Financial Times has included the book ‘Why Growth Matters’ co-authored by Arvind Panagariya and noted economist Jagdish Bhagwati in its yearly list of the best books.

In this special interview Prof. Panagariya while speaking in simple Hindi, breaks it down for the average Indian why Economic Growth matters and why the Gujarat Model with its focus on Economic Growth is important to India at this juncture.

Prof. Panagariya said that the book was written maintaining the best academic standards in mind. Also that the authors wanted that common man should be able to understand the economic concepts and the policies that India has been following.

He added that they wanted that people debate on the economic policies followed by India in the present times and he is happy that since the launch of the book in July 2013 the debate has been going on.

Do you see any reflection in the Congress strategy of what the book suggests: India’s poverty can’t be removed without growth?

Congress took it for granted that growth is happening for few years. So the party didn’t do the reforms necessary for the growth. The party felt that growth will happen on its own and so the party and the UPA government only focused on the social programs. It is not that social programs should not have been implemented but to ensure that they are continued for long in sustainable way the revenues had to be increased.

Can you see disconnect between the Congress policies and what the people want?

The trend to give freebies and promise few things to get votes is changing now. Chief Ministers who achieve all round growth ensure all develop instead of relying on freebies. The government can’t keep giving freebies. Ultimately the incomes of people should rise for which growth is a must.

Pinpoint where the Congress went wrong that it ruined the growth story of India.

There is paralysis with regards to the decision making in the government. This started with stop in giving clearances by the environment ministry under Jairam Ramesh first and now Jayanthi Natarajan. Also in last few years the cases of scams have come up. There was a freeze in decision making as top ministers and top officials of the government ended up in jail due to the scams.

The situation became such that officials refrained from taking decisions to avoid being involved in scams. This badly affected the growth of India. Since last six to eight months the UPA government is trying to get the decision making on track but hasn’t been able to.

Do you think we are on the path of sustainable recovery as the Finance Minister says these days?

Growth rate has increased a bit in the last quarter but till the time the paralysis in the decision making is not overcome the growth rate can never reach 8 or 9%.

Do you see track two reforms happening before the 2014 elections?

No, long term reforms can’t be undertaken by the UPA. UPA lost 5 actually 10 years. No reforms related to growth took place.

Can you tell us with the genius three (Dr. Man Mohan Singh, Dr. Montek Singh Ahluwalia and P Chidambaram) at reigns how come these paralysis happen?

The role of Prime Minister is very important in 1990s we had P V Narasimha Rao then we had Atal Bihari Vajpayee. These people wanted to bring in reforms. They knew that without pushing for growth they can’t ensure other reforms like removal of poverty and so they continued making changes in the policies accordingly.

It was thanks to their efforts that we reached growth level of 8 or 9%. But in last 10 years we have seen no initiative from the Prime Minister. The role is no more of a leader. The decisions are taken by Sonia Gandhi and her focus was never on the growth. Man Mohan Singh who as a Finance Minister heralded the economic reforms in India turned a blind eye to it this time around as a Prime Minister.

So would you point at Man Mohan Singh for India’s economic slowdown? It was his responsibility to ensure India grows that he was the leader.

To say that first we need to see if he was in the role of a leader or not. All know that the control of the government is in the hands of Sonia Gandhi. What Man Mohan Singh should have done is told the Congress leadership that he will go for growth related reforms and if the party is not happy with that they can have someone else as the Prime Minister. Instead the PM went it with the Congress leadership and the National Advisory Council’s ways.

You have talked of Bihar Model of development and also Gujarat Model of development and so many other models. We hear a lot about figures that say the situation of malnutrition and infant mortality rate is very grim in Gujarat. Can you explain us these figures?

Gujarat has developed a lot in the field of increasing the level of literacy and bringing down the infant mortality rate. The confusion is created by not considering the level that was and the level that is now. Again they always compare Gujarat with the best performing state in the said area. Congress should compare how it has fared nationwide that it has ruled the country for a major part of the time with the development that Gujarat has witnessed in last 10 years.

You seem to be more tolerant about the galloping inflation. Which is a major issue for the coming elections rather than the economic policy. Can you tell if the level of inflation that we have now is fine for us?

I would be tolerant on inflation rate being around 7 or 8 if there is an increase in real income of the people. If the inflation and growth rate are both at 5 % there is no increase in the real income of the people.

The present government isn’t interested in long term reforms and have left the short term measures to Raghuram Rajan. How is he faring?

