The President Takes Over

by Bhaskar Sarkar

The Economic Agenda

  The period of emergency was coming to an end. Some differences with the internal emergency imposed by Mrs. Indira Gandhi were becoming obvious. Mrs. Gandhi had imposed the emergency to contain the opposition and to consolidate her own political power. There had been censorship of the media. But the present emergency was different. It aimed to eliminate corruption, improve the functioning of the Government and to destroy the nexus between politicians and criminals. It tried to stop economic offenses and tried to improve resource mobilization. It aimed to take certain steps which were beneficial and necessary for the country but could not be taken in the environment of competitive populism that prevailed in the country. There was no media censorship. In fact the President was completely transparent in his actions and media friendly. He took all criticism on his chin and tried to explain the compulsions behind the actions which he took. He tried to communicate with the masses through the media with a fair degree of success.

  In one of the press conferences one of the media persons asked the President as to what he thought of Mrs. Indira Gandhi. The President said that he was a great admirer of Indira Gandhi. The Lady had more guts and nationalism in her than all her successors put together. Her annexation of Sikkim, nationalization of banks and handling of the Bangladesh War had been exemplary. She had the guts to stand up to the developed world in matters of national interest. She was the moving force behind modernizing and strengthening the defense forces. She had the guts to demonstrate India’s nuclear capability. The space and missile development programs originated in her time. Every person has some weakness. She had her share. But she did more for her country than anyone except perhaps Jawharlal Nehru and Sardar Patel. She believed in a strong and self reliant India. She never sold national interests for a few million dollars of aid or direct foreign investment like some of our ministers are ready to do.

  One of the media persons asked the President as to why he had not said anything about the economic agenda. The president replied that any economic agenda took a long time to implement. He did not intend to extend the emergency and hence did not attempt to set it right. He had only tried to improve resource mobilization so that the incoming Government would not be under the same compulsions to toe the IMF, and World Bank line and go around with a begging bowl. But he had very strong views on economic solutions.

  He said, "The first requirement is to understand that the slogan “Free enterprise” and “being governed by market forces” is bullshit. The principles are used by the economically strong to subjugate the economically weak, to further their economic interests. What is the meaning of free enterprise? Does it mean that a person with money or with access to public money through friendly banks and financial institution has the right to hoard scarce resources, create artificial scarcities and manipulate the market? Off course, they will make good profits. But the question is at what cost to the people of the nation. Why are we against bonded labor? Why are we against exploitation in the unorganized sector? These are ways of making good profits. Are we not trying to make our beloved country a country bonded to the developed world or our workers bonded laborers of industries and big business?"

  "Does free market mean a right to create monopolies so that prices can be hiked? Today, Boeing and McDonald are trying to merge and finish off Air Bus Industries. The world is not satisfied that Fokker has been finished off. The US wants complete monopoly of aircraft manufacture. Is it free enterprise or denial of opportunities? Is it economic liberalization or economic exploitation?"

  "Why are the western countries creating such a hullabaloo about child labor? Is it that their concern for Indian children is more than their mothers and the Indian leaders? Or is it simply their inability to produce goods and services at our costs and an excuse to prevent cheaper Indian products from capturing their markets and damaging their industries? Have they forgotten that they have used the same child labor during their industrial revolutions to make profits? Perhaps, some of the learned media men need to read Charles Dickens's David Copperfield. We will adopt western labor standards when we reach their state of economic development. Till then the western world should just lie off and look at the problems of their own societies."

  "Have we forgotten the damage done to our cottage industries by import of cheap British cloth? Have we forgotten Mahatma Gandhi’s insistence on khadi (cloth produced on hand looms)? Have we forgotten the Swadeshi (Nationalist) Movement started by Gandhiji? Does purchase of foreign consumer goods like Sony television or Samsung refrigerator or foreign soaps and cosmetics improve the economy of the country, strengthen the Indian industry or increase employment in this country? Do we want that import of foreign goods and services should destroy our industries, create unemployment and make us totally dependent on foreign supplies so that they can withhold supplies and twist our arms whenever they feel like. Have we learnt no lessons from the embargoes placed by US and the western world on countries like Cuba, Libya, Iran North Korea and Syria? Have we not learnt from Japan which, in spite of its enormous economic strength, refuses to open up its markets fully to American or European products and refuses to allow import of cheap rice on grounds of national interest?"

