Comprehension

When talk turns to how India has done for itself in 50 years of independence, the world has nothing but praise for our success in remaining a democracy. On other fronts, the applause is less loud. In absolute terms, India hasn’t done too badly, of course. Life expectancy has increased. So has literacy. Industry, which was barely a fledgling, has grown tremendously. And as far as agriculture is concerned, India has been transformed from a country perpetually on the edge of starvation into a success story held up for others to emulate.

But these are competitive times when change is rapid, and to walk slowly when the rest of the world is running is almost as bad as standing still or walking backwards. Compared with large chunks of what was then the developing world - South Korea, Singapore, Malaysia, Thailand, Indonesia, China and what was till lately a separate Hong Kong - India has fared abysmally.

It began with a far better infrastructure than most of these countries had. It suffered hardly or not at all during the second World War. It had advantages like an English speaking elite, quality scientific manpower (including a Nobel laureate and others who could be ranked among the world’s best) and excellent business acumen. Yet, today, when countries are ranked according to their global competitiveness, it is tiny Singapore that figures at the top. Hong Kong is an export powerhouse. So is Taiwan. If a symbol were needed of how far we have fallen back, note that while Korean Cielos are sold in India, no one in South Korea is rushing to buy an Indian car.

The reasons list themselves. Topmost is economic isolationism. The government discouraged imports and encouraged selfsufficiency. Whatever the aim was, the result was the creation of a totally inefficient industry that failed to keep pace with global trends and, therefore, became absolutely uncompetitive. Only when the trade gates were opened a little did this become apparent. The years since then have been spent in merely trying to catch up.

That the government actually sheltered its industrialists from foreign competition is a little strange. For, in all other respects, it operated under the conviction that business men were little more than crooks who were to be prevented from entering the most important areas of the economy, who were to be hamstrung in as many ways as possible, who were to be tolerated in the same way as an inexcisable wart. The high, expropriatory rates of taxation, the licensing laws, the reservation of whole swathes of industry for the public sector, and the granting of monopolies to the public sector firms were the principal manifestations of the attitude. The government forgot that before wealth could be distributed, it had to be created. The government forgot that it itself could not create, only squander wealth.

Some of the manifestations of the old attitude have changed. Tax rates have fallen. Licensing has been all but abolished. And the gates of global trade have been opened wide. But most of these changes were forced by circumstances, partly by the foreign exchange bankruptcy of 1991 and by the recognition that the government could no longer muster the funds to support the public sector, leave alone expand it. Whether the attitude of the government itself, or that of more than handful of ministers, has changed is open to question.

In many other ways, however, the government has not changed one wit. Business still has to negotiate a welter of negotiations. Transparency is still a long way off. And there is no exit policy. In defending the existing policy, politicians betray an inability to see beyond their noses. A no-exit policy for labour is equivalent to a no-entry policy for new business. If one industry is not allowed to retrench labour, other industries will think a hundred times before employing new labour.

In other ways too, the government hurts industries. Public sector monopolies like the department of telecommunications and Videsh Sanchar Nigam make it possible for Indian businesses to operate only at a cost several times that of their counterparts abroad. The infrastructure is in a shambles partly because it is unable to formulate a sufficiently remunerative policy for private business, and partly because it does not have the stomach to change market rates for services.

After a burst of activity in the early nineties, the government is dragging its feet. At the rate it is going, it will be another 50 years before the government realises that a pro-business policy is the best pro-people policy. By then of course, the world would have moved even farther ahead.

 

CAT/1997

Question . 250

The example of the Korean Cielo has been presented to highlight