Govt must ensure fiscal consolidation, privatisation of PSUs: Panagariya

The economist further suggested reducing the number of central ministries to improve governance

The next Indian government must show strong commitment to fiscal consolidation, consolidate central ministries, go for aggressive privatisation of public sector undertakings and create a new international trade negotiation entity to fast-track the economic growth of the country, eminent Indian- American economist Arvind Panagariya has said.

Panagariya, who served as the first Vice Chairman of the NITI Aayog from January 2015 to August 2017, was responding to a question on what should be the priorities of the government to be formed after the declaration of the election results on May 23.

"Show strong commitment to fiscal consolidation to ensure that private sector is not starved of investment funds," Panagariya told PTI.

Reducing the number of central ministries to 30 is another important thing that the new government would like to do to make it in line with international standards and improve the efficiency of the governance, Panagariya said.

"India has more ministries than almost any other country. Most of the well governed countries have 30 or fewer ministries whereas India has 50 plus," he said.

"Too many ministries lead to multiple agencies with competing interests in nearly every policy issue, slowing down even impeding desirable change. Numerous sectoral ministries (steel textiles, telecom, IT, electronics, chemicals, fertilizers, mines, heavy industries, public enterprises, food processing, and MSME) also become focal points for narrowly defined industry interests," he said.

Recommending privatisation of public sector undertakings -- one PSU per week, he said this is feasible since more than two-dozen PSUs already have the Cabinet approval.

"Privatise Air India," Panagariya said.

In the first 100 days, Panagariya also called for amending the Banking Regulation Act through an ordinance to allow the Reserve Bank of India to restore its February 12, 2018 circular or equivalent, aimed at putting a lid on the future creation of non-performing assets (NPAs).

"Accelerate cleaning up of NPAs and infuse capital into Public Sector Banks (PSBs) do ensure that healthy credit growth returns," he said.

Strongly advocating continued movement on lateral entry in civil service, the former vice chairman of NITI Aayog sought increased role of Young Professionals in ministries to inject young blood in governance.

"Announce the intention to introduce a sunset clause on centrally-sponsored schemes and central sector schemes and begin an audit towards that objective," he said.

"Create a new entity with charge for negotiating trade agreements and place it in the Prime Minister Office along the lines of the USTR (US Trade Representative)," Panagariya said.

Among the longer-term reforms, Panagariya recommended reform of labour laws.

"Reform of land laws relating acquisition, conversion of land from one use to another, tenancy and rental laws," he said.