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The Rediff Business Special / P V Narasimha Rao

The correct and lasting way to globalisation

It was after a long reluctance that I finally decided to deliver this lecture in memory of JRD Tata. What decided me was the magic name of JRD Tata. When you mention a big name, there is a tendency to describe your own connection, howsoever tenuous, with the person, perhaps in the hope of shining to some extent in his glory. I have had no such opportunity, and still I cannot forget that we both served on an international committee together for some time. That is just to say that I had the honour to know him. For the rest, his pioneering achievements are too numerous to catalogue. And in any case, I do not find myself a competent cataloguer in his case, even if I want to. So I would just like to refer to what all you know about him much better than I could ever hope to do.

I have been making enquiries about the latest thinking on the state of the economy, the direction in which experts think the country is going, or should go. I thought that was the least I should do to update myself before I actually say something.

Incidentally, the moment a new government took over in New Delhi, you (Assocham) have promptly adumbrated a new Action Plan for that august body, the target date you chose being the year 2005. One could perhaps call it the Assocham Five-Year Plan, extending to six so as to allow for a reasonable margin. Going through the figures you have projected, I have no quarrel with them. After a long experience I have, to some extent, acquired the wisdom of not quarrelling with projections.

However, for the past few days, I have been constantly ruminating over what I should say, if I have nothing to say on what you have said. I thought we had practically come to the end point of our dialogue. But have we? I asked myself once again. After all, we haven't quite reached the end point inasmuch as 2005 is not the need, assuming that everything in the world would go on as it has so far.

Projections for the next century and the next millennium

And in any case, the projections for the next century, and still better, the next millennium, have been so much on our minds for at least a decade now that there is always something more to project, anticipate and object to -- as a continued activity for wise men and women.

Other economists whom I consulted have also given me much the same ideas and prescriptions regarding the short-term scenario. I am sure therefore that you will not mind if I dispose of your Five/Six Year Plan with a brief nod of approval and go on to what I think the advent of the new millennium forces us to ponder over.

We have had several decades of 'more of the same' type of progress, using different methodologies, different agencies such as governments as well as other institutions. It has also happened that whenever we tried to look back, what had been done was grossly overshadowed by what was not. Successes almost paled into insignificance when compared to the horrendous spectacles of failure. And failure, in the main, has been fuelling the political and democratic machine as almost the sole talking point. In a word, the choice to make every time seemed to be: Who has failed less? And who do you think will fail a bit lesser next time? So be it, I wish this process well.

'The Indian village has been haunting me since my childhood'

What has been haunting me ever since my childhood is the Indian village. In other words, India still, if you don't mind my saying so. Even after sixty-five years, I am constantly reminded of, and obsessed by the few telling lines of poetry written then by one great Praja Kavi (People's Poet) of Andhra Pradesh, indeed of India. The lines, when freely translated, said as under:-

I would not have ventured on the inappropriate act of mentioning these lines if I had not been fully convinced that these worriers over the centuries, and millennia, have shaped the destinies of humankind. And when we find ourselves practically on the bridge between two of such time-frames, the uncanny feeling of this palpable transition, which we shall never have again, ever, should make us celebrate this bridgy moment and become one with its spirit, even while we are thinking of the day's Sensex.

'I've lost my job trying to liberalise...'

I have not exactly been only worrying and worrying. I have been a doer all my life, though much less of a talker, and with very few, if any, to talk for me. I lost one job trying to implement a socialistic programme. And as if to balance it, I have also lost another job trying to liberalise what had tended to become insensitive somehow after the socialist process, though not because of it, I am convinced. In both cases, I have found some surprisingly similar -- some even identical -- causes for the results that accrued. In this view, I believe I have something to say, regardless of cause or effect.

Some scholars believe that India had had some kind of a primitive communism once upon a time. Then came a society that maintained its calm and autonomous position for many centuries. Then followed conquests, kings, queens, battles, plunders, subjugations and a long stretch of feudal relations culminating in and thriving under empires. Things flourished in some centuries, bringing laurels and making India look like the prized colony. They decayed in other times…. In this long stretch of national endeavour, we have had a varied experience, now stumbling, now sprinting. After a stretch of a home-made socialist phase, which I think served us well on the whole, the latest in our repertoire of policy strokes has been economic liberalisation which we embarked upon in 1991, though anticipated and planned, at least in part, earlier.

