NEW DELHI — NITI Aayog chairman Arvind Panagariya believes that the most urgent reform needed in India today for the country's growth is the proposed amendments to the Land Acquisition Act that has been mired in protests and controversy.
"Infrastructure cannot proceed without it, if we stay with the 2013 Land Acquisition Act, no industrialisation can proceed and so on," the economist said on Friday. "There is no question that we need that immediately."
Panagariya, who is also a Professor of Economics at Columbia University was speaking to a packed room of policy-makers, analysts, and media persons.
The 62-year-old said he was frequently labelled a pro-market economist and neo-liberal, but he strongly believed in government interventions for redistribution of wealth.
"Nobody is fighting over the compensation today," said Panagariya, calling the UPA government's compensation rate as set in the 2013 amendment of the Land Acquisition Act to be fair. He said the real complexity lay in the fact that the Indian government also acquired land for private businesses.
Pointing out two main problems with land acquisition in India, he said that absence of titles led to disagreements on who actually owned the land. The second more important problem, he said, was the issue of land conversion.
Describing how most of land in India was agricultural in nature, he said that it remains of lower value until it is converted for other purposes. So while it was sold for a lesser value, that changes dramatically later. "The moment it is converted, the value shoots up," he said. "That's what causes the problem."
Land sellers become agitated as they feel they've been given a raw deal, he said, complicating the matter.
Besides the passing of the Right to Fair Compensation and Transparency in Land Acquisition Act, Panagariya said there were two other reforms that he would like to see, which would favourably impact growth, he said.
One was labour law reforms. "The Prime Minister's view is that it's been on the concurrent list of the Constitution so both state and centre can legislate," he said. "The state can take the lead in this which is fine with me."
A second reform was needed banking, according to Panagariya. "We need some progress figures right now. If you look at the restructured loans and the MPAs, those are well over 10 percent of the loans and that has really led to the freezing of the credit markets also," he said. "You can't really have productive investment without the intervention from the banks. You need some relief on that front, so the credit begins to flow faster."
Plan For NITI Aayog
Panagriya said that one of the principal differences between NITI Aayog and the erstwhile Planning Commission was that it's mandate was to work very closely with states. "The Prime Minister calls it a cooperative competitive federalism," he said. "We are the knowledge institution for the states, primarily."
A second important role for NITI Aayog is answering the questions that come up for the government at crisis points. Panagariya gave the example of unseasonal rains that recently ruined crops, plunging farmers into crisis. "Our job is to figure out what can be done to remedy this," said Panagariya.
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