  "We need to understand that the developed countries are keen to invest in India not because they love India but because they need our market to survive. The growth of demand in these countries is stagnating. The growth of the GNP is stagnating and they are finding it hard to even achieve a 2 percent growth. They have reached the end of the marginal productivity curve. They need captive markets. What better market can they ever find? A weak democracy of 300 million middle class and 1 million rich western oriented Indians under a pliable, gullible political leadership. Actually they hate our guts and our independent and moralistic foreign policies. China understands this and they stand firm. The Chinese are not afraid of trade wars."

  "We keep talking about liberalization of our economy. What does liberalization mean? Has any one defined liberalization? Does it mean complete absence of any control mechanism? Does it mean giving the industry a right to evade taxes and exercise duty? Does it mean giving the traders the right to hoard food grain, create scarcities and increase profit margins? Does it mean giving financial companies the right to collect fixed deposits from the public and then misappropriate the amounts? Does it give a right to directors of banks to break or bend rules and give bad loans to politicians, friends and relatives? Does it mean giving right to the industry to violate environmental laws? Does it mean that there should not be any factory inspectors or inspectors for checking observance of safety standards? Does it mean giving the Indians the right to stash money in foreign banks so that the other country benefits? Does it mean giving rights to Drug Mafia and tax cheats to invest in our stock exchanges so that share prices rise?"

  "If liberation of economy means making it simpler for an entrepreneur to set up or run his business, I am all for it. Red tape in giving approvals to set up businesses must be eliminated. If liberalization means simplification of rules and reduction of discretionary powers in the hands of government servants, I am all for it because discretion is generally used to aid the party for a consideration or to help ones kith or kin or friends to make a quick buck by selling the license or permit. But if liberalization means doing away with all controls and safety standards, I will not buy it. We have no morals or concern either for our workers or the public at large. Most of our industrialists or businessmen want to maximize profits at all cost. Hence we have Bhopal Gas tragedy and the Uphar Cinema tragedy. He have labor including children working in hazardous industries without any safety gear. Most of our industrialists have no qualms about polluting the environment. They have no hesitations in turning our rivers of joy, our Ganga, Jamuna, Damodar and other rivers into rivers of sorrow, into sewage and industrial waste disposal channels. If liberalization means reducing import duties so that revenue is lost and our industries get wiped out, I will not buy it. Sony can say that we will run at a loss for 5 years and t
hen we will make profits. How many Indian Companies can make losses for 5 years and still survive. Let us first define liberalization. Then we can decide to what extent we want to liberalize."

  "We need to understand that the west promotes free enterprise and foreign investment not because they believe in them. They have their own protection mechanisms. They impose quotas for imports. They ban imports from developing countries under various pretexts. Did they not ban the exports by BHEL and Atomic energy commission after we tested the atom bomb? It is not for any ideological considerations but simply because they do not like competition."

  "We need to understand that IMF, World Bank and western rating agencies want us to reduce subsidies. But they do not complain against the subsidies given by the developed world. In America, billions of dollars are paid to farmers not to produce because if they produce there would be surplus production and prices will fall. All the developed nations subsidize their farmers. They want our production to go down so that they can export farm products to our country and their farmers prosper. Whether our farmers prosper or not is not their concern."

