'Nehruvian economics prevented India's growth'
By Arun Jaitley
The National Democratic Alliance government has been criticised unfairly, and mostly for political rather than practical reasons. The political machinery of a country has its own dynamics, and numerous factors influence and shape it. The first is good governance, the second relates to radical reforms, and the third pertains to clever strategising.
Prudent governance lies in merging all these issues seamlessly. But many times, reality collides with theory and shapes a nation's politics into a somewhat different form. I will give you my favourite illustration of Himachal Pradesh. A chief minister, some ten years ago, tried to push through the catchphrase: 'no work, no pay'. It was a slogan that spoke of a radical image, good governance, but terrible politics! He lost the next election.
Politics based on practical and material factors rather than on theoretical objectives works better. This is a perpetual dilemma in politics; when you are in power the dilemma is greater.
Take the example of few of the NDA's success stories.
Telecommunications is a big success story. India's tele-density was a lowly 0.8 per cent in the first 50 years of independence. In the following five years, we managed to increase it by 400 per cent. The next half a decade will see it rise manifold. Phone tariffs are dropping, service efficiency has improved, and the long waiting lists have disappeared.
We were criticised for having converted license fee regime into a revenue-sharing one. It was even called a scam. History has now established that without the tariff decisions there would have been no telecommunications success story to tell.
Why could not this have been done 30 years ago? The reason is the Congress party. I'll tell you where it destroyed the growth potential of this country when it was in power. You elect governments so that they improve the quality of life of an individual. But the Nehruvian thinking of state monopolies prevented growth. The Congress is answerable for this.
For instance, take the case of the radio and television sector. It was opened up a decade ago. At the rate of $3 a month you get a choice of 100 channels. And huge commercial potential for employment is created.
During the Congress regime, there was only Doordarshan. It was run with the taxpayers' money. Should this not have happened 20 years ago? Will any Congressman tell me why they delayed the entry of television in India by 20 years? This is where the Congress thinking and planning cost the country heavily.
Why did this country have to wait for Atal Bihari Vajpayee to take over to say that users must pay cess on diesel so that the funds thus collected could be used to construct national highways? National highways are the third success story of my government. Why didn't it strike any Congressman?
Another example. Sluggish public sector monoliths continued to incur colossal losses and the country suffered terribly, except in the case of monopolies and the regulated arena.
Yet, when we sold the government's stake in Bharat Aluminium Company we were subjected to a barrage of criticism! The condemnation was meaningless, it was a tissue of lies. But we didn't blink, and we succeeded. This government had the courage to accelerate the decision-making process.
I hear often that exports are down, the markets are not buoyant, there's a slowdown in the economy... And all this is said primarily to disparage the government without taking the facts into account. You see, exports are down because of the slowdown in the global market, not in India alone. The world's rate of growth has fallen to about 2 per cent. You may or may not term it 'recession', but there's certainly a major global downturn. India too has been affected by this global phenomenon.
Yet, I believe what India is seeing is not a recession. India is one of the few nations to escape the harshest effects of the global slowdown. At around 5 per cent, we are still maintaining the second highest growth rate in the world. Yes, there has been a deceleration in the growth rate in India, but it's not as bad as elsewhere.
Indian businessmen need three things for a level playing field: globally competitive interest rates; flexible labour laws like his competitor outside India has, and - most importantly - raw material, i.e. power at the same price that his competitors get. The NDA government's policy has done a lot in these areas. We have brought down the interest rates. Our Power Minister Suresh Prabhu is probably the most competent minister India has seen in recent years. For the first time, you have a power minister who is speaking the truth! He is telling the country to stop this business of subsidies, they never win you elections!
In the process of subsidy bonanza, eight out of ten don't pay. But since there is nothing like a free lunch, someone has to pay. Either the exchequer pays or the industry does.
This is the first government which is calling the state governments' chief ministers to Delhi and trying to instil into them the courage to implement power sector reforms.
We have also taken a huge step by introducing labour reforms. There will be greater flexibility in dealing with labour, coupled with addressing social concerns. We will have social security, we will also raise retrenchment compensation.
