India seen from Singapore

India seen from Singapore

The Pravasi Bharatiya Divas has just concluded in Singapore, and the Singapore government had made elaborate arrangements to make the event a success. The delegates, part of the Indian diaspora from at least 20 countries, were addressed by Singapore’s Prime Minister Lee Hsien Loong, as well as by former prime minister Goh Chok Tong. The legendary Lee Kuan Yew spent an hour-and-a-half on a Q&A session. There was one particular panel that was scintillating. It included Sugarta Bose, Rajat Nag, Jitendra Kumar (Wharton/NTU) and Prof. Huang Ching, formerly of Brookings. Of these, the last two were particularly brilliant. Kumar is working on two new books to be published from Cambridge and Harvard next year on Indian entrepreneurship and business models. He identified several different Indian business models: those leveraging opportunities in internal markets, for example, the Tata group, the small unit-based multiplier enterprises such as Infosys, those that had first-mover advantage such as Suzlon and international competitors such as those in the pharmaceutical industry. The resilience, adaptability and risk-taking ability of the entrepreneurs, many of whom had emerged in the last decade-and-a-half, he felt, would ensure that Indian businesses would have a global presence in the future and would represent a unique set of management and business strategies that could well be studied by others, just as Japanese models were studied in the past. It is very heartening to see that adversity has created an entrepreneurship model that is beginning to be respected globally.

Prof. Huang, on the other hand, talked about China’s perceptions of India. He said China recognized that the growth of India is inevitable, and that there were mutual opportunities and complementarities. China would be concerned over the competition for energy and commodity resources that India’s growth will bring about. He also said that India’s model of peaceful democratic growth would always be a concern for China, for it would need to keep nationalistic and democratic aspirations under control. In his view, China’s strategy towards India would include keeping a strong defence deterrent, using the border disputes as a bargaining point, ensuring that it had strong linkages in Pakistan and South-east Asia and hedging against growing Indo-US relations. Very candid and very interesting.

However, it was the interaction with Lee Kuan Yew and the speech of the Singapore Prime Minister that gave room for considerable contemplation. Yew pointed out that the concept of ideal village life is incompatible with modern development and that societies could develop only by urbanization and modernization. He referred repeatedly to finance minister P. Chidambaram’s recent speech at a seminar where the latter bemoaned the gradualism in reforms practised by India and the fact that villages had not changed or benefited from development. Yew said this would not work and unless agriculture was commercialized and employment found in towns and factories, India would never achieve its potential. He alluded to the Chinese government’s policy of moving 10 million people from rural to urban areas every year and providing them employment. It is time to give up the “India lives in villages" story, he said, and suggested that delegates should think about what he said and try to make a difference. A growth of 7-8% in his view is far below India’s potential and the focus should be on skill development and employment, agriculture and infrastructure.

There was a marked contrast in the views of Prime Minister Lee Hsien Loong and Union minister for overseas affairs Vayalar Ravi on the global financial crisis. The latter spoke strongly against open markets, commodity trading and futures and derivatives. He argued for stronger governmental control and regulation and that free markets by themselves could be disruptive. The Prime Minister’s views were different: there were concerns in the short term, but matters would settle down if the open architecture was maintained. He mentioned that the most satisfying part was that markets were functioning smoothly and transparently, that price discovery was taking place and the real villains appeared to be the over-the-counter transactions between banks where there was no open price discovery. He was confident that the situation would correct itself, given the intervention by central banks and governments. The Indian minister, however, appeared to be looking for justification for greater controls. It was quite an amazing divide in concepts, and my worry is that his views are the views of his permanent establishment. That would be quite sad.

It is interesting that among all the countries in the world, we are the only country where the government is repeatedly saying that nothing is wrong and everything is all right. At the seminar, the comments in the lobby were that if all is well, why are our markets down by more than 60% while the others are down only by about 35%? Why are our external commercial borrowing rates so much worse than those of our Asian neighbours, and why is credit for exports not available?

S. Narayan is a former finance secretary and economic adviser to the prime minister. Your comments are welcome at