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Business News/ Opinion / Policies without politics: India’s need of the hour
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Policies without politics: India’s need of the hour

It is time for the country's leadership to take tough decisions and encourage businesses to invest

Illustration: Jayachandran/MintPremium
Illustration: Jayachandran/Mint

On the day that the HSBC Manufacturing Purchasing Managers’ Index (PMI) for August for India shrunk to 48.5, the first contraction for the sector since March 2009 (amid a continuing drop in new orders), China’s manufacturing sector gave clear signs it is beginning to stabilize. The country is back in business in spite of naysayers insisting the Chinese economy will implode in the wake of changing business scenarios.

While India stares downgrades and revisions in its gross domestic product (GDP) in the eye, a number of investment banks have swiftly raised estimates for an increase in China’s GDP on the back of strengthening infrastructure and real estate sectors and a surprising pick-up in exports.

The difference in the fortunes of the two Asian rivals, however, may not just be stemming from economic factors. China’s marked improvement in manufacturing is a consequence of Premier Li Keqiang’s policies over the last six months as the country chose to bite the bullet on some fronts, sacrificing growth in quest of correcting structural defects that had crept into its system in building the successes of the previous decade. Among other matters, this included a crackdown on corruption in high places—marked by the latest sacking of the head of the state asset regulator. An India-like renegade non-banking financial companies’ sector has been virtually brought to its knees by inflicting and accepting pain. The property asset bubble that at one point seemed like it would take down the whole economy has been tamed. The growth-at-any-cost -leadership of Wen Jiabao has been replaced by the more measured style of Li, who is now presiding over the transformation of the world’s biggest investor to the world’s biggest consumer.

In contrast, India’s leadership often resembles the Gauls in the Asterix comic series, happily ambling along when the weather’s good and running amuck when it turns adverse. Witness the farcical response to the very real need to cut down fuel imports. The proposal to shut petrol pumps by 8pm to conserve fuel may have been outlandish but the alacrity with which it was withdrawn, shows the reactive thinking of the political leadership.

The policy distortions of the last nine years of the United Progressive Alliance (UPA) government aren’t just about the scandals and the sell-outs. They are about the refusal to look ahead, beyond the next election whether it is at the municipal or the state level. India’s current crop of leaders are dyed-in the wool status quoists. For all their so-called reformist credentials, they belong to an era when merely the act of delicensing a sector was considered sufficiently bold. The changes that have overtaken the world in the two decades since the country took its first steps towards a more open economy have rendered such timidity woefully inadequate. Add to that a natural aversion that the Congress has always had to do something till it is at the edge and the dark waters are staring in its face. Rewind to 1991. Return to the frenzied actions of the last six months and you have a perfect example of a leadership that survives on hope as a strategy, hope that resembles Micawber’s blind faith that something would turn up.

China, in contrast, holds out lessons in forward thinking against a solid ideological underpinning. The enforced change in leadership every 10 years, regardless of how successful the incumbents have been, ensures a fresh look and new thinking. It also allows a leader like Li to emulate one of his predecessors Zhu Rongji in the 1990s, in seeking what a Bloomberg piece aptly called “inflicting short-term pain in the anticipation of long-term gain." But that calls for a leadership which is willing to sacrifice popularity and electoral gains in quest of a larger national goal.

Confronted as we are now with high volatility in our currency the need of the hour is coherent policy direction. The rupee’s depreciation could trigger some kind of a revival in domestic manufacturing in goods where the landed costs have now escalated. Inherently, the domestic value chain could now take off but this revival has one caveat: the leadership has to coddle the business to invest. A government helmed by a party which has made doles the centrepiece of its politics over the last six decades, now needs to find the courage to take tough decisions. It is the test of real leadership.

Is India suffering through a leadership crisis? Tell us at views@livemint.com

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Published: 03 Sep 2013, 04:20 PM IST
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