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The Business Interview/Lord Meghnad Desai

'India is the laughing stock of the world'

Amberish K Diwanji

"India has an elite which can show that India can fail at everything. Every problem that India can have, others have had and have still gone on to become economic successes. The Indian elite that will go on finding excuses because it is threatened with extinction," says Lord Meghnad Desai, who holds them responsible for the current mess in the Indian economy and polity.

Lord Desai, a professor at the Centre for the Study of Global Governance at the London School of Economics and Political Science, feels it is time for the present bunch of elite to go. "When East Europe changed, the entire old guard went. The same is needed in India because the very men who swore by socialism are today talking of liberalisation, but without any conviction," he says.

"The country has not yet absorbed liberalisation as something desirable. On the contrary, many see it as something imposed by the International Monetary Fund or because of globalisation. And the Indian elite is so clever that it can always find an example of failure to point," he said. In the course of the interview, which lasted about an hour, Lord Desai -- who was born in Bombay and educated at Elphinstone College -- would keep returning to the harm the present Indian elite had done, and are doing, to the country."The political leadership and elite have made a mess for the past 50 years," he declares.

The Labour Party peer had little regard for the so-called middle path or Indian way. "The rulers have not reduced poverty and I don't understand why Indians go on talking about the third way, because it simply did not work. It is time for the people to now realise that and to change."

Many opposed to liberalisation had pointed to the Mexican disaster and warned that India could go the same way. "Mexico went wrong because it had an uncontrolled deficit in the year before the presidential elections and they tried to convert the deficit into foreign bonds. When the markets found out, there was a panic. However, since then, Mexico has reversed its capital flow, and while the country's portfolio capital has a state of volatility, foreign direct investment did not suffer very much."

Indians are never short of reasons on why the country has had only limited success. They point to its size and population, its democratic set-up, its diversity unlike the other Asian tigers. Lord Desai dismisses them all. "It is just clever negativism of the Indian elite who will give you a variety of reasons why India cannot change. All of these can be virtues, but the elite loves turning virtues into obstacles. With our religious diversity, we should have been able to attract investment from Islamic countries, Christian countries and from Hindu NRIs. We have a large number of educated people, at least in absolute terms. We have an amazingly vibrant small and medium-sector industry, we have great capitalists and entrepreneurs who need to be unleashed. The solutions are all well-known, they just have to be implemented."

Blasting the ruling class, he said the Indian elite had adopted a "cannot do" attitude towards reform. "We have sophisticated people, multimedia; we can do anything anywhere. But the elites will say `Oh we haven't got the 37th ingredient, so we can't do it'. Somehow, the Indian elite has convinced itself that you can only succeed in globalisation only if you are not India."

It may be difficult to equate India with smaller countries of East and South East Asia, but comparisons with China are inevitable. India is clearly the loser on the economic front. Says Lord Desai, "In the 1950s, when I was a teenager, there was a serious debate on China versus India. Today, no one, but no one, takes India seriously, while there is no serious question that China is an economic power. China has gone through tremendous upheavals. Its cultural revolution was a disaster, and between 1950 and 1978, there were many misgivings. But since 1978, China has grown at a double digit rate. Even if you were a narrow nationalist, you should worry about Asian leadership. Today, India is nowhere on the international stage; its bid to join the United Nations Security Council got only three votes."

Carrying on in the same vein, he adds, "I have travelled through many Asian countries and found that no one takes India seriously. India is the laughing stock of the world today. In 1947, India held the Asian Conference in New Delhi and Nehru gave leadership to Asia. Right now, we'd be laughed off the world stage. And the reason for this is our economic stagnation. It is because of the self-indulgence of the Indian elite who believe that because they have democracy, everything else is forgiven. Some things certainly are, but not all."

Fears have been voiced that radical liberalisation will only hurt the poor if it is accompanied by inflation, and widen regional economic disparities. "Countless countries have been able to combine liberalisation with equity while there is no evidence to show inflation co-related to high growth," says the peer. "The average growth rate in India in 1960-70 was 3.5%, in the 1980s it was around 5%, and now it is at 7%. Yet, inflation in the 1980s was lower than in the 1970s. And today also, inflation is under control." Going on to regional imbalances, he said, "If you have free migration, like India has and China does not, the people will go to the regions of faster growth."

Lord Desai is firm that further improvement will need a change in the present political leadership, especially an end to the present gerontocracy. "India is ruled by people in their sixties and seventies. All the parties have old people at the helm, whether it is Gujral, Vajpayee, or Kesri. And this in a country where the average age must be very young. Look at Britain, the prime minister is 43 years old, even John Major is just 54 years old."

To this end, he mourns the loss of Rajiv Gandhi. "I was not a fan of Rajiv Gandhi, but at least under him, there were young men moving up. But unfortunately, after his death, the Congress played it safe by selecting old men to lead them."

The need of the hour, he says, is the implementation of bold policies and a change in leadership. "We need compulsory primary education. Why can't the government say that we are not going to spend a large part of the budget on subsidies for fertilisers and farmers and instead pay for primary education. Subsidies are a massive corruption machine. In the public distribution system, only one rupee out of eight goes to the poor," Lord Desai points out.

Does the expat peer see hope for India? "I am not too hopeful, but the Indian people have an amazing ability to surprise. At the state-level, they have this habit of throwing out state governments, and it really depends upon them." He considers the political situation in Delhi a grave crisis. "The Westminster system requires two strong political parties or one strong hegemonic party; India has neither, and I doubt even after the next elections the situation will improve," he said.

Lord Desai felt that perhaps it was time to consider a presidential system of democracy which would break the present paralysis. "I would recommend the French system with an executive president, elected by the nation, and a parliament with a cabinet. I personally think the time has come for a change. France is onto its fifth republic, India after 47 years, is still on its first."

He also remains dismissive of the two largest political parties."The BJP blotted its copy book after Ayodhya. Till then they at least had the appearance of a secular party; after that it became clear that they cannot even control their own people." He has even harsher criticism for the Congress. "The Congress is finished," he says."It has no ideology, no principles but to stay in power. I was very sad to hear that Sonia Gandhi had joined the Congress; it is the last of the illusions. It is the biggest mistake Sonia Gandhi has ever made."