Monday, June 28, 2004


Times of India, June 27, 2004

I sometimes find it hard to believe how many of my close friends are leftists. The reason, I suppose, is that I was a socialist once, and old associations don't die easily. Also, I admire your courageous idealism even though it is misguided, and your undoubted personal integrity. This election has reminded us of the left's historic role - it is to make the right sensitive to the needs of the poor and to humanise capitalism in the process. You now have a historic opportunity to do it.

You must have been surprised by the hostility that greeted the Common Minimum Programme. Although you may dismiss the Indian middle class (of which, btw, you are a part), the truth is that it would happily pay to lift the poor if it had the slightest faith that the money would reach the poor. Sadly, the government's delivery mechanism is a leaky bucket.

We both agree that the best way to lift the poor is through good primary schools and primary health care. Hence, your proposed education cess looks attractive. But ask yourself: why don't you send your child to a municipal school? It is because they are rotten. Only 7 per cent of primary schoolchildren in West Bengal can write their name in Bangla. Some 30 per cent of teachers are absent in Bimaru states and 50 per cent don't teach, and most beat their pupils. Unless we first reform our schools (by giving parents' associations a voice, for example, in the teacher's pay) you are only wasting our hard earned money. We already spend around Rs 1 lakh crores on education (which is higher than most countries as a per cent of GDP) and estimates show that a third is wasted.

In the past weeks, you have opposed labour reform, wanted loans waived to farmers, and asked for a roll back of the modest LPG price increase - all this in the name of the poor. Consider this: labour reforms will only hurt the lazy among organised labour (which is only 7 per cent of India's total labour) but it will improve the lot of the 93 per cent. Also, it is the rich farmers who default on loans, not the poor. Finally, it is the middle class which uses cooking gas while the poor use kerosene. It sounds suspiciously as though you champion the labour aristocracy, the rich farmers, and the middle class. For 40 years you supported the license raj, knowing full well that it helped big business houses against new entrepreneurs. There is no bigger indictment of the Indian left - in the name of the poor, it has done so little for the poor.

This brings me to your historic role. If you genuinely care for the poor, then help the state to improve the delivery of services to the poor. The problems of India's poor will not be solved by ideology but by good implementation. And this needs mental application. Since the 1970s the Economic and Political Weekly has been highlighting the horrendous leakages in the employment guarantee schemes. Focus on the how, not the what. It is easier to abuse the bourgeoisie, but more difficult to come up with real answers to real problems.

I sometimes think that you hate businessmen so much that you would keep everyone poor rather than allow a few businessmen to get rich. It is time you reconciled to the market as the only workable economic system. You may dislike businessmen, but you must value competitive markets. Finally, ditch your naive faith in state control. Our nation is groaning under the weight of red tape. Stop being statist - it makes you sound like Murli Manohar Joshi !.

Sunday, June 13, 2004


Times of India, June 12, 2004

During the past year the world has begun to see us differently. In the nineties, China occupied centre stage, but increasingly Western commentators have begun to club India with China as future economic powers. This image received a jolt with the change in government, but it will recover because our economy is strong.

We owe this new respect, in part, to the outsourcing controversy as the West has begun to think of India as a competitor for its service jobs. The changed perception has also made global investors look at us once again, which is why I received an invitation from a group informally known as The Billionaires Club, organised by the respected investment firm, Goldman Sachs.

Gathered in an elegant room in Chicago last month were 15 soft-speaking individuals whose collective net worth exceeded a hundred billion dollars. First, they listened to the now famous BRIC report, which projects India to be the star performer over the next fifty years, ahead of Brazil , Russia , and China . Next, I got up and unabashedly sold India for 45 minutes. Before concluding, I asked these worthies why they preferred to invest in China . One of them gently corrected me, ‘‘Forget China , we have much greater investments than India in smaller countries like Thailand , Malaysia , Vietnam .’’ I asked,

‘‘Why? Don’t you like us?’’

‘‘We love India , but we hate your red tape.’’ Over the next thirty sobering minutes I bit the dust, as I heard one horror story after another about India ’s officialdom. The owner of one of the world’s largest hotel chains described how it took 5 years to get land access to his hotel in Mumbai. Another spoke about his humiliation by the Reserve Bank. ‘‘In other countries we deal with banks, but why are we forced to deal with the central bank in India ?’’

Someone described how his factory was delayed by two months because he refused to bribe the engineer from the SEB. Another complained about our central excise and customs officials. The owner of an FII said, ‘‘Portfolio investors don’t take the Mauritius route to evade Indian taxes — we do it to avoid dealing with your tax officials.’’ To drive the point home, the group contrasted the welcoming behaviour of Chinese officials, who they said were also corrupt, but had created a business friendly environment.

A second reason for India ’s weak FDI performance, they pointed out, was our infrastructure, a point that Jeff Immelt, G.E.’s boss, also made in Bombay recently. ‘‘In the nineties, China ’s energy sector grew 20 times that of India , and transport market 8 times,’’ he said. On the other hand, the billionaires were hugely impressed with India’s human capital, and one of them recounted how Indians had upgraded Russian planes brilliantly with Indian avionics, ‘‘and this has impressed the hell out the American defence establishment.’’

‘‘Face it, Mr Das, Indians are a great people, but your red tape is the killer,’’ was the conclusion. I had tried to put up a brave front in the meeting, but as I trudged back to my hotel I had a sickening feeling in my stomach. I consoled myself thinking, why does it matter to India ’s poor what 15 rich Americans think? But I knew in my heart that it did matter — if these men invested, others would follow. And this would create jobs, bring technology, make India competitive, bring revenues to the government, and this in turn would make it possible to invest in village primary schools and health centres. This is how China has been lifting its poor, and this is why P. Chidambaram so desperately wants foreign investment.