Over the past couple of weeks, the pink and, indeed, white papers and magazines have bombarded readers with the growth story and how China and India are leading the world league. While GDP growth has been strong, and reflected in record high equity prices, it is not my intention to quote any figures: the idea is to look at some qualitative changes, which promise a big impact.
One strong positive signal came from West Bengal -- after God knows (or is it Marx knows?) how many years of debate, the state government finally privatised the Great Eastern Hotel.
To emphasise the change in Marxist perspective, Prakash Karat advised the comrades in Kerala to look to West Bengal and soften their anti-FDI (foreign direct investment) stand. To be sure, the battle about private capital has hardly been conceded, as the tailpiece at the bottom of this article evidences.
To my mind, an even more important development was the increasing interest of the corporate sector in agriculture and farming. For a long time, ITC was the only major corporate consistently showing interest in the rural sector, from its traditional interest in tobacco cultivation, to its recent initiatives in spreading the Internet revolution in rural India though its choupals.
Pepsi too had to take interest in the rural sector, if only because of the export obligation imposed on it when it entered India. Last year was the first, in my memory, in which corporate after corporate, from Bharti to Reliance to Mahindras, have announced major rural initiatives including contract farming.
If politics does not intervene too much, this has the potential to transform the rural sector through better quality inputs and prices for the agriculturists, processing of output, and provision of infrastructure like cold storage and transport. Indeed, what Pepsi has done for potato and tomato crops in Punjab can be replicated in many other areas through the financial and, even more important, managerial resources that the corporate sector can provide.
This, together with fast growth in organised retailing of agricultural produce, vegetables and fruits, eliminating many layers of middlemen who added little value but huge costs, have enormous potential to alter the rural economy, and we should see many positive developments following in the current year.
An equally positive and welcome qualitative change is the obvious and dramatic transformation of manufacturing culture and confidence in recent years. Entrepreneurs are looking at putting up world-scale plants, and hardly a day passes without news of the corporate sector making one more investment abroad.
If, at one time, the Birlas and Tatas were going abroad because they were denied licences here, today they are doing so for a far more positive economic rationale -- backward integration, newer markets, and so. That as many as 13 Indian manufacturing companies have won the coveted Deming quality award speaks for itself -- "Indian" no longer means poor quality.
Another major qualitative change is the far greater willingness to not only acquire businesses abroad, but to sell those which do not fit in with strategic objectives.
Two other major positive changes need to be noted:
- Inflation has remained relatively low despite record or near record high commodity prices. To my mind, competition and improvement in manufacturing productivity have had as much to do with this phenomenon as monetary policy.
- The demolition of illegal structures in Delhi continued. While one cannot but feel sorry about the innocents whose property may have been demolished, is this an indication that we are, at last, serious about implementing the rules we have made? (Not if Maharashtra has its ordinance!)
But do not become too bullish: as they say, the more things change,...
Tailpiece: I began the New Year with a laugh when I put on the NDTV India news channel at 8.00 a.m. last Monday. It showed a Leftist leader, with the usual scowl and world-weariness on his face (remarkably similar to many RSS bigshots), denouncing the finance minister for wanting to divest equity in some profit making PSUs, to get a few thousand crore s, when he is sitting on PSU reserves totaling more than Rs 2,60,000 crore (Rs 2,600 billion).
Unfortunately, I could not get his name -- but he was not one of the usual suspects like Sitaram Yechuri, Karat or AB Bardhan. He seemed to be under an impression that company reserves are held in the form of currency notes or bank deposits. With such a constituency to satisfy, it is no wonder at all that the Left has to take the completely illogical stances it often does!
No wonder also that former finance minister Yashwant Sinha has remarked, "The quality of people in politics is very poorÂ… very few understand economics and those who do are unpopular. It would be difficult to take up reforms unless the rank and file of political parties believes in reforms." (Indian Express, November 30, 2005)