  "Our honorable finance minister believes that poverty can be eradicated by growth in GDP. He believes that if the country must achieve 8 to 9 per cent growth at any cost, poverty can be eradicated. But let us look at some facts. Our GDP has grown from Rs. 2,40,238 crores in 1990-91 to Rs. 3,07,854 crores in 1995-96 at 1980-81 prices. Our per capita income has increased from Rs 4,983 in 1990-01 to 9,321 in 1995-96. The number of scooters on the roads has increased from about 9 lakhs in 1990-91 to 13.5 lakhs in 1995-96. The number of cars has increased from about 1.8 lakhs in 1990-91 to about 3.5 lakhs in 1995-96. However, the population below the poverty line has increased from 229 million in 1987 to 320 million in 1995-96. How does the finance minister explain this? If the rich become richer and the poor become poorer, how can poverty be eradicated?"

  "Our finance ministers are honorable and learned men. I am illiterate by comparison. But I certainly cannot understand how industrial growth can have a corresponding effect on agricultural incomes. The finance minister lauds the growth in production of food grains. It is indeed laudable. However if surpluses are produced and markets cannot be found for the surpluses, prices will crash with untold misery to the farmers. It is a fact that the farmers of Bihar produced a record crop of potatoes during 1996-97. What was the result? The prices crashed. The crops could not be sold. It rotted in the houses of the farmers causing disease. Did any one in the Government shed a drop of tear or take any action to bail out the farmers? Did the media take notice?"

  "I will submit to our learned finance ministers and our great economists that about 76 percent of our population is dependent on agriculture for their livelihood. Unless their incomes increase there cannot be any poverty eradication. Their incomes cannot be increased by smoking foreign cigarettes, drinking foreign liquor, using foreign cosmetics, eating McDonald burgers, using Samsung refrigerators or Sony televisions. Their incomes cannot be increased by foreign investment in the stock market. Agriculture must be made profitable. Remunerative prices must be ensured by Government procurement of surpluses at realistic support prices. This procurement must cover not only grains but all kinds of produces. The farmers should not be punished for producing more. They must be rewarded. The wages of farm labor can increase if the incomes of our farmers increase. Once these 600 million men have money to spend, there would be demand for goods and services. Then our industries will have booming markets and the required growth rates can be achieved."

  "I will submit to our learned finance ministers and economists that employment in rural areas cannot be improved by imports. The small village industries like oil mills, "atta chakkis" (grinding machines for making flour), and animal transport systems need to be strengthened. Is it not strange that every district and at times even taluka (sub-divisional) towns in Maharashtra have engineering colleges? They produce engineers who cannot find employment. But there are hardly any training institutions on agriculture. Not even 1 percent of farmers have any formal training in agriculture. Is this how we are going to improve our productivity? I have come across very few institutions for training of nurses and health workers. Is this how we are going to provide health care to our 600 million rural brothers and sisters? We cannot and will not eradicate poverty unless we can improve the income and life of our farmers and the people living in the villages. All this talk of moving into the 21st Century has no meaning when 76 per cent of our population is not even living in the 20th century. We must get our priorities right."

  "I will submit to our learned finance ministers and economists that a country cannot achieve long term economic growth by relying on foreign capital. Look at the so called Asian Tigers. The economies of South Korea, Thailand, Malaysia, Indonesia, Hong Kong and Singapore faced problems during the economic down turns of 1991 and 2008. Their currencies were in doldrums. Foreign capital does not come as charity. Profits are the only motive. They come with strings attached. They undermine our sovereignty. We must grow at our own pace and by generating internal resources. Whatever foreign capital comes must come on terms which are acceptable to us."

  "We try to look at China’s growth without understanding the circumstances which led to it. It is true that China has a trade surplus and a healthy foreign exchange reserves. We try to attribute this growth to the so called liberalization of the Chinese economy and to foreign investment. What we forget to notice is that China earns billions of dollars through arms exports which we do not. It earns billions of dollars by violating intellectual property rights and by manufacturing and selling American products to the American markets. But we do not. China had controlled the growth of consumption of petroleum products during the nineties but we did not. China is an autocratic country. It does not need to practice competitive populism and waste funds but we do. China has been following a single child norm for years. We cannot even come down to two children per family. China does not have the same hunger for gold where as Indians require about 450 tons of it per year to hoard and give at marriages. This results in a drain of foreign exchange to the tune of about 5 billion dollars. And in spite of their so called economic growth, China has over 200 million unemployed in rural areas. Some of its villages are also struggling like ours. The other side of the river always looks greener. Let us not read too much into the so called Chinese success story. Let us try to understand what they have achieved and how."

