Prime Minister Atal Bihari Vajpayee has said that reforms carried out in a democratic country like India are more deeply rooted and sustainable, and democracy cannot be blamed for impeding reforms.
Vehemently rejecting any suggestion either that reform has been too slow or that India's democracy should be blamed for its slowness, Vajpayee said in an interview to the Financial Times: "We cannot accuse democracy of impeding reforms."
"I also do not accept that our reform process has been 'stop-go' in nature. It is natural -- and beneficial for the durability of reforms -- that the process should move forward on the basis of broad consultations and reconciliation.
"I would go one step further and say that our new experience of successful coalition governments has been ideal in balancing divergent views and accommodating regional and sectoral interests more effectively."
Referring to comparison between the reform process in India and China, he said India had much to learn from China. But China's system of politics was clearly not part of it.
"I visited China recently (in June) and was very much impressed by its many economic achievements," he said. "But I do not think anyone who has closely followed the Indian economy over the last decade can say that our economic reform programme has lacked urgency," he added.
Owing partly to healthy monsoon rains, growth in India's gross domestic product this year is expected to hit 7 per cent or more -- up from just 4.4 per cent last year. Agriculture accounts for almost a quarter of the economy.
Describing as outdated, criticism from institutions such as the World Bank that there was lack of urgency in upgrading the country's rural infrastructure in order to lessen the economy's dependence on the vagaries of the weather, Vajpayee said: "We are focusing strongly on infrastructure development in rural areas, including improved power availability and upgraded irrigation facilities, so that the correlation between our economic growth and the monsoon can be reduced further."
Vajpayee also highlighted the government's "ambitious" plans to link the country's main rivers in a national network of canals and basins.
He also dismissed the suggestion that foreign direct investment to India would remain far lower than that of neighbouring China. India attracts roughly a tenth of the FDI flows of China partly because of perceptions that it has a cumbersome and corrupt bureaucracy that often fails to honour its obligations.
But Vajpayee said that FDI to India, which accounts for 1.7 per cent of the GDP, was "constantly" being liberalised. Ceilings on foreign investment in protected sectors were also being increased quite rapidly. And the coalition government was finalising legislation that would permit the creation of special economic zones that would be free of some of the restrictive tax and labour requirements that apply to the rest of the country.
If enacted, this would broadly track the China experience, where the creation of such zones in the early 1980s helped propel the country's export boom.
Vajpayee said, "We see the SEZ not only as stimulating greater investment inflows but also as policy laboratories. Their success in attracting investment, and the profitability of this investment, will strengthen confidence in our reform process, both within India and outside."
Vajpayee also emphasised that India's economic reform process was irreversible. And he highlighted the country's improving economic fundamentals. India's foreign exchange reserves had recently exceeded $90 billion -- more than one year's worth of imports.
The "policy framework" for India's financial sector had been sharply improved in the past five years, he said.
"Transparency, speed, efficiency and accountability have been introduced, comparable with world standards, in our debt and equity markets. Our financial institutions are healthy," he said.
The prime minister said the policy regime for both power and telecommunications had also been strengthened. For example, India is now adding more than 1 million new mobile phone users every month -- almost a fifth of world growth in cellular telephony.
"I could go on and on," he said, adding, "The short point is that there is no weakening in India's commitment to the reform process. But those who make critical comments about the pace of our reforms should remember that this vast country accommodates a diversity of perspectives."
"We have sought to implement our economic liberalisation with public accountability and a social conscience. This makes our reforms more enduring and stable. Our approach is vindicated by the fact that among the countries which liberalised their economies in the early 1990s, India alone moved to a higher growth trajectory without an interim period of recession," Vajpayee said.
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