I have been missing the finance minister. It is his job to enlighten us about the economy. He played the leading role in driving it into the current crisis; having been at the helm together with Pranab Mukherjee for a decade, he may be expected to know the most. He does not take shelter behind his advisers like the prime minister, who seldom gives his own views. He is often wrong, which makes it easier to criticize his interpretation. It is impossible to find such a riveting combination of intelligence and fallibility. The nation is likely to be stuck with him for many years; a columnist would hope never to be without him.
Recently, he has been strangely silent. That cannot be due to his critics, for he hits out at them with abandon and then forgets them. But he went to the International Monetary Fund-World Bank meetings, and while in the United States of America, gave a lecture at the Carnegie Endowment. First he gave his sales pitch: that India’s economic slowdown was the fault of the world, that whatever the World Bank said, the slowdown would end forthwith, and that India’s “microeconomic fundamentals” are strong. India has millions of young people whom it is filling up with education. The sum of current and capital account flows exceeds India’s gross domestic product; all that interaction with the world will bring bright ideas into India. India invests a high proportion of its gross domestic product. Middle-aged people in the forties have spent their working lives in a reformed India, so they must be better than old people. And, of course, India is a democracy. There was no one in his audience to ask him just why he thought he was more likely to be right on India’s growth than the World Bank, what is the quality of education his young people are getting, and whether the ease of making money in politics, shown by the high proportion of corrupt politicians, is not draining the real economy of entrepreneurs. Foreign audiences are not so obsequious as Indian ones; but they are well enough behaved to avoid asking the finance minister awkward questions.
However, he appointed Raghuram Rajan governor of the Reserve Bank of India two months ago. He has attracted much attention. He is nearly as good-looking and fluent as P. Chidambaram; but he is also able. His new job does not give him much opportunity to show his expletive — sorry, explicative — skills. For the RBI speaks volubly in funereal jargon; it does not leave much scope for its governor to speak for himself. Luckily, he will get many chances to go abroad, so we will keep getting his views. Recently, he was in the US for the Fund-Bank meetings. It is not known what if anything he said there; but he gave a couple of public speeches.
He began his speech in Harvard Business School with a joke. He is lucky that not many Hindutwits can read English; otherwise, they would have been on the streets demanding his resignation. For he made remarks about Indians that were exceedingly funny and insufficiently respectful. He said that Indians were manic-depressive in their reaction to cricket: if the Indian team did well, they deified the players, and if it lost, they dissected its weaknesses, which were there when the team won as well. They brought the same sensibility to their analysis of the economy: when the economy was booming, India could do no wrong; now that it is doing badly, its every deficiency is dissected. Then he mentioned the deficiencies: poor infrastructure, excessive regulation, a small manufacturing sector, and a poorly skilled labour force. With this short list, he established his credibility as a serious analyst.
Then he made a point that I had not thought of and might be worth taking seriously. He said that Indian laws and regulations about land and property make it very difficult to exploit natural resources or transfer ownership. He was obviously thinking of the allocation of coal blocks, which has landed the prime minister in trouble and held up investment worth billions. He was also thinking of the difficulties the Tatas had with land in Singur, which illustrate the problems faced in converting agricultural land to more productive uses. The legal difficulties of property transfer and transformation create opportunities for politicians to get these things done by fiat; their corruption brings in social activists and street politics. Thus we have a very good institutional structure for stopping big changes. But we are not so bad at making small changes; things are always advancing on a small scale. The fiscal and the payments deficit are not structural problems, and are being resolved. Once the euphoria and the despair are stripped out of our view, things do not look too bad in India.
Rajan is right that India’s institutional structure is unsuited to rapid development of land and infrastructure. Despite that, the pace of change was faster under the Bharatiya Janata Party than the Congress. Atal Bihari Vajpayee was keen on highways; under his leadership, the golden quadrilateral and the east-west and north-south highways were built. Private competition in telecommunications was initially introduced in the early 1990s. But nothing moved then, except that Sukh Ram, the telecommunications minister, enriched himself with bribes. Initially, the coming of BJP changed nothing. But then, Pramod Mahajan broke all rules, and the telecommunications revolution set off: India got the cheapest network in the world, and even the poor started using cell phones. The power generation industry is in a gridlock all over India; but the Gujarat government sorted out the problems, took power to everyone including farmers, and made the industry viable. India is a difficult country to do business in; but clever politicians have broken barriers and started off little revolutions.
I have just noticed that every example I have given of political enterprise belongs to the BJP era. I tried to think of some Congress successes for balance, but it is difficult. Manmohan Singh was an admirer of Vajpayee, and often went to do obeisance to him. But that is foot-service, not even lip-service. When it comes to action, he has carried out faithfully the wishes of Sonia Gandhi and her group of advisers; though famous for his personal honesty, he has created the world’s largest corruption mechanism in the form of the Mahatma Gandhi National Rural Employment Guarantee Scheme and the public distribution system. Narendra Modi is making waves. He is leading the BJP’s election campaign, and giving speeches all over the country. They are extensively reported. If the press were an indicator, the country has woken up to him. I do not know whether it has or not; his new incarnation as Vikas Purush (development man) does not wipe out his earlier image as an abettor of riots against Muslims. His speeches are full of venom against the Congress. But when he can subdue his hatred, he comes up with all sorts of clever ideas. He has won over the middle class; if they were the majority, he would win handsomely. But whether he wins or not, I think everyone should pick up good ideas from him. What is worrisome about the Congress is the lack of ideas.