Outdated policies hurt India’s economy

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Geopolitical Notes From India

M D Nalapat

THERE is a hunger for faster economic growth in India, especially among the young. During 1990, the political atmosphere in India became toxic as a consequence of the (“upper caste”) Prime Minister,Viswanath Pratap Singh, adorning the garb of saviour of the “backward” castes by pressing for the implementation of the Mandal Commission report. This report, as also regional variants such as the Havanur Commission report in Karnataka, sought to give increased representation to the “backward” castes in Hindu society at the expense of the “forwards”. Such measures ignored the fact that for close to a millenium, almost all of India was under the control of first the Mughals and subsequently the British, neither of whom could differentiate between “forwards” and “backwards” in Hindu society. In the case of India, although economic progress has been high by international standards, yet in the context of India’s potential, it is still far too low. While China needs a minimum of around 6% growth to remain stable, India needs to reach above 9 % for the same result. A lower rate of growth would not be sufficient to ensure that the population of the country be satisfied that their potential is being tapped and to their own benefit. Hence the cheering at the 7-8% growth now being registered by the economy is premature.
But for the chokehold of the colonial bureaucracy over the economy, India would have crossed into stable double digit growth in the 1980s the way China did. While Prime Minister Rajiv Gandhi favoured a liberal policy towards industry and commerce, he was unable to make his team of officials go along, with the consequence that reforms were slow during his time. The exception was in telecom, a sector where Rajiv roped in an expert from the US, Satyen Pitroda, to assist. The bearded tech wizard was given backing by Rajiv Gandhi against his own bureaucracy, and as a consequence, superintended a telecom revolution in India, drastically bringing down delays in long-distance telephone calls and expanding communcations coverage. Had other segments of the bureaucracy been provided with outside leadership of the calibre of Satyen Pitroda, India would have equalled the speed the Chinese economy was achieving under Deng Xiaoping. However, that was not to be. Later, under Prime Minister P V Narasimha Rao, economic reforms were started, although these were far from the fullscope measures undertaken by China. Despite their partial nature,the Rao reforms ensured a doubling of the rate of economic growth, so much so that despite a disappointing raft of subsequent policies, India is on course to be the world’s third largest economy well within two decades. It was expected that Narendra Modi would emerge as India’s Deng Xiaoping when he took charge as Prime Minister on May 26,2014. However, the new Head of Government decided to adopt a conservative approach to the economy, choosing a well-known Delhi insider as Union Minister of Finance. A senior lawyer and BJP politician, Arun Jaitley has friends across the political spectrum, and his appointment reassured those close to the previous government who were worried about being their being targeted by the incoming administration. Now in its fifth year, the Modi government has thus far abstained from taking action against any of the Congress and allied leaders whom it accused of making billions of dollars during 2004-2014, the decade of undiluted rule by Congress President Sonia Gandhi.
Both fiscal as well as monetary policy have been textbook examples of conservative economics designed to ensure that those holding dollars feel reassured even if at the expense of those placing their trust in the long humble but now humiliated rupee. It must be said to Prime Minister Modi’s credit that despite the political damage such a cautious policy of maximising government revenue is doing to his political support base, he has stood firm and has fully backed Jaitley, refusing to replace the Finance Minister despite such lapses from health as vital organs needing to be substituted with transplants and inability to stay outside sterile zones for any length of time. The friendship and loyalty PM Modi has shown to his close friend and confidante Arun Jaitley is in contrast to the way in which so many at the higher echelons of the BJP abandoned their mentor and benefactor L K Advani when it became obvious by mid-2012 that the energetic and always pleasant nonagenarian politician from Sindh would not be the top voice in the BJP for much longer. Almost the entire Advani loyalist brigade overnight became Modi loyalists, a bond likely to endure as long as Modi remains PM.
Narendra Modi gained popularity across India because of the belief that he would be a “Wirstshaftwuenderkind”. A leader who would substantially increase the annual rate of economic growth and generate a minimum of 10 million actual jobs ( as opposed to make-work jobs such as cooking and selling junk food on the street). However, thus far the annual rate of growth of the economy has been lower than that witnessed during the Sonia-Manmohan decade, despite the policy errors made during that period. When he announced demonetization on 8 November 2016, Modi asked for a three months grace period before the miracles promised by supporters of the measure came to pass. These wonders have yet to dawn, 23 months later. Now the hardworking PM is asking his voter for time till 2022 to fulfil the promises made by him in 2014. So far, the PM has gone along with a cautious, conservative, Wall Street-oriented policy of the government (including concessions on IPR that make it more difficult for Indian generic drug manufacturers to compete against US and EU pharma giants that price their drugs beyond the reach of 95% of the planet’s population.
The BJP is hoping that enough voters will agree to the call for an extension of the time given for Modi to make good on his 2014 electoral promises as would enable the BJP to return to power in 2019 for a fresh 5-year term. Had Modi focussed on sending VVIP crooks to jail the way Xi Jinping and Mahathir Mohammad have been doing, had he followed the innovative style of Lee Kuan Yew and Deng Xiaoping in his policies, and had important symbols such as work on the Ram Temple at Ayodhya got started, the BJP would certainly have secured a handsome majority next year. But absent such achievements, it is difficult for the BJP to ensure that the 2014 result gets repeated in 2019. Too little fresh water has gone under the bridge.
—The writer is Vice-Chair, Manipal Advanced Research Group, UNESCO Peace Chair & Professor of Geopolitics, Manipal University, Haryana State, India.

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