After a path-breaking policy change towards privatization in mid-January, the BJP has been back-pedaling with a ferocity that has left even the erstwhile socialist and present Defence Minister, Mr. George Fernandes speechless. The BJP not only is not a party that cannot shoot straight, it cannot shoot, period. Is it possible to go backwards so fast? Since the answer is an obvious yes, the key question is obviously why.
In a few weeks, Gujarat goes to the polls in what is bound to be one of the most important elections in India since the Emergency elections of 1977. According to many pundits, and the prestigious India Today (IT) opinion poll, the BJP is not only expected to win, but to triumph with 55 percent of the vote and two-thirds majority of seats. Some analysts are talking about the distinct possibility of the next national election being between “leaders” like Narendra Modi and Sonia Gandhi. A Hindu chauvinist and an Italian Christian – it speaks volumes about our democracy but not much about our future.
It was the end of summer of 1997, the East Asian crisis had just begun, and at the World Bank-IMF meetings in Hong Kong I presented a paper entitled “Economic Freedom and Growth Miracles: India is Next”. I then argued that because of ongoing increases in economic freedom, the Indian growth rate should accelerate towards 7.7 percent per annum. “In other words, the uncaged tiger is now prowling a restricted habitat but should soon freely hunt in the whole jungle”.
Openness leads to more efficiency, greater growth, and boredom. Once the Ministry of Finance took the unprecedented step of openly discussing tax reform on the web, via the Kelkar report on taxes, the suspense about the budget has disappeared. But there is still a lot of mess to be cleared up, and it remains to be seen whether the government is genuinely concerned about fairness and growth.
We must reduce the fiscal deficit. In the name of the poor. We must raise taxes. We must not cut expenditure. Round up the usual suspects. But does anybody bother to at least check if the numbers add up, if the logic is sensible, if the reasoning is consistent? No, and why not? The TV glitterati have an easy answer – it is all so complicated really. But we must cut the deficit. Tune in again next year, same time.
Finance Minister Jaswant Singh has scored a century on debut. He should have scored a few more runs to make certain the country wins, but he has done enough to ensure a high probability of success. And as a welcome change, he did not try to be a batsman, pace bowler and googly expert all at the same time. The only reason he got out earlier than he should have, is that he did not go all the way on the recommendations of the Kelkar committee report pertaining to taxation of individuals and corporates. That, presumably, he has left for another innings.
Finance Minister Jaswant Singh’s maiden budget is oriented towards growth. It portrays a vision of India as a will do, can do country, a society ready to assume its historic role in the world economy. Juxtaposed between the fast growing developing country authoritarian model of China, and developed countries feeling the heat from competition down South, there are few counter-weights to the emerging China dominance. Thanks to our misguidedly misguided policies towards labor, small scale industries, food security and other paraphernalia of the left-parivar economics, China has become the leading producer of all the manufacturing goods (besides whiskey) that our erstwhile “in the name of the poor” glitterati consumes. There is little left for other developing countries except to move rapidly up the value chain – that is what Korea is desperately trying to do, and what Jaswant Singh is trying to deliver.
The war in Iraq has changed a lot of equations with the expected effect of confusion in all our minds – including mine. Not predisposed to sitting on the fence, I find myself envious of those in that position. What is going on?
It is more than fashionable, especially among the intellectual left, to hector everyone about the lack of governance in the market place. Arguing against governance is arguing against motherhood, and I, like most people, am not into matricide. Good governance is good, and more is indeed better.
The comparison of India with China is hot - again. First, Prime Minister Vajpayee visited China and every born-again journalist (as well as those born sometime ago) started comparing India with China. The reporting was considerably more favorable to China, with some wizened (but not necessarily wise) experts attributing China’s better economic performance to India having to cope with the “drawbacks” of democracy. Before the dust could settle, the discussion heated up again with the publication of the UN’s flagship report on the state of welfare of the poor, Human Development Report, 2003. This report, done by objective experts, and experts with access to the research of the best and the brightest at not only the UN but also the World Bank, convincingly demonstrated that not only was the average Chinese significantly richer, but so was the average poor Chinese – so much so, that only 16 percent of China’s population was poor, compared to more than double that amount, or 35 percent poor in India.
