is that the BJP does not know to rule the country and are totally inexperience in handling the state of the economy. I have sincerely started believing this in spite of a BJP supporter at one point of time..

Dr Jagdish Shettigar (Wed Nov 4 1998 7:47 IST)
Ramola: I am not surprised at the type of the accusation made by the Congress that we are not experienced to run the government. It is for the first time since Independence a truly non-Congress government came into power. But it doesn't mean that we have don't have the vision to run the country. I would like to point out that price of onions started rising since March 1997 when the wholesale price was Rs 4 per kg which ultimately went up to Rs 18 per kg in February in 1998.

During this period, governments of the country was in the hands of the people who were at the mercy of the Congress whether it was the Deve Gowda or Gujral governments. During this period there was a crop failure by as much as 40 per cent. Why those governments were not able to read the pulse of ground realities and did not taken any measures to contain it whether it is decision to import onions or suspension of the export. In fact, they made a commitment to export onions even during this period. At that time, the major supporting party of the government -- the Congress -- never raised this issue.

Even now if we are not effective in controlling the prices, here the main stumbling block was the Essential Commodities Act, we could have climbed down on the hoarder. But unfortunately, the Congress party that ruled the country for 45 years did not realise that common man's items like onions and potatoes were essential items. That is why they did not include them in the Essential Commodities Act. That is why we could not act against the hoarders.

In fact, the BJP ruled states could not act against the hoarders. Even the West Bengal government could not take action mainly because of this reason. During the last parliamentary session, we wanted to amend the Act, but due to pressure by the Opposition parties, the matter was put to the select committee and the matter is hanging there. As for the BJP-ruled states are concerned, we have started acting against the hoarder with the help of two national security acts.

Praful (Wed Nov 4 1998 7:32 IST)
Dr Shettigar: What was the reason to replace Montek Singh Ahluwalia as finance secretary? Don't you think the BJP government is just installing their people and even replacing those bureaucrats who have a good background? Be it in the field of education or finance...

Dr Jagdish Shettigar (Wed Nov 4 1998 7:51 IST)
Praful: This is just a routine administrative measure. In fact Mr Ahluwalia had the distinction of serving the finance ministry continuously for more than five years which no bureaucrat got. Besides, we have promoted him to the rank of minister of state and made him member of the Planning Commission. His services are being utilised there. He has also been made member of the PM's council of advisors. So he is very much in demand in the government. Commenting on the remark that the BJP government is trying to bring in their own people:"What is wrong in it?" After all, any government would like to have its own team of people with whom it has faith.

Amartya (Wed Nov 4 1998 7:36 IST)
Jagdish Bhagwati (sure you know him) said the BJP lacked intellectual depth. And this is most apparent in your economic policy (or non-policy). Why is this so?

Dr Jagdish Shettigar (Wed Nov 4 1998 8:1 IST)
Amartya: First of all, Jagdish Bhagwati is not the judging authority to comment on intellectual calibre of anybody or any organisation. The same Bhagwati's followers celebrated when Dr Amartya Sen failed to get the Nobel Prize last time. As far as the party is concerned, we have got an economic affairs cell which regularly meets and articulates the party's viewpoint.

In fact, some of the stands we have taken -- whether it is our resistance against the full convertibility of the rupee which previous governments were in very much favour of -- actually saved the country during the crisis in South East Asian countries. Now even international institutions like the World Bank and the IMF, who were strongly advocating India going for the full convertibility of rupee, have advised us against it.

And similarly if one looks at the BJP's economic policy document, one can find a place for basic issues such as poverty alleviation, empowerment of women, health care, literacy which normally conventional economics do not treat as an integral part of policy. In fact, Dr Amartya Sen got the Nobel Prize only because of his non-conventional approach like covering poverty alleviation, health care and promotion of literacy. Even our stand on open door policy towards foreign investors, particularly the FIIs, is very much appreciated by other sections of society and other political parties though they don't acknowledge it as the BJP's stand.

What we could visualise long back only on the strength of our vision was recognised by others after experiencing the difficulties by following different routes. Thus to say that the BJP doesn't have an intellectual stand is a wrong comment, and especially by people like Dr Bhagwati, who as an advisor to the then director general of GATT, sacrificed the interests of developing countries like his own motherland. These people have no moral rights to pass judgement on others. If we lack economic expertise on the parameters decided by people Dr Bhagwati, I am happy to admit that.

Ramji Ki Jai (Wed Nov 4 1998 7:40 IST)
Doctorsaab: Jai Shri Ram! I am sure the Congress and Communists aare hoarding the vegetables to bring down Atalji from power. Do you agree that the vegetable crisis is a political plot?

Dr Jagdish Shettigar (Wed Nov 4 1998 8:4 IST)
Ramji: I don't agree that our political opponents indulge in hoarding essential items like onions. At the most, they may vitiate the atmosphere through rumour-mongering and they may try to take political advantage of the situation. Unfortunately, we have not developed a culture where so-called political opponents behave in a responsible manner. Probably, even if we are in the Opposition, we could have tried to take the benefit out of the situation.

Kesri Rumaal (Wed Nov 4 1998 7:53 IST)
Good evening, Dr Shetty. How is the Indian economy going to do this year?

