A42 BUSINESS India Abroad May 2, 2014
To Asim Dasgupta, for- mer minister for finance and excise in Bengal’s erstwhile Left Front government, the
fundamental reason for India’s
poor economic health is its indifference towards agriculture. He
believes that a balanced approach
towards exports and globalization and a strict handling of corruption will lift the country out of
Part of our continuing series on
the state of the Indian economy ahead of the
After achieving above 8 percent growth,
India’s GDP slumped to 4.7 percent in Q3 of
this fiscal year. What, according to you, ails
the Indian economy?
Major problems afflicting the national
economy at the moment are unemployment,
inflation and corruption.
India has witnessed sluggish growth, particularly in manufacturing and in agriculture. Growth in the industrial sector in the
current fiscal is estimated at 0.7 percent
whereas in the manufacturing sector, the
growth has been negative.
This is a matter of grave concern.
What immediate economic steps should
the new government take to lift the country
out of despair?
We need to thoroughly revamp our agricultural sector. India has seen a great oscillation in agricultural growth path, which
resulted in an unfortunate fall in per capita
availability of cereals.
According to Economic Survey statistics,
in 1991, per capita daily availability of cereals
was 501 gram per person per day but in 2011,
it fell to 462 gram. Compared to these figures, growth in India’s population has been
This sluggishness led to inadequate growth in employment.
What steps should the new government
take for creating jobs?
India has been witnessing a poor growth in
employment for several years. According to
Economic Survey statistics, between 2011
and 2012 and 2012 and 2013, India’s total
employment grew from 2.87 crore (28.7 million) to 2.89 crore (28.9 million), which is
less than 1 percent.
To generate employment, India has to
focus on agriculture first. If the agriculture
sector looks up, its benefits will spill over
into other sectors soon
and that, in turn, will generate employment.
Neelkanth Mishra, an analyst at Credit
Suisse, reckons that if activity in informal
industries and rural areas were properly
measured, India’s GDP would look bigger
and more stable. Do you agree?
I do believe that a thorough accounting of
the contribution of unorganized sectors in
both rural and urban sectors will improve
the gross domestic product figures of India
to some extent. Moreover, agriculture should
be stressed at all levels consistently to stabilize the GDP.
What are your tips to the new government
to curb inflation?
The main solution lies in rejuvenating the
country’s industrial growth. Moreover, we
must restrain ourselves from becoming too
dependent on exports.
We have seen how the sub-prime crisis in
the USA and the slowdown in Europe had
affected industrial growth. Instead, we must
concentrate on developing the domestic
If efforts are made to improve
the purchasing power of India’s
120 crore (1.2 billion) population, there will be an enormous
growth and a steady decline in
Moreover, policymakers in
India often take a regressive
stance and relate agricultural
production with a ‘good’ or ‘bad’
monsoon. This is a faulty
Sincere efforts are needed to
strengthen the agricultural sector in such a way that it can counter the
vagaries of nature and can maintain a
healthy growth throughout the year.
How swiftly can India bring its black econ-
omy into the daylight? What steps should the
new government take?
Two factors that help the black economy
survive are: An inadequate audit and
absence of political will. Black money is
accrued either through tax evasion or
through hawala transactions.
The government should try and bring back
money hidden in the Swiss banks.
It must also take advantage of the value
added tax module introduced sometime
back for effective computation of commercial tax.
VAT is like a sales tax, but it differs from
the sales tax in that, with the latter, the tax is
collected and remitted to the government
only once, at the point of purchase by the
end consumer. Therefore, if one calculates
the VAT properly, one can prevent tax evasion at all levels.
Moreover, the government has to stop
wrong tendering and has to bring in an open
When I was the finance minister of Bengal,
I had initiated an internal audit of all government departments. Officials of the Comptroller and Auditor General of India had done
the audits on deputation.
Such steps too can bring the
black economy into daylight.
Ask any lay person what ails
the Indian economy, pat comes
the reply — price rise and corruption. What steps should be
taken to address both issues?
Generally government statistics are presented in terms of
Wholesale Price Index, which
does not reflect the ground reality at the retail level as faced by
In recent times, prices of many
food items have more than doubled.
It should be mentioned here that the Ess-
ential Commodities Act, 1955, which was
brought into force to control the production,
supply and distribution of certain essential
commodities, became rather slack during
the National Democratic Alliance govern-
ment’s regime in 2002-2003.
There still exists a wide gap between the
price that the producers get and the price
that the consumers pay; a number of traders
and hoarders work in between, artificially
jacking up the prices of food grain and other
Added to this is a massive corruption at the
2G spectrum and coal block scams with
financial implication of Rs 1.76 lakh crore (Rs
1.76 trillion or $28.75 billion) and Rs 1.87
lakh crore (Rs 1.87 trillion or 30.5 billion),
respectively affected the economy to a large
Should India Inc be granted bank licenses?
If yes, how will the move fortify India’s strug-
gling banking sector? If no, what are the haz-
ards behind such a move?
There is no dearth of new banks in India at
I feel the national banks should be more
Also, the PSU banks have already diluted a
substantial portion of their shares. More
dilution will spell danger for the economy. It
might even lead to US-like sub-prime crisis.
Banks must remember that their experiment with business correspondence model
failed miserably and the personnel heading
that exercise turned into chit fund agents
We must not forget that already there are
74 percent foreign investors in the Indian
At the moment, India must work towards a
‘bank for all’ model.
As the finance minister of Bengal, I wanted
to have a bank in every gram panchayat.
How do you rate the Reserve Bank of India’s
interest rate policy?
I sincerely believe that the Reserve Bank of
India’s rate of interest policy must be
Asim Dasgupta, a former
Bengal finance minister,
shares valuable tips for
the new government in a
‘India’s economy can never improve
if agriculture is neglected’
Agriculture should be stressed at all levels consistently to stabilize the GDP, says Asim Dasgupta, inset.