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Seeking answers to questions on India's economic situation

Recently, while working on a project on the growth of India's economic policy over the past 50 years, I met some very distinguished people who have contributed to the country's policy making. Each of them, during the course of our conversation, raised one important question. Do you have any answers to them?

1) At 92 years, Dharam Vira asks his assistant whether he has packed his favourite club for the golf game next morning. Sitting in his favourite sofa at his residence in New Delhi, his small figure, shrivelling with age, springs to life when he talks about the past. He was the first Cabinet secretary to the government of India, and was former prime minister Jawaharlal Nehru's principal secretary for two years.

"I remember just after Independence at a dinner meeting, our defence minister asked an American entrepreneur when could India manufacture its own tractors? The entrepreneur fished out a cigarette lighter from his pocket and said, 'You can't even make a cigarette lighter and you are talking of a tractor!' Such was the contempt the world had for us,'' recounts Dharam Vira.

And then, after a pause, with a twinkle in his eye, he adds, '' Of course, we promptly threw the entrepreneur out of the country! If that was his attitude, we didn't want him here. And we proved to the world we were right when we became economically and industrially self sufficient.''

Fifty years after Independence, Dharam Vira may be right. As he points out, people do not die of starvation now. There are no famines. Life expectancy and literacy has increased.

But Dharam Vira is not happy.

Today, his eyes glisten with anger when he looks around at what's happening to the country. "This is not the country we wanted to be free. Look at corruption. Every country has corruption. But in places like China, Indonesia, and Malaysia they take the money but do your work. In India, they take money and do not even do your work!

Has economic prosperity led to corruption?

About 20 kilometres away from Dharam Vira's residence, Professor Mrinal Kumar Dutta Chowdhary sits in his room in north Delhi and looks at the carrom game which his grandchildren left unfinished. He is one of the most distinguished professors at the Delhi School of Economics: India's former finance minister Manmohan Singh was his junior; the redoubtable Amartya Sen a contemporary and a close friend (Chowdhary's first wife was Amartya Sen's second!). These days, Professor Chowdhary spends most of his time reading and with his family and close friends. He has withdrawn himself from the "charmed circle of economists" whose advice and services is frequently sought by the government.

He remembers the time when Indira Gandhi whom he met often, once got very upset with him. She had called him over to dinner with some other economists. After dinner, Professor Chowdhary told her that she liked surrounding herself with economists to show them off as trophies. But that economics itself bored her unless it could be used as a populist tool -- like reducing the problem of tackling poverty to the slogan Garibi Hatao!

Professor Chowdhary never got invited again to Gandhi's home again.

"For India to progress economically, we need to put more emphasis on institution building and fine tuning our regulatory machinery," he says. "Take, for example, the case of water sharing between states. Till date we don't have an effective water management system which can introduce concepts like a national grid. Just like we have the SEBI to monitor and facilitate the growth of stock markets, you need to have institutions which will independently look into each aspect of economic growth -- for the financial sectors, infrastructural areas, socio-economic areas like health, education, etc. You cannot tackle these problems on an ad hoc basis; you need to have the institutions in place first.

Why is the government not building autonomous institutions that can pursue socio-economic progress? Will this not be better than, say, Parliament holding a special five-day session in which speakers wax eloquently on the state of the nation?

On the first floor of North Block, housing the ministry of finance, G V Ramakrishna, chairman of the Divestment Commission, sits quietly in a large room. His office is just a shout away from Finance Minister P Chidambaram's room. But despite being physically so close, Ramakrishna and the finance minister are drifting away on policy matters.

For the past three months, Ramakrishna has been submitting reports on how to restructure India's public sector. He has spelt out how and why the government should go about divesting its stake in these units and how these PSUs should be given autonomy so that they compete successfully with private companies in this post-liberalised era.

But to date, he says that the government has not accepted and acted upon a single recommendation of the Divestment Commission.

"We had suggested that an Employees Fund be set up from the proceeds of the divestment which would be able to implement projects such as the voluntary retirement scheme. We had suggested that autonomy should precede divestment, so as to make the disinvestment offer more attractive to buyers -- but look at what's happening to the Mahanagar Telephone Nigam Ltd and the Gas Authority of India. "

Fifty years after Independence, why is the India government manufacturing cycles, bread and running hotels?

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