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INTERVIEW

’The Economy Is Just A Sideshow’

Paromita SHASTRI

Monday 26 April 2004, by SHASTRI*Paromita

The hero of economic liberalisation on the Congress’ economic vision, the Indian people and India Shining

He’s not taking another shot at the Lok Sabha because of an angioplasty but he’s campaigning. Dr Manmohan Singh, leader of the opposition in Parliament, hero of economic liberalisation and Congress’ cleanest leader, looking a bit under the fabled north Indian weather, speaks on Congress’ economic vision, the Indian people and India Shining.

Do you think the economy and growth have become the main poll planks?

The BJP is only harping on its statistical agenda. The economy is just a sideshow. The amount of hatred they are pouring on Mrs Gandhi and her family is horrible. If it was so secure of its achievements, why is it raking up issues like foreign origin and Bofors? Advani himself has punctured the balloon by saying that this prosperity has not touched the farmers who are 60 per cent of the population. Look at what happened in the PM’s constituency (the sari stampede).

Is the average voter more interested in economic achievements now?

I wish it was true. The BJP doesn’t appear to have a campaign focussed on development. The ordinary people have always been primarily concerned about economic problems. They are not bothered about politics. The middle class has this luxury of not having to worry about immediate economic concerns. When things do well, they feel they are responsible for it. But when things go wrong, they blame the system.

You mean the middle class believes India is shining for them? Well, there are certain positive points about the economy — IT, telecom. Areas where we have comparative advantage of high-quality, low-cost human capital. Outsourcing and ITES enable us to use those advantages.

Do you believe in India Shining?

Shining yes, but in what? If you say India is now growing faster than five years ago, no, it’s not. The rates of growth of output, national income, exports, agriculture, industry in the last 5-6 years are much lower than what they were in our rule. It’s nothing that’ll set the Ganga on fire. But that doesn’t mean the country is not progressing. It’s making progress because of the foundations we laid. In balance of payments, market-induced exchange rate, direct taxation, portfolio tax, even in the maturing of the capital market, you see the steps we had taken.

Irrespective of who’s responsible for them, what do you think are the economy’s greatest strengths now?

First and foremost, the BoP and external debt. But the fiscal situation is far from comfortable. In infrastructure, things are happening in telecom and roads. But the growth of power production in the past few years has been only 3-3.5 per cent. Even the April-February Index of Industrial Production is only one point higher than last year. Last year growth was 6 per cent but agriculture growth in the past 5-6 years has been half of what it used to be in our time. The terms of trade for the farmers have deteriorated. There’s no public investment, no reform in agriculture. The Sharad Pawar committee on drought and disaster management is lying for one year because there’s a fight between him and the government. Credit for farmers is at 15-16 per cent while loans to buy a refrigerator charge 7-8 per cent. There’s a perversity in the system. The banks have to be directed to lend to the farmers. We have to have a minimum emphasis on social capital development even if using the banks as instrument.

The highway project, you’ll agree, is a big stimulant. Why couldn’t the Congress come up with something like this?

That is true. But the sorry state of the economy we inherited didn’t allow us to even think of such things. This government inherited a well-functioning economy, sound in food, forex and prices.

But apart from the roads, the other physical infrastructure like railways and airports are in shambles.

The Congress’ disinvestment policy still seems to be caught in a time-warp.

If PSUs are doing well and making reasonable profits under competitive market conditions, not monopoly condition or loss-making, then we don’t see the need for privatisation. They are of course independent to go to the market to raise capital as long as they retain their public ownership.

That rules out Indian Airlines’ privatisation.

If IA assures us that it can flourish in competition, we have no problem in keeping it public sector. There must be greater accountability of course, and transparency. Just because some minister can misuse the power they have over PSUs doesn’t mean we throw out the baby with the bathwater. The public sector still has a role to play.

Your investment policy is almost a free for all. That’s a dramatic change.

We’ll set aside only defence and environment related sectors, and where there is a fear of monopoly. The rest is open to all to invest. Through the RBI or market. No limits whatsoever. We don’t have a control fetish. We are the original reformers. But at that time, everybody was opposing it. We were also feeling our way around.

When did Congress decide to reclaim reform ownership?

We have been consistent on our stand on reforms. Take our economic inspection group or Banagalore policy resolution. Only the direction and speed were in question, in an effort to include the deprived section. There was never any question of going back on reforms.

How would you solve the unemployment problem?

First, the economy has to grow fast enough. But we’d also look at labour-intensive growth — export units, textile units after the MFA phaseout. We will have a national employment guarantee scheme for small sector and destitutes. We’ll also set up a national commission to look into the credit and supply problems of the informal sector.

Do you think India can sidestep the investment issue and reach a high-growth stage through services alone?

We can’t neglect manufacturing. Our manufacturing is 17-18 per cent of the GDP compared to 35-40 per cent in South East Asia and China. How else do we give employment to our huge blue-collar workers? We have a 470 million workforce. BPOs can generate at best 4 million jobs.

Are we’re ready for full convertibility? How else do you stop the rupee’s climb?

That has to be gradual. We’ve to be cautious. We can carry on that road only when our fiscal system is sound. The banks are in good shape but if intrest rates start climbing, they may get into trouble. There are other ways of controlling the rupee — to create a demand for it, by liberalising imports.

Your party’s chances of forming the next government seem remote.

I don’t think so. We are still one month from elections. Even in urban India where the shine is visible, there has been a progressive dilution of the feel-good. The SC verdict, the Lucknow accident — these are showing the real face of the BJP.

Will you ally with the Left parties who’re rigid on privatisation and labour?

They had a common minimum programme with the UF. As for labour law reform, I’m sure if the employment situation was buoyant, the labour wouldn’t mind a little flexibility. Anyway, we’ll cross the bridge when we get there.

P.S.

This is the full text of the interview, extracts from which appeared in the print edition.

in Outlook India, Monday, April 26, 2004.

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