India received more than $100 billion of foreign aid between 1950 and 1990. Foreign aid was the only source of foreign currency as India did not have much to export that world wanted. Aid India Club met annually in Paris to make commitments so India would know how much to expect. Foreign currency was tightly controlled hence FERA and FEMA and famous $8 men, of which I am one.
Foreign Aid was the worst possible thing that could have happened. It enabled bad economic behavior to last far longer than would have been possible. It was the economic crisis of 1991 that forced the hand. Now, India has a close to a $500 Billion in foreign currency reserve. India has an IT industry of almost $300 Billion dollars.
1991 liberalization only dismantled the extremes of the license/permit Raj. Vajpayee government got back to liberalization when finance sector, aviation sector, automobile sector and telecom sectors were liberalized. The results were spectacular.
There is a lot more liberalization yet to be done. For India to emerge as an economic powerhouse it needs to back to that agenda.
After a two colorless and ineffectual prime ministers, the rise of Atal Behari Bajpai in 1998 had been a breath of fresh air. He is articulate, forceful and not an effete socialist of the congress ilk. He made a fundamental break from the past when he led India onto the world stage with a nuclear bang. His reaching out to Pakistan with Lahore bus diplomacy and later his leadership during Kargil war made every Indian proud. Though he belongs to the Sangh Parivar and is a leader of BJP which espouses Hindutva as its core philosphy, his leadership by and large has been positive and uplifting. This was so in spite of the occasional mischief by Parivar minions against minorities. Even on the economic front his leadership, though not spectacular, had been good enough to keep country moving forward. Telecom liberalization and accelerated privatization of the public sector units are likely to provide a major boost to the economy soon.
It is under this backdrop, comments made by him in Goa at the party enclave are unfortunate, to say the least. Coming on the heel of riots in Gujarat where over a thousand Muslims have been killed, and over a hundred thousand have been rendered homeless in a retributive vigilante justice, they have sounded a discordant note that is totally out of tune with the need of the time. Also, casting a slur on the whole people because of the acts of a few is very unbecoming for the prime minister of the great nation. It is discouraging to see this happen at this time when Indian democracy is finally beginning to blossom and focus on economic growth. India is finally getting the recognition as a pluralistic democracy that has achieved maturity and confidence and is on its way to achieving the prosperity for its masses within a generation or two. Faltering leadership at this time by the prime minister can only hurt and is likely to take focus away from the economic imperatives. That may prove to be disastrous for the nation and may set us back several years.
India needs to fixate on China. Starting at roughly same place in mid seventies, China has raced ahead. Chinese per capita income is double that of India already. China, moreover, is outgrowing India at about 3% per capita per year. At that rate, an average Chinese will be producing four times as much as an average Indian. That spells disaster for India, as China is not likely to be friendly power. China has already used Pakistan as a low cost way to distract India. Now is not the time for unproductive misadventures. If India is to catch up with China, or at least not fall too far behind, it needs to boost its growth rate to 10%. What is needed is, a leader who provides an even sharper focus on economy and pushes for faster liberalization and not allow unnecessary and unproductive adventures.
Prime minister will do well to remember that partition did not produce a Muslim nation and a Hindu nation. India chose to be a secular democracy. India is too diverse to be any thing else. After 44 years of meandering, India finally set sail in the right direction in 1991. Economic liberalization and emergence of free electronic media in India has invigorated the Indian democracy. Frequent change of power through electoral process in 90’s has shown how deep-rooted democracy has become. Now is not the time to look back and undo the gains in the name of imagined past glories or settle scores for past slights.
Spontaneous rise of a world class IT industry in India has given a great boost to the self-confidence of Indians. The earlier sense of hopelessness has given way to new hope; we can compete with the best and the brightest in the world in a sunrise industries. But it is not enough, we need to get going and build a world class manufacturing industry in India. We need to set a goal of producing 10 million new jobs a year. A lot needs to be done to build the infrastructure. Power sector needs to be reformed. Free markets need to be introduced in agriculture. We need to eliminate illiteracy; we need to build hundred more IIT’s.
We need a steadier hand at the wheel, now is not the time for faltering. Is prime minister up to the challenge? I had assumed he was until recently.
With PM Manmohan Singh at Montek Ahluwalia’s home in the spring of 2000. He was the leader of opposition in the Rajya Sabha at the time. I was on my high horse at the time championing the telecom reform. Manmohan Singh was dead set against privatization of the industry at the time. I was surprised, given his liberalizer creds.
I later came to realize that he was not a liberalizer at all. He talked about inclusive growth as the PM and pushed NREGA as his main agenda. During his 10 years no liberalization happened, at least I cant recall any. And growth came crashing down. He preferred no growth to the non-inclusive growth. During Bajpai’s regime there was a liberalization galore: starting with telecom, airlines, financial sector, automobile sector, golden quadrilateral highway building program. I am sure my memory is not as good as it used to be so there must be more that I am missing.
Thomas Babington Macaulay must be turning in his grave wondering what had he wrought.
After East India Company had conquered India and was in full control of India san Punjab in 1830s, he set out to educate a class of Indians who will be intermediary between the British and the Indian masses and will help them rule. They will be fluent in English and accept British as a superior race but will be seen by masses as part of them.
British never had the numbers needed to rule directly. At the height of British Raj, there were fewer that 100,000 English men, women and children in India. There were less than 10,000 of them in the army of almost 200,000.
Macaulay’s children were quick studies. They were not happy being clerks. They went on to become engineers, doctors and scientists. Within 50 years, they had started Indian National Congress as a national movement.
Macualay’s children have turned out to be very aspirational. They out-argued British out of India, gave India constitution and built a well functioning democracy.
As they moved on to the world stage they constitute 10% of all the business and science/engineering professors in US and almost 14% doctors. They are emerging as CEOs in top corporations. One of them may even become a VP of US.
I know the Saffron crowd detests Macaulay’s children but they are just being ungrateful.