Sunday, October 19, 2014


N Chandrababu Naidu is an unusual politician. He inherited his political mantle from his father-in-law, N T Rama Rao, who was the leading hero of Telugu films before he turned to politics and became chief minister of Andhra Pradesh. Naidu once called me to Hyderabad, asked me about the reforms we introduced when I was in the finance ministry in 1991-93, and asked for my help in doing reforms; unfortunately, he was defeated in 2004, soon after he consulted me. I dropped in on him once again in 2008, but he was then in opposition, and was more taken up with returning to power. He is now back in power in truncated Andhra Pradesh, and is making grand plans to build a new capital for it. This column was published in Business Standard of 26 November 2001.


Chandrababu Naidu is India’s most famous chief minister – at home and abroad – and the most well regarded. He has worked long hours and travelled far and wide for the sake of Andhra Pradesh. It must be a matter of some frustration for him that despite his hard work, Andhra Pradesh is not much more prosperous, nor the dream destination of global – or Indian – investors. Should he be more patient? Or should he do something different? To help us answer this question, Sevanti Ninan has ghost-written a book by him which tells us cogently what he thinks and what he has tried to do (Plain Speaking, Viking). Let me say right at the outset that I admire Naidu and would be delighted to see him succeed. In the rest of the article, I shall eschew compliments and stick to what I think are the harder issues.
What struck me was how ideal this chief minister is. What are his priorities? First, Human Resource Development. Next, improving the environment. Third, power reform. Fourth, poverty reduction. Fifth, law and order. Finally, long-term growth. Can anyone fault this? Wolfensohn would fall in love with Naidu. The rest of us would doze off. In his own (or Ninan’s) words, Naidu comes on as too perfect. Is there something he passionately cares about? Is he impatient with at least some of the do-gooders’ shibboleths? Has he some strategy – would he do some easy and high-return things first, harder things next? Compare him with Lee Kuan Yew, Reagan, Mahathir, Adenauer – leaders who transformed their countries – and you will see the difference. They were men with a mission, lopsided characters who cared about just a few things, were opinionated, stuck to a narrow agenda and pushed it through. Being so well rounded must be exhausting for the Chief Minister, and perhaps not such an efficient use of his energies.
Second, who are his troops? Reading this book, one would get the impression that Andhra had no civil service. Consider some of the best performers in the post-war world – Japan, Korea, Thailand – it would be difficult to recall a leader who transformed them. Their transformation was managed by their civil servants. It is true, Naidu has done much to root out corruption from his civil service and to make it more goal-oriented. But what is his vision of the civil service? How will he create one which will carry one the good work when he falters or leaves? The art of leadership lies in delegation; and all we know about the Chief Minister – his 18-hour days, his use of e-mail, his phone-in programmes – suggests that he is not good enough at delegation.
Third, what is his political gameplan? His party, his MLAs, his cadres are as invisible in this book as his bureaucrats. He does mention the training courses he has made them take. But politicians are not school kids. In this country, they are petty businessmen. They are people who are too poor or incompetent to succeed in business, so they use their gift of the gab and people-skills to get into representative bodies and make money. Even an otherwise clean chief minister like Digvijay Singh recognizes this and makes space for his party men. There are few countries in the world – most of them in Scandinavia and western Europe – where one finds politicians to be mostly honest. There they are rich, otherwise provided for (for instance, a German teacher who gets elected retains a lien on his job forever) or employed and paid by their party. In Andhra, Naidu is competing with Indian-style parties; how does he expect to feed his politicians, to keep up their morale, to give them political space?
Fourth, what about money? Naidu has two chapters on state finances which are best described as scholarly – good analysis leading to no solution. He compares various figures for Andhra with those for other states. He laments the centre’s hardheartedness. He bemoans the fallout of the Pay Commission. He mentions the subsidies he has cut. He defends his pursuit of loans from the World Bank. But tax reform? Increasing the elasticity of revenue? Strengthening budgetary control? Changing expenditure priorities? He did not think they merited a place in this book; and I suspect they do not have much of a place in his mind. So at least it would seem from the virtually invisible improvement in Andhra Pradesh’s finances over the past four years. Finances will make or break Naidu’s experiment, and evidence is still to emerge that he has got a handle on them. How about concentrating on fewer tax bases? Reshaping taxes to make collections more secure and corruption more difficult? Capping rather than reducing subsidies? Relating taxes to government services, so that people are more prepared to pay? There is a certain lack of ideas in this crucial areas.
So far I have talked about what I miss in Naidu’s book. Let me now come to two of his passions that it is impossible to miss – information technology, and foreign investment. Naidu describes with justifiable pride how he has applied IT to government and thereby cut out sleaze and delay. He has also built a supermodern complex in Hyderabad and used it to attract software companies from all over the world. All this is just right. But I, perhaps wrongly, suspect a fallacy that is common to the chief minister of Andhra, the Prime Minister of India, and Pramod Mahajan. They all are determined that Andhra and India should not miss on the IT revolution. For one thing, the countries that will benefit most from IT are not those that produce most of it, but those that consume most of it. It is far more important to find economic uses of IT than to attract IT firms. And in the future as in the past, people’s welfare will not depend so much on how much IT they consume, but on what they eat, what houses they live in, how they travel to work, and so on. There are more effective ways of making a visible difference to the way the people of Andhra live: introduce international standards of grading for its tobacco, rice and cotton, so that they get a better price for these commodities; use ICRISAT to disseminate agricultural technology into Andhra’s drylands; or use DTH to impart all education.

Finally, the colour of the investor does not matter; investment is investment, whether it comes from an American or a Punjabi. And it is attracted, not by high-profile suitors, but by ground conditions – land, power, water, government, cities. Gujarat got rich not so much on foreign investment but by luring away industrialists from West Bengal; and all it had to offer was hassle-free government. But managers do not like Gujarat because they cannot drink there and their children cannot learn English. Andhra today has a comparative advantage over Gujarat and Maharashtra in its quality of government; it could industrialize much faster if it lured away their industry. Maybe there are easier ways of achieving what the Chief Minister is trying to do with so much high-profile exertion.