Wednesday, December 2, 2015


After five years of slow growth, the economy started looking up in 2003; I celebrated that in the Business World column of 19 December 2003.

Ask not why the times are good

For the first time since the Congress departed Raisina Hill, the economy is looking good. Sundry estimates of growth this year are creeping up to 7 per cent. I reckon that the economy will grow at least eight per cent, perhaps even ten. The shares are soaring; even those fools who bought at the peak of the great Congress boom of 1994 can get their money back. None of us can eat the foreign exchange reserves. But when the foreign minister calls ambassadors of 15 countries and tells them India will not be taking their aid any more, a whiff of pride can justly fill our chests. If there was a time for smugness, this is it.
How did we ever get to this? The mainstream view is that reforms did it – that slowly, tortuously, this government has taken forward the reforms started by the Congress government a dozen years ago. My view is just the opposite: that not only is this government ignorant of the ABC of reforms, but that it has done immense harm to the economy by raising import duties to oblige backward businessmen and feckless farmers, and by blowing up public expenditure far in excess of revenue. Its stupidities set us back by half-a-dozen years. But every economy has its cycle; even despite the government, a downturn must end some time. However slow the growth – and growth has been slow in the past six years – capacity built up in boom years will get slowly utilized, the cost paring forced on producers by bad years will revive their margins, and some day, some day their fortunes will look up again. And that day has arrived.
So let us enjoy the good times while they last. Of course, there are plenty of things to worry about for those inclined that way. This is the year of the Grand Elections; and all indications are that the present government will return. For someone with faith in its economic incapacity this cannot be a cheering prospect – although the Congress would indulge in no less folly if it had a chance. Imports are growing faster than exports. Till now the impact of this worsening trade deficit has been masked by the funds foreign investors have poured into our shining stock market. This too cannot last forever. Those irrepressibly cheerful souls who are not impressed by this have only to look at our gallery of rulers. To start the day on a suitably somber note, keep the portraits of the following personages opposite your bed: Rabri Devi, Uma Bharati, Jayalalithaa, Narendra Modi, Mulayam Singh, Chautala. That should curb any tendencies towards irrational exuberance.
But you do not have to do it. Chastisement of the spirit was an old Christian virtue; we do not have to be that virtuous. Instead you can keep pictures of Urmila Matondkar, Arundhati Roy, Anu Aga, Arun Nair, Anand Mahindra, Zaheer Khan. One virtue of liberalization is that it expands your choice. You do not have to be obsessed by self-important rulers; the ruled offer better choices.
Nor do you have to be confined to this country. Growing numbers of businessmen are taking leave of their cut-throat competitors in this country and looking for better markets abroad. The old mode was to buy a textile quota and export cheap skirts to the US; the new mode is to fly to China to sell engine valves, or to Malaysia to sell medicines. For everything that can be produced can be exported; all that you need is a competitive price. Our government does not like competition; so it keeps appreciating the Rupee and making exports uncompetitive. Still, labour costs are higher elsewhere, and Indian workers are trainable and well behaved – at any rate outside West Bengal.
Even better than producing for export is to convince a competitor abroad that you can make his product better and cheaper. If he is convinced, he will invest in your factory, he will train your workers, and he will go and sell your product. This is one great reform the present government can take credit for. It has given up the unnecessary and unproductive confrontation that earlier governments had forced between Indian and foreign producers. Then, a foreign carmaker could not set foot in India, so no foreign car buyer was prepared to step into an Indian car. Today, Hyundai is the second biggest carmaker here, while Tata cars are being sold by Rover.
Nationalism is a rampant ailment; people instinctively think ill of other nationalities. But these hostilities dissolve when people get to know one another and find mutual interests. That is what foreign trade and foreign investment do – they make it unprofitable to fight. Once the overwhelming advantages of friendly intercourse are realized, peace breaks out and spreads like an epidemic. The killing fields of Europe, where 30 million, mostly civilians, were killed only 50 years ago, are one nation for all practical purposes today. China, the other battlefield of World War II, was the first to realize the magical properties of peace, and put to sleep its disputes with Russia, Japan, and Pakistan. India is usually backward, but it too is coming close to realizing this truth.
Although India is not in a position to punish hostile neighbours, it has begun to reward peaceful ones. The past year has seen Yashwant Sinha making overtures to almost all our eastern and northern neighbours except Pakistan. Not all the overtures were well conceived; not all the prospects are equally promising. But the message that it pays to be a friend of India is worth giving; its power can be increased by importing neighbours’ goods duty-free, letting their nationals invest in our stock markets, and admitting their students into our universities. If we open our gates wide, we can get a flavour of the world sitting at home.
Meanwhile, it is even more attractive for us to visit our neighbouring countries. Even today it is cheaper to take a holiday in Bentota than in Goa. Soon a dozen airlines will compete to take you to a couple of dozen destinations in Southeast Asia. Our weird government prefers you to fly with foreign airlines; your favourite Jet or Sahara will not take you to Phuket or Penang. But whether you fly by Thai or Garuda, the sands are just as dazzling and the bars just as inviting at the other end. For all too long have we Indians been cut off from the world – first by poverty and then by socialism. Thanks to this unfamiliarity, we do not have to go far to find exotica. Visit the Shinto shrines of Japan, and you will have to revise your idea of a temple; go to the crusaders’ fort in Damascus, and you will experience a market out of Arabian nights.
And who knows, if the Pakistanis have any sense, you will soon be able to walk down the Food Street of Lahore. For Lahore is the food capital of Pakistan; and those who visited that remote country testify to the high culinary standards over there. The best antidote to incivilities of Indo-Pak politics is to let people see that ordinary, simple, loquacious, somewhat foolish but generally warm-hearted humans live on both sides of the border.
And even if you cannot go far, enjoy the company of your peers. For Indians are getting less serious, less curmudgeonly, less self-important –the younger generation is far more capable of enjoying itself than mine. The highest enjoyment is to be found in your friends and family – and in a country of a billion plus you should not lack either.

And while you enjoy yourselves, give a thought to your less lucky countrymen. The Indian exuberance is a middle-class phenomenon; it is only if you can afford a fridge that you can think of a car. There are millions who cannot afford a cold drink, let alone a fridge. Make the life of one of them more bearable; that can give more satisfaction than you will get from your natty new jeans.