  "Our honorable finance ministers and economists keep talking of globalization, of lowering import tariff, of improving quality through competition. I do not see how throwing open our markets to multinationals and foreign investors in retail is going to improve our economy and improve employment. The tobacco giants of the world, who are being restricted from selling their products in their own markets, are planning to sell their product in our markets. How does import of foreign cigarettes or foreign liquor improve our economy or increase employment? How does direct to home television improve our economy or employment? It will, in fact, put many of our cable operators out of operation and reduce employment. It will eliminate many of our television studios and reduce employment. What prevents our Bidi (Indian cigars) trade from being taken over by the tobacco multinational forcing millions of part time workers out of employment? If we assume that demand is finite, what ever share of the market we surrender to foreign products is from the share of our own products. This means that non essential imports are always at the cost of Indian industry and means job losses."

  "It is difficult to turn back the clock. We have joined the World Trade Organization. We have agreed to lower tariffs and to allow foreign investment with minimal restriction. We have accepted a system of intellectual property rights which deny us use of products we have used for centuries without paying royalty. The farmer cannot use the grain grown on his field as seeds. We are committed to increase the cost of medicines and health care. Yes, we have made many commitments to our so called benefactors which are not in our national interes
t."

  "The only good thing is that these are commitments made by weak governments and not by the people. World Trade Organization can force our Government to lower import duties and allow imports. But they cannot force the Indian people to buy their products. Let us fight their evil designs in their own way. Let us boycott all foreign products. Gandhiji gave us Swadeshi. He told us to boycott foreign goods. The British did not allow Indians to produce salt. Gandhiji showed us that we could. Let us go back to the teachings of Gandhiji. Let us again boycott foreign goods. Let us boycott all shops which sell foreign goods. Let us socially boycott all those who use foreign goods, who cannot do without foreign cigarettes and foreign liquor. Let us boycott all ladies who use foreign soaps and cosmetics. Let us organize a national movement. Let us regain our economic independence. Let us be self reliant and strong. Let the people of India tell the multinationals to quit. I can assure you, they will quit. They are businessmen. If the cannot sell they cannot survive. They must go."

  "We are always crying about lack of infrastructure. It is a problem that needs to be tackled. But why do we not look for cost effective solutions. Why do we not modernize our old power plants? It would certainly be cheaper and quicker to modernize old one than to construct new ones. Why do we go in for new alignment of roads and not improve existing ones? I heard that roads are being designed for speeds of 120 km per hour. Do we have any vehicle other than a few luxury cars which can travel at these speeds? Why do we not tap our vast hydroelectric power potential by small and medium projects which do not disturb the ecology or the population, require less outlay and can be completed in a short time?. The Bramhaputra by it self could meet 25 percent of our power requirements?. Why are we wasting money on gauge construction instead of increasing the capacity of our trunk and economically important lines?"

  "Why do we not take sensible economic decisions? We are short of petroleum but we are dieselizing the railways. We have almost unlimited reserves of coal but we have discarded the steam engines. Have we ever considered that if there is a war in the Middle East or an economic sanction as faced by Iran or Syria and we cannot import our requirement of petroleum products, what would happen to our infrastructure or our economy? Why can we not build on our strengths?"

  The President said, "Our economic problems were by no means as insurmountable as it is being made out to be. The problems seem insurmountable because we want too much too soon. In the process we are not trying to focus on sustainable growth. What is the use of allowing uncontrolled growth in motor vehicles when we do not have oil reserves to sustain such growth"? Parking is becoming a major problem along with pollution .The need is to improve public transportation system and non conventional, cost effective systems like rickshaws , animal transport , inland water systems and more Metros. They may appear to be backward steps but they are employment intensive and energy efficient."

