There is no policy paralysis in India, only a slowdown: Kaushik Basu, Chief economic advisor

Chief economic advisor Kaushik Basu would not have imagined that his comments about the reform process in the country to the Washington-based Carnegie Foundation would trigger a political slugfest. In an e-mail interview with ET, he clarifies there is no policy paralysis in India, only a slowdown. Basu makes it clear that there is nothing to retract.


Do you think your comments about reforms have been taken out of context and blown out of proportion?

I don't think anyone blew it up deliberately but the dynamics of public discourse in a democracy has this quality that something routine and mundane can come to acquire a life of its own and create a storm. And it also dies down just as quick. A TV journalist who wanted to interview me just now summed it up perfectly in her response, when I said I can do an interview earliest tomorrow. She lamented that by then no one would have an interest in this "big story".

My lecture in Washington was on a possible European crisis in 2014 because of the huge lumping of repayment from private banks to the ECB that will occur late in that year. This has large implications for the sovereign debts of Spain and Italy, since a substantial part of the loans that the banks took they used to by sovereign bonds. The possibility of another European crisis 3 years from now, which I genuinely believe is likely, generated a huge amount of interest in the audience.

I spoke about India from this perspective and commented on our reforms. What I said on the reforms was boringly unoriginal-namely, that some of them had slowed down thanks to the nature of coalition politics.

Do you subscribe to the thinking that there is a policy paralysis in the country?

Paralysis not at all; some slowdown, yes. I do believe there is some slowing down that occurred because of a variety of factors, including the atmosphere of scams and vilification, and finger-pointing. But there is a host of policy initiatives that is taking place. It is this that enabled me to assert in my lecture that, once the dust settled from the possible European crisis of 2014, I expect it will be India that will be in the lead in terms of growth, ahead of even China.

Your statement has been construed as India's reform process has been put in a deep freeze till elections?

A reform like the GST is stalling not because some political parties felt it was not good policy but precisely because they thought it was good policy. So they are reluctant to let this happen under the present government; and they indeed do have clout because GST needs constitutional amendments.

There are other reforms which are, I believe, very much on the cards, and quite soon. I spoke about them in my lecture and argued that this will cause a slow rebounding of growth soon.

Has this compromised your position considering the furore it has raised? Did the finance minister speak to you on the issue or asked you to clarify your stand on the issue?

Not at all-this has not compromised my position at all and there is nothing I said that I would retract. Of course, I spoke with the Finance Minister. In fact, this is the first time I spoke with him even before I had my morning tea. It was a wonderful conversation about reforms, economic policy and the European crisis.

I have put out a statement, not clarifying anything, but stating in summary of what I said at this engaging meeting that I had with a very large audience at the Carnegie Endowment in Washington.

What reforms can the country undertake in the backdrop of coalition politics?

There are many reforms which I expect to happen over the next six months. I have said this before publicly and I will talk to you about these when I return to India.

Do you think India can achieve its potential with the kind of polity it has?

I have said it before that the one thing that impresses me about this government-and this I did not know till I joined the government-is the quality of mind and professionalism among the leaders, maybe not all, but several of them.

The four or five topmost leaders with whom I regularly interact are statesmen of the highest order, with nothing but the national interest on their mind. This is more than most countries, including many industrialized nations, can boast. And for me this is the greatest reason for hope for India.