Monday, October 18, 2004


Times of India, Oct 17, 2004

I have been visiting the Far East regularly now for the past thirty years, and each visit has left behind the taste of a sweet and sour Chinese dish. I have marvelled at the sweetness of their economic achievements, watching poverty vanish from country after country. The sourness comes from an unhappy comparison with India and from the sadness of our missed opportunities. Last week’s visit to Hong Kong was no different. Like many an Indian before me, I asked wistfully, what if in 1947 the British had kept the island of Mumbai for fifty years? And what if Mumbai had become like Hong Kong?

Well, for starters, there would have been a policeman on the street when you needed him and he would treat each citizen equally and politely. The roads would have been clean, nicely paved and lit at night. An impartial judge could be trusted to interpret the law fairly and speedily. A diligent teacher would have been insistently present in the government school to teach my child, and so would a doctor in a clean government hospital if I were sick. Today’s Hong Kong offers all this. Although Hong Kong does not offer political liberty or democracy, the average citizen’s life is paradoxically freer, more benign, and happier than the average Mumbaikar’s. The reason is that Hong Kong delivers far better governance and far more economic liberty. The combination of the two raises the quality of life to a level that is the stuff of ‘Bombay Dreams’.

Indians are also impressed with Hong Kong’s wealth, and for good reason. Its per capita income is higher than England’s; its exports are more than twice India’s; its reserves are also higher than the whole of India; its currency is stronger than the rupee and the Hong Kong businessman commands greater respect.

However, if Mumbai had become Hong Kong, its greatest gift would have been to fuel India’s industrial revolution, as Hong Kong has done for China. Mumbai would have kept open our window to the world when the rest of India shut down during our dark socialist decades of the License Raj. It would have kept alive our great trading traditions, as it went on to become one of the world’s financial capitals. And when India began integrating with the world economy after 1991, it would have brought not only capital for India’s industrial revolution, but also trusted relationships with customers in the global market. Smart businessmen understand that anyone can put up a factory, but it takes real talent to perceive unfulfilled needs of customers in a competitive market and success lies in satisfying and retaining their loyalty. This was Hong Kong’s great bequest to China--it not only invested financial capital in China, but it brought trusted relationships with customers that it had cultivated over decades. This is a crucial but less appreciated reason behind China’s industrial take-off.

This thought game is not a mere academic exercise. Even today, when we are struggling to unshackle the chains of state control over industry, our Leftists are determined to stop those reforms. Instead of amending our labour laws to bring us on par with our competitors, the Left wants to burden our under-performing industry by extending reservations to the private sector. I would humbly request our honourable Leftists to take the new Delhi-Shanghai flight at state expense to learn how to compete in the global economy and how to wipe out poverty in a sustainable way through growth and not subsidies. Only then will they realise the damage they are doing by returning us to the Jurassic Park of the Licence Raj.

Monday, October 04, 2004


Times of India, Oct 3, 2004

Mani Shankar Aiyar is my friend. I don’t hold it against him for going to the wrong school. Nor do I grudge him his failure to learn economics from his sensible brother. I also ignore his juvenile scraps, such as the Savarkar affair. I even overlook his feudal bouts of sycophancy for the first family. With all his flaws, I like him because he is wilful. He is headstrong like Arun Shourie, and only determined people make history.

What I especially like about Mani is his passion for the Panchayati Raj. And this is why I am going to give him the best advice of his life this Sunday. It is to give up the ephemeral attractions of the no-win Oil Ministry and become instead a full time Minister for Local Government. If you don’t want to go the way of the forgettable Ram Naik, and if you want to be remembered as the man who brought good governance of India, I say, go and breathe life into Panchayati Raj.

We need determined people to fight the vested interests in the states that prevent the rightful devolution of power and funds to the panchayats. Don’t cop out by saying, it is a state subject. You know as well as I that the centre controls the purse strings, which means the clout to get things done. Panchayats need the authority to sack (or at least transfer) teachers that don’t show up in school; they need to withhold the salary of doctor and nurses who are absent from primary health centres. They need funds to dig wells for drinking water and build bunds for irrigation. The politicians and the bureacrats in the state capitals are naturally dragging their feet in passing on these powers to the panchayats, who now own them by law. Hence, there’s a man’s job waiting for you—go and implement the law.

In comparison, political suicide awaits you at the Oil Ministry. With oil prices at a historic high you will be the sacrificial lamb who will only be remembered for raising prices. Moreover, the only new idea to come out from your Oil ministry is a bad one, which is to merge the oil companies. We need the opposite. We need vibrant competition between companies, both government and private, to give us an efficient oil sector. We have seen time and again, whether in airlines or telephones or TV, competition has improved services and brought down prices. What is less well understood is that intense rivalry in the marketplace also makes companies stronger. Competition is a school where companies learn to improve products and lower costs--Michael Porter of Harvard taught this lesson to the world in the 1980s. For this reason we have competing brands within P&G, such as Ariel and Tide detergent. At J&J, they used to spin off an autonomous division when its sales crossed $100 million. Competition is the lifeblood of industry; so don’t merge the PSUs.

The ancient Greeks taught us the value of realizing our human capabilities. This is a theme that Amartya Sen and Martha Nussbaum have also taken up in recent years. The tragedy of modern India is that so many young people don’t realize their capabilities because they lack access to quality education and health care. With a single-minded focus on Panchayati Raj, you can improve governance on the ground and help millions realise their capabilities. It is the only moral thing to do. Besides, a man can either do one thing brilliantly or two things in a mediocre way. So, follow your passion, dear Mani