Run, Don't Crawl - Need for Action, Not Rhetoric

(Originally appeared in the 1990s in the Times of India, as published in M. D. Nalapat's book "Indutva", Har-Anand Publications, 1999)

First impressions may not always be the best ones, but they last. 

While in many other democracies, incoming administrations

seek to push through major changes in emphasis during the first 

100 days, in India this has not been done except by P. V.

Narasimha Rao, who 44 years after independence began turning 

India away from the 1,000-year clasp of the Mughal-British-

Nehru patriarchal state.

Inder Kumar Gujral's entry to his present post was due to the

coincidence of his excellent relations with both V. P. Singh and

Sitaram Kesri. However, once in, his touch faltered. The first

hiccup was his acceptance of almost the entire Deve Gowda

team, thus confirming the impression that the change-over had

been because of a personality clash between Deve Gowda and

Sitaram Kesri. As a result, the incoming Prime Minister's authority 

over his team got diluted.

Headhunters will testify that the time for tough negotiations

is before an employment contract is signed. Once duty is joined,

efforts to substantially improve conditions are usually futile.

Neither Mulayam Singh Yadav nor C. K. Moopanar boasted the

acceptability to the Singh-Kesri duo that Gujral had. The other

alternative, Chandrababu Naidu, declined to follow Deve

Gowda’s example of exchanging a safe regional perch for an

unstable national one. Thus Gujral could have driven a much

harder bargain before accepting the offer to head the government.

Family Nostalgia 

Nostalgia about the days of the Nehru family—when India

crawled along at a growth rate of three per cent and the

corruption-breeding controls system dug in—was not going to 

lift Gujral’s rating. Rather than lapse into sentimental

remembrances, what is needed is the hard-headed formulation

and implementation of policies designed to push up growth

from the seven per cent bequeathed by Rao to the 10 per cent that

China has shown to be possible. Step one is the rapid dismantling

of the web of procedures and permissions that chain Indian

companies. Step two is to remove the restrictions on the setting

up of service industries.

Sadly, instead of diminishing in critical areas regulations

have grown. While Murasoli Maran acted as a reformer during

the Gowda period, in the Gujral era he appears to be using

restrictive regulations for reasons not transparent. Beni Prasad

Verma is doing likewise with communications, while both R. V.

Paswan and C. M. Ibrahim are working hard to ensure that local

transport infrastructure remains inadequate.

While a certain amount of personal diplomacy may be

necessary for the continuance of the UF ministry in office, it

needs to be remembered that survival is by itself not the

objective. The goal has to be increased growth. If it is expected 

that US Secretary of State Madeleine Albright will appreciate

that the world has changed somewhat since Papa Korbel's time

and not harp on the same Kashmir mantras as were used then

by the US and the UK to kill any incipient move by India to forge

strategic links with the rest of the democratic, English-speaking

world, one expects the Gujral team to go beyond old policies in

formulating solutions to domestic economic problems.

Appeasing Game

Today's Nehru family loyalists are not just those who flock to 10

lanpath, they are also those political parties that seek to push the

economy back into the regulatory cage of the pre-1991 period.

Unless the Gujral government passes legislation freeing industry

and services from such cords, it will not be fulfilling its promise.

At present, it appears to be more a Surjeet than a Gujral

government, at least in regard to economic policy.

For the sake of a few thousand state employees, the UF

partners appear prepared to sacrifice the long-term interests of

the rest of the country, just as the right-wing swadeshi lobby

wants to coddle controls-friendly sections of domestic industry

at the cost of the consumer. Elements of both saffron and scarlet

are united in promoting Mughal-British-Nehru style restraints

on honest and efficient enterprises, thus encouraging units that

profit through sleaze and connections. Unfortunately, the UF

government has thus far gone along with such views rather than

implement reforms that will lower bank interest rates and attract

greater investment in infrastructure and other key sectors.

The Communists (and Mahathir Mohammed) have a point:

that pure speculation needs to be curbed. However, this is

possible through the market, as Singapore has demonstrated in

the housing sector. There, punitive capital gains taxation is

levied on houses sold within three years of purchase. India can

also have a system whereby steep capital gains taxes get levied

on shares or houses sold within 180 days of purchase. On a

sliding scale, those sold after 18 months should escape this tax.

This would attract the genuine investor while keeping most

speculators out. However, such measures are different from

those that choke off investment altogether, which is what the

China and Pakistan lobbies in India want the government to do.

Lack of Leadership

On August 15, robust speeches were made about "cleansing the

country of corruption". To show that little has changed, all that

needs to be done is to examine the Foreign Investment Promotion

Board (FIPB). In the Narasimha Rao period, the PMO would

block or clear projects on opaque and arbitrary grounds. Today

the same process continues. Files move swiftly, then crawl, then

stop, then mysteriously speed up again. Unless the FIPB is made

transparent and guided by objective procedures, investment

flows will continue to be a trickle relative to the potential.

However, just as in the case of the (frozen) PSU reform or the

(lack of) moves to simplify laws and procedures, here too

rhetoric seems all that is on offer. Another ministry more

concerned with blocking than with promoting growth is the

ministry of environment. It has been killing or freezing projects

with a vengeance. The eco-fundamentalists who seek to push

India back to the agrarian age appear to be ruling the environment

ministry, with negative consequences for growth.

One reason why there appears to be a glut of politics on the

front pages may be the lack of initiatives to prod the country

onto the 10 per cent growth track. Should Gujral put his job on

the line and shame his team into bringing forward the policies

and legislation needed tu achieve this, he may find the doubts

about his survival dissipating. Such a course is the only one

consistent with the pledge he took on August 15, 1997 - to

fashion a system free of graft that will give a better life to the

prior. Both aims are linked, and need a focus by the UF

government on development rather than politicking.