Hon'ble Prime Minister, Dr Subbarao, Raghu, Isher, and friends:
At the outset, let me add my congratulations to Isher for getting a battery of distinguished commentators to contribute to what is an outstanding collection of essays, and to update them and make the book an Oxford "perennial". The person in whose honour the book has been produced, deserves no less.I have been wondering these last few weeks why Isher asked me to be up here today, and you may be thinking the same thing. Normally, they say, "No news is good news. No journalist is even better!" But I suppose I should use the Prime Minister's presence to say a word about journalism as the government's interlocutor.
I recall the time four years ago, in early 2008, when Dr Singh very kindly received the first book brought out by our fledgling books division. Hosting a reception at his residence on the occasion, Dr Singh gently admonished both Business Standard and me for seeing the glass half empty, and for not recognizing that it was also half full. I quote his words: "To say we must do more, as Business Standard always tells us, is unexceptionable and welcome. At the same time, there is no harm in recognizing what we have done!"
In Dr Singh's style, it was gently said, and I got the message. But Lyndon Johnson said it more colourfully. He complained once (and I quote):"If one morning I walked on top of the water across the Potomac River, the headline that afternoon would read: "President Can't Swim!"
Truth be told, the Prime Minister has a point. As Ashok Gulati says in the post-script to his chapter, the fixed investment in agriculture has trebled, as a proportion of agricultural GDP. The result is that agricultural growth rates have gone up. I am not as gung-ho about PPP as Montek is in his post-script, because there is a lot of crony capitalism at work, but it is also true that the investment in infrastructure, as a percentage of GDP, has doubled, and we can see the results. The rate of adding new power generation capacity, has doubled. The approach paper for the 12th Plan points out that the number of children in middle school too has doubled in the last 5 years. These are changes of enormous significance, and we have written about them.
I'm afraid, however, that we have also continued to be critical of the government even though it is led by a person whom, like all of you, I deeply admire. In my defence, I can only quote the philosopher Erasmus, who said half a millennium ago that to be a friend is to be in opposition.
But even a critically-minded journalist can see that change is not easy to bring about, because we now have a unique political system, and it is unique because of four features. First, we have copied the Communists, for whom the party is supreme and the government secondary. This is of course alien to the Westminster system, which we nominally follow, and creates some problems. Second, we have a prime ministerial system in Delhi, but a de facto presidential system in most of the states. So the prime minister at the Centre has to be consultative in all things, but presidential-style chief ministers in states can be as arbitrary and whimsical as they wish.
Third, we have a coalition system at the Centre where the Cabinet acts like the American confederacy; each minister is an independent republic. So we have one policy under X environment minister, and quite the opposite under Y environment minister, and both are the policies of the same government. The fourth and final unique feature of our system is that our courts can and do dictate policy, breaching the walls that ensure a separation of powers. But when a former judge of the Supreme Court whom the government has foisted on the Press Council declares that 90 per cent of Indians are foolish, it does raise questions about the percentage of those on the Bench who are foolish, and how (if you'll allow me to mix metaphors) the physician will heal himself.
Anyway, having got ourselves a system that is designed to make functioning difficult, what are the people in government expected to do? Among other things, they have to make an omelet without breaking the egg. This is something that even a Michelin chef cannot conjure up, but we expect our government to introduce organised retail chains without anyone in any existing kirana store being worse off. This demand for Pareto optimality, where no one can be better off if someone else gets worse off, denies us massive potential benefits at the cost of relatively small potential losses, but our political system is such that no losses seem tolerable.
A car project that can transform the industrial map of a state, and create thousands of jobs, is seen as worth sacrificing in the name of giving land back to 400 farmers. They call this paribartan; I think it leaves us with an empty bartan, which also makes a lot of noise. I wonder what would have happened if we had said back in 1983 that the Maruti car project would not be allowed if any worker in any existing car factory were to lose his job.
Even in this political environment that we have created, is there wiggle room for bringing about reform? I think there is, and would suggest some guidelines.
First, we must learn from homeopathy, and the importance of small doses. I am told, for instance, that Gujarat raises its power tariff by 2 per cent every quarter; no one notices and no one protests. It seems to me that we can do that for petroleum pricing, and for pricing reform in general.
Second, we have to find a way to get beyond positions adopted out of fear of change or because of ideological bias. As the Chinese would say, feel the stones as you cross the river. For instance, introduce income transfers through pilot projects, then do state-level changes that demonstrate that a lot of money does indeed get saved, and only then commit to a national roll-out. It is hard to sustain ideology-driven opposition when the proof of the pudding is in the eating.
Third, since politicians and civil society leaders do not like being told that poverty is declining, we must assure them that, as Jesus said, the poor will always be with us. How do we do that? By making poverty a relative and not an absolute definition; you are poor if your family gets less than 60 per cent of the income of a median family-which is the European definition. This means two things. One, there will always be a large number of poor people, so no one need be afraid that poverty is disappearing. Two, the number of poor will always be less than 50 per cent of the population, since the median family is the yardstick. So any anti-poverty programmes, or fiscal transfers, will by definition be aimed at the really poor. There is also a third benefit, because this will also help track inequality because a skewed income distribution pattern will mean that a larger number fall within the 60 per cent category. That's three goals in favour and none against.
Finally, reform has not yet got a political constituency even after 21 years because we talk of the fiscal deficit, of tariff walls, of public debt, of monetary policy and other arcane things that mean nothing to ordinary people. The market for change exists and grows only if it is linked to the market for votes. Instead of power sector reform, why not offer guaranteed electricity supply, at lower cost?
These are just by way of example, to suggest that change is in fact possible, and brings me to my final point, about the business of inclusion, and how we may have got it all wrong. True inclusion happens when you create jobs. And you do that when you facilitate low-cost manufacture in labour-intensive industries. We have failed to do that. When China vacates low-cost manufacture, the factories go to Vietnam and Bangladesh, not to India. But we don't point that out in our public debates, and we don't want to discuss labour policy, or the cost of infrastructure. Surely, make-work programmes in the name of inclusion are not a substitute for creating real work which is also growth-enhancing. If people have decent-paying jobs, it provides food security too. So how about making jobs the centerpiece of the inclusion debate?
My over-all point would be that, in an atmosphere of declining optimism and a sense of stasis, change is possible, and we can and must bring it about.
In closing, let me recall the lines that George Bernard Shaw wrote some 90 years ago, and which have been quoted often since: "You see things; and you say 'Why?' But I dream things that never were; and I say 'Why not?'" It is a quotation that used to be up in the news room in India Today, when I worked there 30 years ago. May I suggest that it is the job of all of us to ask both those questions: Why, and Why not?