It was only liberalisation, not substitution, since we had had an ongoing, well-entrenched market system for ages. So it has been possible for us to fashion our liberalisation as a well thought-out programme, based on an assessment of the current situation, both local and global, as well as anticipated future developments. It remains part of our development effort; the objective has not changed. We have hit the right road and the direction has been set. The way is only forward. Yes, there is considerable criticism from some sections. This criticism is important, since it illustrates the strange line-up of hostile forces when a serious, systemic change is undertaken. But our reform has the general approval of the people. Therefore, it ran no risk whatever of dilution, far less of reversal.

Expenses in one year in the village were less than one day's expenditure in the city

What are mere disparities in affluent countries become dual economies when they occur in the poorer ones. I have to relate about my own stay of one year completely and continuously in my native village, long ago, at the end of which my total expense in cash happened to be less than my one day's expenditure in the city. When I visited the village grocer's shop now and then, I found that a regular and perhaps honest barter system was in vogue, between the grain that the customer brought to sell and the oil or the salt or matchbox the shopkeeper sold to him or her in return. I do not remember to have seen cash or currency notes figuring anywhere in the transaction. No one called these large number of transactions by the exalted name of trade or economy, but that was what they really were -- an economy down below the regular economy and to some extent independent. In a milieu like this, any upward mobility is obstructed by strong and inflexible social structures at the village level.

Liberalisation tends to benefit only the urban economy

All that has been affected over the decades, and now the dynamism of globalisation will overtake it; but what is disconcerting is that it promises to benefit only one of the two economies. The other will not even be left unaffected; it may in fact be affected adversely. At some point, therefore, the growing distance between the two can suddenly go beyond endurance and create tremendous internal social and economic strains, throwing the whole liberalisation programme itself into disarray and delay... Therefore, here is the need of a strong bridge -- a challenge for the expert architects and engineers of economy.

This is why it is important to ensure sizeable and simultaneous benefits to the lower layers. We cannot wait for the trickle down; we need to engineer a by-pass by investing massive resources for the benefit of the poorer sections, particularly in the rural areas, directly from the State's resources. Smooth assimilation is the crux. I consider this to be the correct and lasting way to globalisation whose bottomline is partnership, not annexation.

New paradigm: private enterprise in infrastructure, govt investment in human resources

We need investment in people and in infrastructure; the package is inseparable and indispensable. Government took care of both investments in the past; the results, while beneficial in several respects, fell short of overall expectations and requirements. The new policy now assigns a large portion of infrastructure investment to private enterprise on a global scale, while government takes on the bulk of the responsibility for investment in human resources, as also for rural development in general. This is the proposed pattern, broadly speaking.

Unlike in some developed countries, unemployment is not a marginal or fractional phenomenon for us. Looking closely, one can perhaps find a nexus between the lack of full employment on the one hand and the emergence of multiple economies in the society on the other, to which I have just made reference. The lower layer seldom gets the benefits of any technology-driven innovative progress. Gainful work is therefore the primary weapon necessary to deal with this poverty. Equally important is to narrow the difference between the skilled and unskilled earners. In other words, more education, training and skill development -- almost on an exponential scale. Where does this come from and become a reality? That is the question we return to again and again. The new policy contains the seeds of the answer.

Socially conscious thinkers from all over the world, at all times, as well as far-sighted institutions, have forced us all, particularly in recent years, to reconsider the goals of development. The most recent irresistible force that has hit every eye everywhere has brought home the responsibility to preserve the environment and the finite resources of this planet. Nevertheless, the original sin endures, namely, of consumerising happiness, which translates, in plain terms, as equating the quantum of happiness with the quantum of consumption. Professor Galbraith and several others have written of the wisdom and need to perceive the difference between luxury and necessity, a topic that was considered elementary in our economic text books long ago. It seems to have been practically given up in recent years and everything is seen as necessity today -- or caused to be seen so, I am inclined to think that the Indian housewife, at least until very recently and even now in many cases, is the best judge of this very real distinction. Continued

How to harmonise technology, consumerism and environment

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