  "The focus of our development has to be to cut out ineffective expenditure. Loss making industrial organizations whether in the private or public sectors have to be either modernized or closed down. It is a stupid but populist policy to keep on paying wages and accumulating losses. Some will suffer but that cannot be avoided. Unproductive organizations are like cancer or AIDS. They will only lead to slow death of the nation."

  "The other important step is to make expenditure cost effective and reduce gestation period of projects. It is necessary to take up a few projects at a time and make adequate budgetary allocations to them rather than take up large number of projects and be unable to provide adequate funds to finish them quickly. The latter policy born out of political compulsions results in time and cost over runs and breeds inefficiency."

  "We must privatize in all but the core sectors. There is absolutely no justification for running state transport corporations or hotels etc. by the Government and keep making huge losses. Government ventures in these departments must be closed down. If the workers want to run these organizations, they must come up with measures to make these organizations profitable. If the workers want to keep their jobs, they must increase productivity and reduce waste. They can be given a few years time to turn around these organizations or face closure. However, it is foolish to disinvest in profitable public sector undertakings just to get some short term cash flow. It is better to increase budget deficit."

  "Policy decisions need to be economically viable. It is ridiculous to raise the support price of sugar cane with out a corresponding increase in the price of levy sugar. Such actions will make profitable industries sick and set off a host of problems like non payment cane dues, drop in production, shortages and increase in prices."

  "The issue of rations through public distribution system to all families with an income of more than Rs 5000 per month should be immediately stopped. The public distribution system in rural areas needs to be strengthened."

  "Economic development must be aimed at increasing the income of the farmers. The support price system should cover not only a few grains but a host of other products like potatoes, onions, and fruits. Procurement should not only cover Punjab, Haryana and a few states but all the other states, particularly the backward ones. Agricultural infrastructure like cold storages and store houses must be constructed both in the private and public sectors so that there is no distress selling and exploitation by middle men. The Government must ensure that the farmers get remunerative prices for their produce."

  "We must generate competition within the country particularly in the Public Sector. We should give far greater autonomy to public sector banks to try to increase their profitability, to have different wage structures and incentive schemes. They should be allowed to franchise some of their products in the same way as the foreign banks. We should allow the nationalized general insurance companies to go into life insurance and allow Life Insurance Corporation to go into general insurance. They should be given autonomy to form their own packages and organizational structure. We should split the railways into say ten corporations like the Konkan Railways. The Chairman of the Railway Board should naturally be the one who runs the most profitable corporation. Similarly we could split Air India by dividing their assets and liabilities into two corporations each. We should make ONGC into three corporations to look after the three regions of the country. All public sector undertakings must be made completely free from the ministries as far as decision making is concerned. Serving bureaucrats and politicians must not be permitted to hold any position in any public sector or state government organization. The management should be totally professional."

  "Lastly we must deal firmly with corruption. He says give me proof of corruption and I will take action. How does one, particularly a third party give proof of corruption. Bribe giving is between the giver and the taker. The giver is not going to complain because he gains from giving bribes. The taker cannot be expected to complain. The third party cannot complain because he cannot have any evidence. The only way corruption can be eliminated is by transparency in Government decisions and by making Government servants accountable for their deeds. If a bill is not cleared by the accounts department within the laid down time, the accounts officer must be sacked. If a retired person does not get his pension, gratuity and provident fund within seven days of his retirement, all persons dealing with his case should be sacked. If the signing of a contract is delayed after the tenders have been opened, the competent authority must be sacked. These are the tell tale sign of the arm twisting that goes on to get bribes. If work is substandard, the person in charge of supervision must be sacked. Transferring a government servant should not be treated as a punishment. Only suspension followed by termination of service if found guilty is. If the Prime Minister is really serious about eliminating corruption he must act tough. He must first clean up the top echelons of his government as I am trying to do and then enforce the checks and balances and maintain transparency in the dealings of the Government."

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