Manali musings

The prime minister should spare a thought for the economy

Sanjaya Baru

Prime Minister Vajpayee has done enough in his three years in office to earn his place in history. But almost all of it on the national security and foreign policy front. If Jawaharlal Nehru had shaped India’s foreign policy for the Cold War era, Vajpayee and his able aides, external affairs minister Jaswant Singh and national security advisor Brajesh Mishra, have shaped it for the post-Cold War era. However, the Vajpayee government’s real challenge on the domestic front remains inadequately addressed.

Perhaps it is a legacy of his first stint in government, as an external affairs minister of the Morarji Desai government, and the fact that during the two decade interregnum between 1979 and 1998 Vajpayee’s interaction with policy makers was largely confined to people he came to know as an external affairs minister, that foreign policy has remained his first love. True, this was also the area where important initiatives were waiting to be addressed, since the Narasimha Rao government was largely focused on economic policy and placed on the back burner critical strategic and foreign policy issues.

The economic turnaround achieved by the Rao government in 1992-97 also enabled later governments to focus on external and strategic affairs. Vajpayee, like Rao, was never seriously interested in economic policy on issues. However, while an economic crisis forced the Rao government to focus economic policies, the relative comfort of the economic situation Vajpayee inherited, along with the fact that he was unwilling to disturb the hornet’s nest of internal divisions within the Sangh Parivar on economic issues, combined to take economics away from Vajpayee’s radar screen. But if the PM doesn’t make internal economic policy issues his primary concern now, he runs the risk of becoming a Gorbachev, hailed abroad with nothing at home to be remembered by. The lacklustre performance of the economy over the last two years and the resurgence of antediluvian voices within the Sangh Parivar on economic issues have already sullied the Vajpayee government’s record.

While there are many positive features to the present economic situation, the government appears unable to politically gain from it. This may result in economics being further downplayed with the more obscurantist elements in the Sangh Parivar forcing their backward looking agenda of religious revivalism upon the PM. This would be a disaster. The biggest challenge facing India today is the challenge of economic growth and development. It is this that must be resolutely addressed. Everything else is secondary.

Resolving strategic policy dilemmas on the external front, breaking the log jam with Pakistan, improving relations with neighbours and Big Powers are all factors that can help improve the external environment for economic development. Securing a favourable external political environment for internal economic development is important and all marks to the Vajpayee government for doing a reasonably good job of it. But none of these foreign policy achievements will amount to much if the domestic economic challenge is not addressed quickly.

The biggest challenge facing India is the relentless pursuit of economic development by all the major powers of Asia, especially China — which is is an economic challenge for India, not a security threat. Our response to China’s growing economic and commercial influence globally cannot be political or military. Indeed, that is hardly a response to the real challenge. The Indian economy must grow faster, internal economic development must be equitable, the productivity of land, labour and capital must increase, investment in education and health must go up, the infrastructure for rapid industrialisation, agrarian transformation and urbanisation must be put in place.

Unless the Indian economy can deliver an average of 7 to 8 per cent growth over the next decade, it may miss the bus yet again and be relegated to the category of ‘also-rans’, like Indonesia, the Philippines and Brazil. Some Indian states are addressing the challenge more convincingly than others. To the extent that a considerable part of the groundwork for development has to be done by state governments, there may be little that Vajpayee and his party can do since they control few state governments. However, there is a lot that the Centre can do to push forward the economy and the reform process at the state level.

To be fair, a few steps have been taken by the Centre to bring the states on board on important economic policy issues, but with inadequate homework. The results so far have not been convincing. The available instruments of federal governance have not been put to effective use in recent years. Consider how infrequently the National Development Council meets, or how such meetings are wasted with chief ministers, central ministers and the prime minister reading out prepared speeches and catching the next flight back home. Where is the interaction, the debate, the discussion? With the Central government and the Planning Commission taking few initiatives in this regard, it has been left to the World Bank to organise workshops on state level reforms. A pathetic comment on the nature of governance in a large democratic country like India.

Vajpayee has gone to the hills to reflect, much like Nehru used to do. The last time he took time off from the daily drill, he had mused on political issues. After reading his ‘Kumarakom Musings’, we dubbed him ‘Atal Bihari Nehru’, for his strong re-affirmation of secular values. At Manali, Vajpayee may devote considerable time to reflect on his foreign policy initiatives and on a Kashmir policy. Perhaps Manali is the kind of place where Pakistan, Kashmir and the affairs of state may figure more prominently on Vajpayee’s mind, than economic issues. This will be a pity.

It is time for Vajpayee to reflect on his government’s economic track record. Between 1998 and 2001, the average annual growth rate of the economy has slipped to less than 6 per cent compared to an average of 7.5 per cent in 1994-97. This year promises to be no better. Notwithstanding the global slowdown, the economic powerhouse of Asia — China — continues to forge ahead. This sustained high growth has enabled it to build mutually beneficial bilateral economic relations with dozens of countries.

For all known history, and until barely three hundred years ago, China and India have progressed together, remaining at relatively comparable levels of development. This has enabled them to live in peace and prosperity. Over the last four decades, China has relentlessly increased the distance, economically speaking, between itself and India. China’s share of world income is now twice that of ours, and its share of world trade seven times as much. If we falter on economic growth, political gestures and strategic moves are unlikely to help make us a great nation.