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Monday, Sept. 4, 2006

ECONOMIC REFORMS

An uphill battle for Manmohan Singh


Special to The Japan Times

HONG KONG -- When Indian Prime Minister Manmohan Singh, following in the footsteps of Jawaharlal Nehru, spoke from the great gateway of Shah Jehan's Red Fort to celebrate Independence Day, he looked like a tiny, almost insignificant figure, framed by gigantic red sandstone walls, as he looked down on the throng below.

That's appropriate, since he is a slight figure with probably the most difficult task in the world -- dragging and cajoling India into the 21st century. But is he the one person in 1.1 billion who can do for India what leader Deng Xiaoping did for China? He can certainly claim to be making a better attempt than any of his predecessors.

Nevertheless, he is under fire from outside India for being too timid a reformer and, from inside, for giving too many privileges to foreigners. He has plenty of critics inside the ruling Congress Party who would rather see Sonia Gandhi, the latest scion of the Nehru-Gandhi dynasty, take over.

Singh recalled Nehru's words 59 years before when he had spoken of India's independence as its "tryst with destiny." In some ways India has succeeded gloriously: It has kept the flag of democracy flying, with a free press, a rambunctious parliament and elections, where every vote counts, even that of the wife of the poorest illiterate landless peasant. This is an achievement that should not be belittled, least of all by the world's other developing giant, China, which does not trust its own people with the vote.

In other ways, the country has failed abysmally, as Singh himself noted eloquently. Although India at last has begun its economic march with growth of 8 percent, he said, "the challenge of banishing poverty remains with us. We have yet to banish hunger from our land. We have yet to eradicate illiteracy. We have yet to ensure that every Indian enjoys good health. I see that there are vast segments of our people who are untouched by modernization."

To this list of woes he added farmers who have committed suicide because they cannot pay their debts, and city slums growing faster than the skyscrapers that economic progress is spawning.

Singh's career epitomizes India's own quest for its political and economic dreams. A brilliant student, he won scholarships and a first-class degree at Cambridge, then went to Oxford for his doctorate before returning to India to Punjab University to teach and then go into government.

When I first met him more than 30 years ago, he was chief economic adviser to the ministry of finance stuck with the Soviet-style dreams of Nehru and his daughter Indira Gandhi -- that strong government could solve all problems through big state-run industrial factories, nationalized banks and government control of foreign exchange.

Slowly Singh's career progressed through the commerce ministry, finance ministry, Reserve Bank, planning commission and head of the Reserve Bank. From there he was catapulted into the job of finance minister.

There, confronted with the reality of a foreign exchange crisis and barely enough in the government kitty for two weeks' imports, Singh was forced to understand what Hong Kong realized under British tutelage and China woke up to nearly 30 years ago -- that a prosperous country needs to release the energy and imagination and entrepreneurial ideas of all its people. It cannot thrive by fiat of a handful of the elite.

As architect of India's economic open door, Singh was a reluctant privatizer. He once asked me why the benefits of a profitable state-run enterprise should not be distributed to all the people.

As Singh continues to struggle with the contradictions of India. His Congress Party is in uneasy alliance with a leftist coalition reluctant to give up economic controls. Singh has to deal with an unholy trinity of bureaucrats, businessmen and politicians who grew rich by helping to spin spiders' webs of red tape that strangled initiative and enterprise of potential rivals and kept the poor in their place.

Within the Congress Party he has some vicious opponents. Luckily, so far Sonia Gandhi has been wise enough to understand that she is better off using her magical monarchical name to pull strings within the party while remaining out of the limelight.

If she gave in to the family sycophants and took power openly, she would be assailed for her lack of knowledge of economics. She would also risk unleashing religious and nationalist tensions since her Italian origins and Roman Catholic upbringing would be an easy target for Hindu chauvinists.

Singh's Independence Day speech was attacked in the press because only late in his speech did he talk of the need for greater security after the bomb attacks on Bombay -- even though India's president, a Muslim, had made security the theme of his speech the night before.

But the prime minister is surely right to emphasize the economic task. As a Sikh, who account for fewer than 2 percent of India's people, and as a former academic and bureaucrat, he has a clearer vision and fewer trammels than many of his colleagues who have state or caste interests to satisfy.

The job of the government is not to plunder the resources of the country for the benefit of the few, as happened in old India and in large areas of Africa, but to lay the infrastructure so that life is stable and the economy, ideas, innovation and entrepreneurs can flourish. Yet the Indian government has failed in key areas, such as basic education, safe and regular water and power supplies and the construction of rural roads so that goods can go to markets.

Singh has spoken many times movingly, both publicly and privately, of the need to remove the tears from the eyes of the ordinary Indian child and peasant. His determination to remedy deficiencies in basic infrastructure is vital in bringing opportunities to all Indians -- not just the 250 million middle class who make the most noise.

Cynics know that if he fails, one of the benefits of Indian democracy is that the wise poor peasants will throw him and Congress out, just as they threw out the predecessor Hindu chauvinists, and even Indira Gandhi before them.

Kevin Rafferty is a former managing editor of publications for the World Bank.


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