‘Unless we get the health and economic situations right at the same time, we will not recover.’
Dr R Nagaraj, a professor at the Indira Gandhi Institute of Development Research, is one of the economists who drafted Mission Jai Hind — a seven-point action plan for the government — to revive the economy.
“It will be quite a while before we get back to some semblance of normalcy,” Dr Nagaraj tells Rediff.com‘s Shobha Warrier in the concluding segment of a two-part interview:
Do you feel this is the time for the government to increase public spending, but the finance minister spoke of projects only in the PPP model? But we don’t see confidence in the private sector to tie up with the government.
Absolutely. Public spending is what most countries are doing. It is not just now, even six months ago also, we had seen that there was lack of trust in the government.
When the private sector has no trust in the government, how can you expect them to tie up with the government?
Who would want to take that risk?
Recently, Dr Manmohan Singh remarked that what is most important is trust in the economy; trust between the government and its citizens.
Why is it that private players have no trust in the government? Is it because of witch-hunting by various government departments?
It seems like. That’s what many businessmen are saying. This lack of trust is not enabling businesses to come forward to invest.
The government may change its tune, but banks are not confident about lending.
Just like businessmen do not want to lend due to lack of demand, bankers also do not want to lend because they fear they will be questioned by some government agencies for their decision tomorrow.
It is a vicious cycle.
Only when the bankers feel confident to lend without being harassed, only when businessmen feel confident that their business plans will be respected, we will see a restart of the virtuous cycle of investment and growth.
Until then the economy will be in trouble.
Your seven-point plan mentions that 50% of the stimulus package should go to the states. Do you feel decision-making has become more centralised now, like many states are complaining?
Yes. There is a view among states and state finance ministers that they are being starved of funds. They complain that they have not received their dues.
For example, the central government has pushed the responsibility of taking care of the migrant workers on to the states, but the states have very little money.
They only have…