MUMBAI: A Narendra Modi-led BJP government at the Centre could simplify the process of buying land for factories and enhance operational and financial freedom to state-owned banks and enterprises, as part of an ambitious economic agenda being crafted with the help of economists such as Arvind Panagariya of Columbia University.BJP, which is sensing power after 10 years in the wilderness, opposes the Reserve Bank of India’s policy of increasing interest rates to combat inflation, a stance that raises the possibility of tension between the government and central bank if the party were to capture power.BJP also believes that RBI’s road map for giving new bank licences is subjective, and will closely scrutinise new licences if the central bank issues them before polls, a senior party leader said.“I think (RBI Governor Raghuram) Rajan is only aggravating the problems and making it worse by increasing interest rates,” said Piyush Goyal, the BJP treasurer and a top member of the team that is involved in drafting the principal Opposition party’s economic agenda.“In the past six years, they (the central bank) have increased interest rates multiple times, but inflation has not come down at all. It is relentlessly increasing,” said BJP leader Goyal.Recent statements by RBI and comments by Rajan indicate the central bank wants to implement a new monetary policy framework with inflation-targeting at its core. The way to bring down inflation is to raise interest rates, Rajan and his core team are said to believe.BJP officials, including Goyal, have been talking to noted economist Arvind Panagariya for his inputs on various policy issues for the past two years. Panagariya has lauded the Gujarat government’s performance on various parameters and has generally been leery of the welfare schemes and doles favoured by the Congress-led UPA government.

“We are soliciting ideas from highly placed economists such as Arvind Panagariya, and I have been personally engaging with him for the past two years. I once went to University of Columbia to spend half a day with him. We need eminent people to give us good ideas, and both within and outside the country, people are continuously engaging with us,” Goyal said.



Some of Panagariya’s suggestions and ideas are contained in a book that was published last year with Jagdish Bhagwati, also of the Columbia University. Panagariya declined to talk to ET on this issue. The party’s agenda and to-do list, if and when it comes to power, suggests a strong focus on investment and job creation and hints of a crackdown on procedural lapses on the part of the existing government.



The grant of additional flying rights to Abu Dhabi, which helped close the deal between Etihad and Jet, the largest foreign investment in aviation last year, could be scrutinised.



The payment of royalty by consumer companies to their multinational parents will be examined on the basis of the need for such payments in technology-light industries. “It is a complete scam. What business does the government have to give a freebie to increase the value of a private sector company?” Goyal said, referring to the additional flying rights to Abu Dhabi.



“Any deal which has corruption at the genesis of it is open to scrutiny as we saw the Supreme Court doing in earlier cases. It is for the courts and the investigative agencies to take a call on that.”



Consumer multinationals, especially those selling soap, detergents and even food items, could have reason to worry as the party is likely to target what it calls as rampant misuse of royalty provisions.



“I can understand some great cancer-curing drug being manufactured in India for which we send out royalty, but if we are going to send out huge amounts of royalty, which is increasing rapidly not only in value terms but also in percentage, on things such as soap and detergent, the government will have to open its eyes to it,” said Goyal.



MNCs, notably Unilever and Maruti Suzuki, have increased royalty payouts to their parent companies in the recent past.



India’s economic growth is expected to inch up marginally to 4.9% in 2013-14 from 4.5% in 2012-13, the Central Statistics Office (CSO) said on Friday. The year 2013 was a forgettable one as the country suffered a currency crisis and corporate investment plummeted due to policy and regulatory uncertainty and roadblocks in the form of environmental hurdles.



Easing regulatory roadblocks



If it comes to power, BJP immediately wants to kick start investment and job creation by cutting through regulatory and procedural hassles. For instance, large-scale industrial investments can be made easier by shortening the lengthy process involved in land acquisition. Compensation can either by increased or maintained at same levels, but the process involved in getting clearances and relief and rehabilitation can be simplified.



“I clearly see Modiji giving a major thrust to creating manufacturing capability and infrastructure development,” Goyal said. “One of the major concerns people have is regulatory processes, so he (Modi) will unlock these and make them simpler, process-driven and timebound.”



He added that many industrial projects are stuck because of the environment ministry’s stubbornness and its refusal to give the green signal even when the damage to forests or environment is limited. Companies can be encouraged to plant new forests where old ones are being destroyed and states that have large funds for afforestation lying unused can play a role here.

“Land acquisition regulation should have increased the compensation to landowners while making land acquisition simpler. Cut the clutter and make the compensation reasonable. What was needed to be done was to simplify the process and increase compensation manifold,” he said.



Conglomerates who feel that RBI’s new bank licence norms are too strict or stringent can take heart from BJP’s strong opposition to the format and its promise to do things differently. “The current process is completely vitiated. I think this government should not be giving any licences in this arbitrary fashion at the fag end of its tenure. I think that any licence issued now will be a disservice to the company which gets the licence because there will be suspicion of collateral reasons why they got that licence,” Goyal added.



The PSU banks and other stateowned enterprises will probably have a lot to smile about as the party, if it comes to power, is likely to give them operational and financial freedom. Banks, which have been dependant on the government to provide capital, can expect more freedom in raising money from the public. Goyal said it is not the job of the government to provide capital to banks. “There are enough and more avenues available to raise capital through dispersed ownership of banks’ equity capital. It is not as if we are handing over the banks to some industrialists and there should be any objection. The shareholding is being dispersed to small retail shareholders and millions of Indians are becoming partners in the progress of that bank.”



He added that the Gujarat model, where the Narendra Modi government gave PSUs more freedom and professionalised their management, will be adopted though the party will study the matter more closely before taking a call.



ET View: Let Visions Contend



It is welcome that a leading contender for national leadership is preparing to spell out his economic programme. Having concrete policy measures spelt out helps economic agents evaluate what the candidate stands for better. This is regardless of whether they agree with the proposal or not. That a noted economist like Arvind Panagariya is helping Modi flesh out his vision helps, as it would give it coherence.



This said, the overall efficacy of an economic programme depends not just on its own internal merits. The attendant politics will determine its viability. This is where the BJP and the Sangh Parivar, of which it is a part, have to address the need not to exclude any group of people from the growth process.