Atanu Dey On India's Development

Advani’s Address to FICCI

Mr L K Advani, the leader of the opposition in the lower house of the parliament (Lok Sabha), addressed the 80th Annual General Meeting of the Federation of the Indian Chambers of Commerce and Industry (FICCI) in New Delhi on 15 February 2008.

Here are some excerpts:

I can, in all humility, claim that ours is one party that has consistently followed a policy of supporting private enterprise and voicing our opposition to the license-quota-control regime even in those years when there was hardly any debate on economic reforms. Indeed, the Soviet model of government control was the dominant political fashion and intellectual obsession at the time.

He says that the BJP has had a consistent pro-enterprise economic philosophy.

It has always been our belief that the dharma (duty) of the raja — or the democratically elected government in our times — is to govern, whereas the dharma of the community engaged in business, commerce, industry and agriculture is to create wealth, generate gainful employment and fulfill the material needs of society. A proverb in Hindi says, ‘Raja Bane Vyapari, Praja Bane Bhikari’ (People become paupers when the rulers handle business.)

I agree with the wisdom of the saying above. The government should not be in business and businesses should not be in the business of governance. Basic specialization and division and labor. That principle is accessible to any reasonable adult. So the disregard of that basic truth by powerful people in the government – especially the Nehru-Gandhi variety – was willful and motivated by the simple lust for power. They knew that it would impoverish the nation but that was not their primary concern. Perhaps they did not deliberately seek to impoverish the nation; they just had to accept the resultant poverty as an unintended consequence of their own self-interest.

Advani goes on:

To be sure, the special situation after India gained independence, and the preceding centuries of de-industrialization under foreign rule, necessitated the state to establish big industries and run all the utilities. Even today, it is necessary for the state to stay engaged in select strategic industries, and ensure the provision of social and economic infrastructure.

It is important to remember that the British systematically de-industrialized India. I am glad that Advani points it out.

But what does “the state to stay engaged in select strategic industries” mean? Does it mean that the state has to regulate them? I would agree because there are externalities that need to be compensated for and which can only be done through regulation. Does it mean that the state may have to create the conditions that would encourage competition in those sectors? I would agree because under certain conditions, monopolies can grow to the detriment of social welfare. Does it mean that the state should lend a helping hand when the industries face conditions that are recognized sources of market failures – such as very high fixed costs, credit constraints, incomplete insurance markets, etc? Yes, I would support state intervention to correct for those market failures and then let the market grind out the solution.

What I would not support is the state in any way getting into the business of providing goods and services. The state should not be in the business of running utilities, or railways, or airlines, or bakeries.

Advani:

But what we saw from the 1960s onwards is that state control became dogma, red-tapism set in, entrepreneurship was frowned upon, with this came the culture of political and bureaucratic corruption, and the Indian economy suffered badly.

Our roads remained narrow. Our ports remained small. Our airports, even in big cities, remained archaic. We did not expand or modernize our railway network adequately. We did not take steps to remove power and water scarcity to meet the needs of our growing population, as also the growing needs of our agriculture and industry. Hundreds of our irrigation projects suffered from cost and time overruns. We did not improve our colleges and universities to widen the access to quality higher education and to create opportunities for well-educated Indians within India. Our system of primary education and primary healthcare suffered badly, as a result of which India, even today, is stuck with a very unfavourable ranking in the UN Human Development Index.

The negative effect of all this was not only in the economic sphere. It was also psychological in nature. Tens of thousands of young, ambitious and talented Indians started to believe that they could realize their dreams only by going abroad. There was also a subconscious belief that anything of quality, anything state-of-the-art, has to be of foreign origin. Hence the craze for imported goods and a tendency to associate inferiority with Indian goods.

Actually, it is not a psychological affliction to judge inferior goods as inferior. Most goods produced by the socialist license quota permit quota control raj were in fact inferior.

Advani again:

We must develop a long-range vision for India’s development

Friends, viewed from a historical perspective of the wasted decades in the past, what do these recent achievements convey to us? According to me, they convey that it is the duty of India’s political, economic and intellectual elite to look several decades ahead. In a world that is rapidly changing, we need to gain a good understanding of India’s needs, challenges and opportunities from a future, strategic perspective. The tendency, especially in the political and governing class, to only think of the near-term in office or of the next election, can do no good to India.

I urge the business community also to develop a long-term perspective for themselves and the nation.

