Prime Minister Manmohan Singh’s Independence Day speech on Wednesday should come as a huge disappointment to investors. The country’s 60th anniversary of independence from Britain was a perfect opportunity for Singh to make up for lost time and announce bold, new economic freedoms, something that his government has shied away from granting the people in the three years that it has been in power. He missed the chance.
Singh uttered the word “reform”—India’s official shorthand for all plans that seek to modernize the economy and loosen state controls—just once in his speech, and that too in the context of fixing university education. By contrast, Singh’s predecessor, Atal Bihari Vajpayee, had used the word 13 times in 2000. The only tangible takeaway for investors from Singh’s uninspiring address is that his government already has the 2009 polls on its mind.
Why else would the prime minister of the world’s second fastest growing major economy celebrate a proud and unique moment in the nation’s history with a lament that included as many as 15 references to poverty? One hates to be a cynic, but a simple analysis of Independence Day speeches seems to suggest that concern for the plight of the downtrodden follows a cyclical pattern in India. It rises when general elections are near and ebbs once they are out of the way.
Prodding into action
On the six occasions Vajpayee had addressed the nation from the historic Red Fort in Delhi, he used the words “poverty” and “poor” a combined 27 times. Out of these, as many as 24 mentions occurred in the three Independence Day speeches immediately preceding the May 2004 election, which he lost. Singh isn’t taking any chances. “Even after years of development and rising growth rates, why have we not been able to banish mass poverty and provide employment to all?” Singh asked his countrymen, adding that the purpose of his rhetorical question was “not to make you feel dispirited, but to enthuse you to march forward.”
It isn’t the people of India who need to be prodded into action; it’s the politicians that need to wake up. Almost everyone outside of the political and administrative establishment is already marching forward as best they can. The creative solutions invented by people to make a living are visible on every street corner, though they may not always make for a pretty picture.
In smaller towns of Uttar Pradesh, it’s common to find pushcart vendors who will replace—even repair—your soiled, torn currency note for a fee. They call themselves “money exchangers”. Why do the people of India have to be engaged in such desperate, hopeless businesses 60 years after the end of colonial exploitation? Why can’t the world’s biggest democracy, which has done an incredible job of nation-building, find better uses for its people’s enterprise? Official estimates suggest that between 22% and 28% of Indians live below the poverty line, which is defined as per-capita consumption expenditure of about 40 US cents a day in urban areas. While the ratio of poor people in the population has steadily declined for three decades, there’s no denying that 28% of one billion people translates into a huge challenge. It’s not that Indians have chosen to live a life of penury; impecuniousness has been thrust on them by an uncaring state that isn’t even willing to give them the freedoms they need to find a job or run a business.
Take the country’s overly restrictive labour laws, which discourage hiring by making it extremely difficult and expensive to fire workers. As a result, a majority of workers have to toil in informal, extra-legal businesses where they have no rights. Based on a survey of about 2,000 retail stores across India, World Bank economist Mohammad Amin recently concluded that scrapping the country’s rigid labour laws would boost employment by 22% for an average store. With retailers employing 9% of the workforce, the gains in employment would surely be significant for the economy as a whole. Yet, a plan to amend the labour laws has awaited political consensus since 2001. Similarly, large-format global retailers are being prevented from investing directly in Indian stores, out of a misplaced concern for the small local shopkeeper, curtailing yet another opportunity for employment creation and economic growth.
Change is perhaps the slowest in the financial sector, where the opportunity for India is probably the largest. Insurance, pensions and banking remain heavily state-owned, state-controlled and, therefore, tiny compared with what an economy the size of India’s really needs. A committee established by the government has come up with a bold road map for turning Mumbai into an international financial centre. The least Singh could do was to endorse the strategy in his speech so that it would be taken seriously as part of the executive’s political agenda.
But then, in his speech, Singh even forgot to claim credit for what may well become the single biggest victory of his political career: the recently concluded civilian nuclear agreement with the US. That deal may be getting the Prime Minister brickbats from politicians of all hues, but it’s also winning him praise from businessmen who are impatient for an end to the country’s acute shortage of electric power. If only Singh had strived for a great speech, instead of a safe one.
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