“Life can only be understood backwards
but it must be lived forwards,” says an epitaph from the philosopher, Soren
Kierkegaard. It rightly belongs on the grave of this dying UPA government that
has destroyed our economy, with the traumatic collapse of the rupee its latest
achievement. The epitaph reminds us that we must not ignore history if we want
to lead a reasonably predictable life in the future.
One of the greatest lessons of history is that only an
industrial revolution can make a poor nation prosperous. Every country has done
it this way. Only thus can a nation hope to provide jobs for the millions of
young people on the farms. But after two decades of reform, India’s economy is
driven not by manufacturing but services.
Tragically, 90% of Indians work in the informal economy and
even Ganesh idols are sourced from China. Our prime minister knew about this
structural weakness when UPA came to power, and his government should have
focused on making India a great manufacturing nation — by reforming rigid
labour laws, investing in power, roads and ports, cutting red tape, and
removing “inspector raj”— so that India does not rank 134th in the ease of doing
business.
Instead, this government turned against industry. It brought
retrospective changes in taxes, stopped hundreds of projects through red and
green tape, imposed arbitrary penalties on companies and placed silly
conditions when inviting foreign investment. Given this very unwelcoming and
unpredictable climate, honest business people lost all faith in the system.
Only crony capitalists remained faithful. And now, in the midst of one of the
worst crises faced by our country, this government has championed two
disastrous pieces of legislation.
It has proposed a new law based on the dreadful premise that
acquiring agricultural land for industry is inherently coercive and bad. Under
the new law, it will now take years to acquire land, as the land acquisition
proposal even for small projects will have to pass through a hundred hands.
This will ensure that India remains disadvantaged against its competitor
nations and does not experience an industrial revolution.
Secondly, it has enacted a law on the ridiculous assumption
that two thirds of Indians go hungry to bed. Hence, the state will now have to
provide 80 crore Indians with grain at 10% of the market price when less than
2% of Indians claim to be hungry according to official surveys. Where will the
colossal money come from when the nation is teetering on bankruptcy with its
rating about to be downgraded to junk status? Two weeks ago Sonia Gandhi told
Parliament that if there is no money for the food security bill, it would just
have to be found. And if the public distribution system is broken, she said, it
would have to be fixed. But how, she did not say.
We used to believe that even if India reformed slowly, it
was reforming surely and there was no going back. Under this premise
businessmen made huge investments after 1991 and this unleashed the gift of
high growth, gradually making India the world’s second fastest growing economy.
But this government sneered at this gift and has even undone some reforms.
Despite some excellent moves by the finance minister in the past year, there is
uncertainty and confidence remains low.
The coming of Raghuram Rajan at RBI has stemmed the rot
somewhat. But it will take time to rebuild confidence that has been recently
shaken by the fall of the rupee which brought huge collateral damage to the
bond and equity markets. India can still create an industrial revolution if it
remembers Kierkegaard’s epitaph. The rupee’s devaluation has once again
presented an opportunity for export driven manufacturing growth. But it will require
a deep commitment from the next government to create reliable infrastructure
and transparent rules.
Meanwhile, the best that this government can do is to call
early elections and put an end to some of our misery. Let people decide if they
want to take the path of long-term prosperity or the path of short-term
populist giveaways. One can never be sure in a democracy about the next
government but it is in the nature of the human heart to hope for a better
tomorrow.