I still don’t understand why anyone has to tell businesses what businesses should do. It normally pays businesses to take the long-term view. Those that do, succeed in the marketplace; those that don’t, get weeded out. Telling them that the future matters for them is needless and vacuous moralizing. Businesses are not pre-adolescents and treating them as if they were is both silly and counter-productive.

Later Advani goes on about the growing inequality:

How can we tolerate this reality? No, we cannot. We must not. The BJP and the NDA certainly will not. We shall take bold and innovative measures to ensure that wealth is distributed across regions and across social classes.

Indeed, I urge the business community itself — and also the media — to ponder over how we can make the current growth story more equitable and sustainable. I seek your suggestions in this regard.

I approve of his attitude which seeks answers to how a problem can be solved instead of declaring the solution. Staggering economic inequality is a moral disgrace. It should not be tolerated. But what are the reasons for the inequality and what does one propose to do about it? One way is redistribution – and do by taking away from the rich and giving it to the poor.

Just by the by, I find it interesting that people who propose redistribution of wealth as a means of eradicating inequality do not generally set the example by redistributing their own wealth. They are always proposing to redistribute other people’s wealth. Charity, it appears, does not begin at home for them.

Moving on, Advani goes on to define what a future NDA government would concentrate on: Good governance, Development, and Protection – or GDP. It is the usual rhetoric about moving from swaraj (self-governance) to su-raj (good governance). He claims that the NDA had followed that principle during its six year tenure and Narendra Modi’s performance in Gujarat has only strengthened the BJP’s conviction that that is the way forward.

Summing up, I think Advani’s speech is definitely more palatable to me than Dr Manmohan Singh’s speech to CII about corporate social responsibility was a few months ago. I hope that the BJP has better luck in clubbing together a good set of coalition partners and delivers India from the clutches of the UPA and Madam Gandhi. I do believe that this time around, the NDA may have a more realistic public policy considering that Modi will most certainly have a greater say in framing it. I am certain that if Modi ever becomes the prime minister of India, he would be better than any previous prime minister.

I am sensing that the budget would be a disaster. Why? Because it will attempt to appeal to the UPA vote banks with a view to a quick early general elections. The budget will therefore be short-sighted and damaging to the prospects of long-term development.

But despite all my doom and gloom, I do see a light at the end of the tunnel. My feeling is that Indians are moving ahead despite the best efforts of the rulers to keep them dependent on the government and in poverty.

Link: Full text of Advani’s speech at Offstumped.

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  • Alpana Sadya

    Atanu:

    I am not sure why Advani is silent about cow based economy. His party gave practical demonstration of this in Madhya Pradesh when Uma Bharati introduced cow based economy, funds for Goshalas (cow sheds) were given from Government treasury, and her official residence became the first such Goshala. Cow based economy aimed at promoting cow products as the core of economy.

    If you thought Madhya Pradesh’ cow based economy was an aberration, hold your judgment. Uttaranchal government has come up with a novel scheme to buy cow urine at Rs.5/- litre.

    http://www.indianexpress.com/story/267544.html

    It is difficult to imagine how a healthy perspective can emerge from an obscurantist vision.

  • http://www.sundarmail.com Sundar

    BJP provides hope and better alternative.

    Their government started improving roads infrastructure.

    I remember reading Azim Premji’s interview in one book stating that BJP government is nationalist and business man like him are respected and prvided access to the government.

    Earlier he will be given access to meet mandarins only if he brings some white skin.

  • http://www.deeshaa.org Atanu Dey

    Alpana:

    I don’t have any particular hatred of cows. If someone is willing to use products derived from cows–urine or whatever–I don’t care.

    If the BJP supports cow related research, it is up to them. If your opposition to the BJP is based on their policy on cows, you are right in doing so. I, however, would not dismiss any party based on one quirk of theirs. I would rather consider the big picture and then decide.

  • shakti

    Atanu:

    True, BJP can decide to *support* cow related research. No harm there. But the BJP government getting into the business of buying/selling products (cow-related or otherwise)? Now, to me, that just goes against Advani’s own “Raja Bane Vyapari…” quote.

  • Prashant2

    Shakti:

    If the BJP government wants to provide venture capital to initiate a cow-related buying/selling grass roots business then there is nothing wrong. However if it continues to subsidize for a long period of time, then your “Raja Bane Vyapari” tag may be valid.