Raghuram Rajan’s measures have been a relief for the people. Rajan has been doing the right things till now. Will have to wait and watch as to how much he can fight inflation. His predecessors tried to fight inflation resulting in lower growth rate. They hiked the interest rate 12 or 13 times. We can put the blame on this factor also for the decline in the growth rate. So the same dilemma even Rajan faces.

You have praised Bihar model also. How would you differentiate between what UPA did to what Gujarat government did or Bihar government did?

In Bihar Nitish Kumar stressed on education. There has been improvement in the literacy level especially female literacy. But overall development is slow as the situation is not favorable for industrialization especially manufacturing. Manufacturing only contributes 5% towards Bihar’s growth. So growth in Bihar is expenditure driven.

Development in Gujarat is investment driven. The share of manufacturing in the states development is the highest in Gujarat. In Gujarat it is around 25 to 26%. The chances of development are very fast in Gujarat because of this urbanization will also be very fast. The state has more resources to fight poverty due to rapid industrialization.

Both Bihar and Gujarat have reduced poverty levels drastically in the last 7 or 8 years.

When we talk of Bihar we talk of migration. Using MNERGA workforce was not allowed to migrate. We don’t allow migration to happen instead we take anti migration stance. Can you throw light on the issue?

For migration to happen urbanization is a must. Either through industrialization migration can be encouraged towards urban areas or rural areas can be urbanized. By giving incentives we have stopped migration. We never paid attention to the fact that all the nations that have progressed have encouraged urbanization.

Even Rahul Gandhi agreed with you about encouraging manufacturing. He said we should not import rakhis and Ganesha statues from china. What was your reply to him?

Rahul Gandhi asked the question to the manufacturers of India so I asked him that what your government has done to encourage such manufacturing units. If India is importing rakhis and Ganesha statues from China it is because the policies are such that discourage setting up of such manufacturing units in India.

Our labor laws are so troublesome that manufacturers don’t want to set up labor incentive units. They prefer capital intensive units like automobiles, refineries, and so on so forth. Labor incentive industries like apparel manufacturing is very low in India. China’s export of apparels is more than 10 times that of India’s export of apparels. Even Bangladesh exports more apparels that India.

We try to know from the BJP leaders including Mr. Narendra Modi as to what will be the economic policy that they will follow. Even critics ask him to expressly talk about his economic and foreign policy. We all know subsidies, labor laws, retail FDI are big issues. Do you have an idea of their economic policy or is it better for BJP to keep its economic policy vague as of now?

NDA has the history of trying to develop the labor intensive industries and currently no clear idea about the BJP’s economic policy is there. But it can be safely assumed that there are better chances of the labor intensive industries thriving in India under Narendra Modi as PM than under UPA.

People are eagerly awaiting the outcome of the 2014 election as many feel there are chances of unstable coalition coming to power. What is your view on it?

It is a tricky situation as no one knows what will the situation with regards to seats once results are out. It is difficult to predict the election results. If we get non NDA government then we will be back to 1996 situation. In couple of months we will get clearer picture regarding this but comeback of Congress is very difficult. The elections results of the four states going to poll will be an indicator about the Modi wave.

How do you react to Mr. Bhagwati and you being considered pro BJP and Modi while Amartya Sen being considered pro Congress?

What we say is that if you concentrate of growth you will be able to remove poverty faster. Also you will have extra revenue to help the under privileged. Mr. Sen also now says he would favor growth model but he doesn’t talk of the measures that would boost the growth. He doesn’t talk of land acquisition or education or higher education or infrastructure or labor laws. We don’t know his stand on all these.

By merely stating that he also favors growth can’t help. He has to tell how he wants the country to achieve growth. In our book we have given instance of what reforms need to be undertaken to achieve growth and what needs to be done to get social programs on way with regards to education, health, poverty. We have given references as to how we want the social programs to be implemented.

We can’t have a debate between Rahul Gandhi and Narendra Modi so we will want a proxy debate between Mr. Sen and you? Any progress in this regards that you had also sent an invitation to Mr. Sen for a debate?

Mr. Sen declined the invitation. I see a higher probability of Rahul Gandhi debating Modi then Mr. Sen debating with me.

Is it because had the UPA implemented what you suggest poverty could have been brought down drastically?

There is an ample proof that policies that we advocate have been implemented successfully by Narasimha Rao and Atal Bihari Vajpayee. We can see from the data that the times when we have grown faster we have reduced poverty also faster. The sad part is that Mr. Sen has down played the success of the growth model and UPA government has completely ignored it. We can see how slow growth has resulted in difficulty funding the social programs.