Dr Jagdish Shettigar (Wed Nov 4 1998 8:15 IST)
Kesri: Now that we have taken many steps to revive the economy, especially agriculture, industry and the capital markets. We hope that in a couple of months this will start giving positive results. But there are certain challenges. One is from the international front. Due to the worldwide recession, and developments in the South-East Asian economies, Russia and China, we have to face stiff competition on the export front. Probably we may not be able to achieve the desired results.

And another equally challenging front is international pressure which is trying to shape the economy, mainly as a pressure tactic so that we may sign the CTBT. In fact, the developments in the capital markets and also the recent crisis with regard to US-64 of the UTI and quite possible even with regard to the shortage of certain items like salt clearly show that there is no economic rationality nor policy linkages. These are the results of non-economic events.

I have got a strong belief that international pressure is working in the background to prove that this government is not capable of governance so that ultimately they may succeed in bringing down the nationalistic government. In fact, in a couple of debates on economic issues, I was confronted with a suggestion that developments in the capital markets would become alright the moment we sign the CTBT.

Though one cannot find the rational linkage between the two, developments since the last three-four months show that some force is working to destabilise the Indian economy. Otherwise, we may end with a growth rate of plus 6 percent. Even in the revenue collections because of various measures taken by the government, direct tax collections have gone up substantially, though indirect tax collections are not satisfactory due to slowdown in the industrial sector.

Sheila (Wed Nov 4 1998 7:59 IST)
Dr Shettigar: Are you planning to give some sops to the people of your states where you are ruling, I mean Rajasthan and Delhi. Please don't do that, Dr Shettigar. That will lead to more internal debt problem and will be a disaster for the economy overall.

Dr Jagdish Shettigar (Wed Nov 4 1998 8:18 IST)
Shiela: There is no question of discriminating against the non-BJP states by giving more sops to the BJP-ruled states. After all, we are here to take care of all states and all sections of the country whichever party may be in power.

Ramola (Wed Nov 4 1998 8:4 IST)
Dr Shettigar: What is the government doing to come out of the internal and external debt trap?

Dr Jagdish Shettigar (Wed Nov 4 1998 8:23 IST)
Ramola: We are very much committed to make the country debt-free. Unfortunately, today the situation is not very good. In fact around 48 per cent annual revenue collections are just utilised for the payment of interest. If one adds principal payments due practically nothing remains. After coming to power, we have taken measures to expand the tax base and also to tighten the screws in order to minimise black money generation.

We expect that in the near future the resource base of the country will improve. In fact, the country has got tremendous resource generation potentialities going by the data of income and number of people filing tax returns.

Besides, there is also capital flight to the extent of more than $ 100 billion through over-invoicing of imports and under-invoicing of exports. If one plugs the loopholes, I am sure the resource position of the country can be strengthened and we can come out of the debt trap.

Rajesh (Wed Nov 4 1998 8:17 IST)
Dr Shettigar: What are you doing about subsidies?

Dr Jagdish Shettigar (Wed Nov 4 1998 8:27 IST)
Rajesh: Under the given socio-economic conditions, it may not be possible to do away with subsidies, especially the food subsidy and fertiliser subsidy. But even here there is scope to minimise the subsidy burden by targeting it at the really-needy section which is not the case right now. And try to push the sections which may not require subsidy support. This, of course, requires an integrated policy approach like evolving a system under which one needn't possess a ration card as an identify card. As far as the other subsidies are concerned, slowly the environment has to be created through public debate. But it will take some time.

Ramola (Wed Nov 4 1998 8:20 IST)
Dr Shettigar: Your government is promoting the Internet and talk about Swadeshi and agriculture economics. Don't you think it's hypocrisy?

Dr Jagdish Shettigar (Wed Nov 4 1998 8:33 IST)
Ramola: I don't think there is any contradiction between the two. Swadeshi simply means promotion and upholding of national interests. If the Internet helps in reaching this target, one should be happy about that. In fact, our government has already started utilising information technology to monitor rural development work in parts of Maharashtra which should help us in the progress of the project as per the schedule and minimising leakage of resources which normally takes place.

As far as the importance of agriculture in our policy package is in the overall interest of the economy unless and until one strengthens a dominant portion of the demand base which happens to be the agricultural sector in our case. One cannot hope to achieve industrial growth. In fact, recession in industry during the last three years was mainly due to negligence of agriculture since 1991 which we tried to rectify in the last Budget.

Ramola (Wed Nov 4 1998 8:27 IST)
Dr Shettigar: Is it important to defend the rupee when the Indian masses are dying for want of vegetables?

Dr Jagdish Shettigar (Wed Nov 4 1998 8:36 IST)
Ramola: After all, the external value of the rupee reflects the health of the economy and the confidence one has. But here the rate of exchange is by and large determined by the market forces except some intervention by the RBI in extreme cases. But if one prioritises the issue, definitely we are in favour of providing essential commodities at affordable prices and in adequate quantity. In fact now the priority of the government is the controlling the prices of the vegetables.

Dr Jagdish Shettigar (Wed Nov 4 1998 8:37 IST)
I would like to thank all those who tried to get clarification with regard to the policies of the BJP government. I hope I have been able to answer the queries satisfactorily. Once again, Thank You All.

Dr Jagdish Shettigar, continued