What we are doing is, in fact, reversing what Mrs Indira Gandhi did in the 70s. Her 20-point programme needs a serious debate. Her sycophants regarded it as the 19th Chapter of the Bhagvad Gita. Today, we know how all those steps kept India backward and inhibited growth.
What prevented the growth of the housing sector in India? The principal reason was the Urban Land Ceiling Act. You locked up the land resources of the country instead of unleashing them. Only this government had the courage to touch that law.
This government has created an overwhelming support in favour of divestment. People are not asking 'why divestment?' They are actually telling us to go faster on it. Divestment Minister Arun Shourie has done exceedingly well since taking over the reins of the ministry.
Between the two of us, we have been able to convince the country that these monolithic PSUs are being maintained with the taxpayers' money, which is a wrong policy. Those favouring liberalisation have won the nation-wide debate. In just eight months, I was able to privatise India's first company, Modern Foods. And then I was able to push through 34 more state-owned companies for privatisation.
Tell me which other government has done it so fast?
When I was in the information & broadcasting ministry, I could see that the times are changing. In 11 months, we auctioned the channels to private parties. We approved 108 radio channels and went ahead with privatisation. Imagine the boost this gave to the artistes and technicians in the country.
India is the second country in the world to have a convergence law. We relaxed uplinking norms, we reviewed cable legislations. I also started 11 regional channels.
For 10 months, I had a shipping responsibility. The sector needs serious investment. Ports need funds for modernisation. Private sector investment in India is the maximum in the port sector. The container terminals at three of our 11 ports have been privatised: Nhava Sheva, Tuticorin and Chennai have some of the best international companies.
For the first time, we prepared an Inland Water Policy. Our shipping industry is suffering because they have to pay corporate tax. The world over, most shipping companies operate on zero tax. So we have introduced the concept of tonnage tax.
We have done very well in roads, ports and telecom sectors. However, the power sector is still facing some difficulties.
Enron is again not a problem created by the NDA government. It started when Congress's Sharad Pawar was the chief minister of Maharashtra, and has worsened when another Congress Chief Minister Vilasrao Deshmukh is at the helm of affairs in the state.
Indeed, Enron has affected us. It cuts both ways. It hurts the whole cause of foreign direct investment in India. Indian people feel that when we invite foreign investors to participate, they must know that - in a developing country like India - international majors should tune their pricing in a manner that does not make costs exorbitant. At the same time it hurts the movement where investors want to settle down in India.
Investors want production, supplies and profitability. They don't want litigation.
On the legal side, I am working on two-three areas. I have eliminated gender discrimination from all personal laws, except Islamic Law. Our laws of maintenance to women are exemplary. The upper limit for compensation to a woman has been removed; 60 days' time limit has been fixed. We are improving the Indian Penal Code and the Criminal Procedure Code. We will simplify procedural laws.
I have amended a law which provides for compulsory pre-litigative Lok Adalats. Don't go to court always, go to these Lok Adalats and settle your disputes quickly.
I have started a scheme under which the central government is funding five fast-track courts in every district of the country. I met with huge difficulty on this count, but in just ten months of my tenure I have managed to take many progressive and positive steps.
Fortunately, within the NDA there are no quarrels. It is a reasonably coherent coalition. I always maintain that good performance must be accompanied by the creation of a feel-good factor. I don't think that is missing. There is a feel-good factor for our government's performance on the international front. A similar sentiment exists for our stance against terrorism. The economic reforms we are pushing through too have created a lot of goodwill internationally.
However, the Unit Trust of India US-64 type of controversy did affect us despite the fact that we are not responsible for its creation. The government had no role in the US-64 debacle. UTI's economic health did not decline because of Yashwant Sinha's actions.
US-64 lost its value because of Manmohan Singh's defective investment policy. Instead of making strategic sales he compelled US-64 to pick up PSU shares that the markets were not ready to touch. That's when sickness set in for US-64. Such a controversy does dilute the feel-good factor created by other positive decisions.
However, in my view, overall the NDA government has done a terrific job on the economic and reforms front in India.
Union Law Minister Arun Jaitley has penned this exclusively for rediff.com
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