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The Rediff Business Interview/Lord Swraj Paul

'Competition is most important for free market economy'

After having criticised the ongoing reforms and the recent budget, what did Paul consider essential for the success of the free-market economy. "Competition is most important for the free market economy, and without it, you are putting the free market economy and the consumers at a grave risk," he said.

In fact, Lord Paul warns that India faces such a situation. "What is even more dangerous than a government monopoly is a private monopoly. Unless there is competition, the people won't have choices and the monopolists become arrogant. However, free market does not presuppose competition. And till such time that competition develops in India, there must be a good and strong regulatory mechanism to ensure that monopolies are not created. This is the same thing that I said in a recent speech in the House of Lords."

He pointed out that privatising industries without creating competition was the blunder that the Conservative party made when Margaret Thatcher unleashed her privatisation crusade. "Historically, Britain has self-regulation, but when private monopolies occur, such self-regulation fails. This calls for government intervention," he said.

There is a message in this for India. Years of protections saw government and private monopolies created, and many Indian industrialists have been against liberalisation which will threaten their citadels. Paul said this is what he has been stressing on his visits to India. "I keep saying, 'Do not create private monopolies.' Over the next few years, this is going to be a major problem for India."

So what happens to the government of India's dreams of disinvestment of large, floundering monopolies? "Air-India and Indian Airlines are government monopolies which have been criticised by everyone, even Parliament. The government should not privatise these two aviation giants without first creating sufficient competition."

What about foreign companies seeking to buy up existing Indian ones? "My personal view is that all this is incorrect. Every time someone wants to raise a company's share price, they start a rumour of a buyout. It happened with TISCO some three years ago. In the UK, if some one started such a rumour, he would be hauled up," he says.

Definitely the takeover code will help sort out such problems. Lord Paul remains dismissive about the same, much as he has been so far. "The problem is that you still have companies which will not register the shares. So the takeover code has no meaning. The whole system has to be made much cleaner." No doubt, at the back of Lord Paul's mind must be his by-now legendary battle with DCM and Escorts, which finally went in his favour in the Supreme Court.

Lord Paul has a new avtaar. He has begun to campaign for the Labour candidates in the UK elections on May 1. It is strange to see a millionaire as a Labour supporter. "I came to the UK in 1968, and my association with Labour began a few years after that. I liked their concept of social justice, which is something that is very close to my heart, because with social justice you create a decent society and a strong social fabric; without it, you have law and order problems, social problems within the family and outside. Secondly, it is because they believe strongly in a manufacturing-based economy."

But did he support the Labour's economic policies which are extremely socialistic. Lord Paul does confess to a mismatch between his economics and that of the Labour party's. "I believe in free-market economics, which Labour earlier did not. But I still preferred to be associated with Labour because overall it was far closer, and I am very excited about Labour's new agenda."

He pointed out that Labour began to change its policy from 1983 after its defeat in the elections. "Labour party was a party of the workers, but if you want to be a national party, you cannot have just one constituency. And that is what Tony Blair has done. Very often you hear during the campaigning that if labour wins, you'll get back to the 1970s (when the country was plagued by strikes); but there is nothing to get back to. The world has changed and moved on. The new Labour has a very new agenda. They have kept some of the central issues such as national health, which was introduced by them, and copied worldwide. Take another issue such as education. We have some very good schools for the very rich. Keep those schools, but provide schools for the ordinary individuals, otherwise you create a class divide. So, Labour today is a modern party. No doubt a very good message for India, where the chasm between the haves and have-nots has, if anything, widened.

Asked how important the Asian issues were when he voted, Lord Paul spoke strongly against the very idea. "When I vote in the UK elections, I vote as a British, and that is the message that I give to the Asian voter. South Asian issues are not primary. And the Asians here must vote thinking of themselves as British. Only 5 per cent of the British is racial, so we must think of the remaining 95 per cent."

But what about specific ethnic problems, such as immigration of spouses. Paul admits to certain difficulties. "I hope Labour will be more sensitive to such issues, which the Tories have so far not been. It is inhuman to keep spouses separate."

And the thorny issue of Labour's view on the Kashmir tangle which is causing some worry in India. "I think the Labour shadow foreign minister made his party's policy very clear. It is a dispute between India, Pakistan and the people of Kashmir. However, since Labour was involved with granting of Independence, they are willing to help resolve the dispute, provided all the three constituents concerned invite them. That is the policy. Every now and then some Labour MP says something different or is quoted wrongly, but they do not represent the official policy line.

Does the official policy support plebiscite? "Labour is not for plebiscite. It is a matter between the people of Kashmir and India and Pakistan. My personal view about Kashmir is that they will have to sit together and resolve the issue. There is no way you can decide the people's fate without getting them in. And India has followed suit by holding elections. This applies to all parts of India. You cannot keep people unless they are happy."

Lord Paul says that even if India offered dual citizenship, he would not accept. "The question of dual citizenship is being discussed for a hell of a long time. It makes no difference to me; I accepted UK citizenship 27 years ago and am very happy with it. The advantage of dual citizenship is that for the diaspora of 15 million or 20 million, you give them the feeling that they are also part of the country. It will therefore be nice on the part of the government of India to do so. One must remember that the Indian diaspora have a gross product that matches the Indian GDP! And they are growing faster. The Indian diaspora are not going to return to India, but they will feel better.