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Atal Bihari Vajpayee On India’s Economy, Public Sector, And Globalisation

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Former Prime Minister Atal Bihari Vajpayee’s stewardship of India came at a time of major changes in the nation’s economy, as well as its relationship with the world. Credited with major reforms in energy, communications, financial services, and transportation infrastructure, Vajpayee also pushed the disinvestment of government holdings in state-owned enterprises in a big way.

Considered among the country’s most skillful orators, Vajpayee’s speeches on these issues still make for insightful reading. Excerpts:

Also Read: Atal Bihari Vajpayee’s Economy: ‘Policy No Good Without Implementation’

What are the challenges that we must overcome in accelerating our GDP growth rate to 8 percent and beyond? Let me briefly touch upon a few critical development-related issues. I must clarify that the list is not exhaustive:

The first and foremost challenge is that of implementation.

"I repeat what I have been saying to all the people in the government – at the centre and in the states – that our policies and programmes are only as good as their implementation."

...Our new Finance Minister made an incisive point in his remarks before members of the Trade & Industry Council. He said that a major burden on our economy is the way our governmental machinery functions. It is designed to achieve delay, not development; its preoccupation is procedures, not performance.

The second challenge is to further speed up economic reforms so that India becomes a clear-cut market economy, with the government withdrawing from production, barring a few clearly specified strategic sectors. However, government must retain and further strengthen its role in policy-making, regulation and facilitation.

"" - We need to ensure that regulation of markets is by competent and independent regulatory agencies.

Third, government would have to continue to shoulder dominant, though not exclusive, responsibility for physical and social infrastructure. However, the laudable goals of a welfare state will now have to be pursued within a new framework -- mainly by broadening and deepening the scope of public-private partnership in education, healthcare, shelter, sanitation, care of the aged and the poor, and promotion of sports, arts and culture.

Fourth, even as we try to speed up growth, how do we ensure that it will be employment-oriented growth, and not jobless growth or growth with less jobs?

The challenge of unemployment will become more acute as the youth segment of our demographic spectrum continues to expand in the coming years.

Also Read: Why Atal Bihari Vajpayee Put India’s Public Sector Under The Scalpel

...the immediate task that faced the government of Independent India was to build a national economy, virtually from a scratch, to meet the demands and fulfil the aspirations of a free nation.

A truly daunting task made more difficult by the fact that local entrepreneurs had neither access to large funds nor the capacity to accumulate capital for major enterprises. Lack of technology was another impediment -- after all, India had missed the Industrial Revolution.

In these circumstances, government had to intervene in the form of both mobilising resources as well as setting up basic industries that came to be known as public sector enterprises.

"In the early decades of our Independence, these enterprises played a significant role in the nation-building process. However, by the seventies and eighties, public sector enterprises had begun to falter."

The reasons for this are too many to be listed here. But, broadly they are:

  • inadequate competition, leading to inefficiencies;
  • inadequate accountability, making them careless about productivity and profit; and,
  • inadequate motivation, making them uneager participants in the economy.

There were systemic problems, too, and many of them still remain. For instance, it is virtually impossible to entirely separate a public sector enterprise from government. As a result, the constraints within which governments have to function are invariably replicated in the functioning of public sector enterprises.

I would be amiss if I do not mention that political parties in power contributed to the decline of public sector units, too, by using them as fast breeders of jobs, instead of making them sustainable, competitive and fruitful players in the national economy.

Political expediency of the moment was allowed to prevail over the future viability of public sector units and the employment security of their employees.

I may also add that these experiences are not unique to India. Countries in the West with huge public sector enterprises that ranged from railways to telecommunications to mining to public transport faced the same problems. They have been able to overcome them because they dared to face the truth.

Since the late eighties, however, things have begun to change -- both in India and abroad. The wave of economic liberalisation in countries across the world has not only swept away the age of monopoly for state enterprises but also swept in the conversion of public sector units into private enterprises.

"World over the experience has been that privatisation has led to increased efficiency and higher profits that have not only benefited the new private owners of these enterprises but also their employees."

Yet another global experience is that of liberalisation sweeping away those public sector enterprises that had refused to shake off their lethargy, thus making themselves untenable and losing their relevance.

In India, compared to other countries, we have been less hasty in ending monopolies and privatising public sector enterprises. And this for good reasons, too. After all, we did not have a safety net in position, nor did we have a welfare system that was adequate to meet the problems of blanket privatisation that often leads to redundancy and re-deployment of the workforce.

...we need to prepare public sector enterprises to meet the challenges of the new era of global economy driven by market forces.

"" - What are the facts? Of the 235 operating public sector enterprises, more than 100 are loss-incurring units.

In a third of public sector enterprises, capacity utilisation is less than 50 percent.

These facts and figures are hardly encouraging and should cause concern -- to both management and employees of public sector enterprises. The results do not reflect government’s efforts to keep public sector enterprises going.

Also Read: How Atal Bihari Vajpayee Saw Globalisation’s Opportunities And Challenges

The inevitability of globalisation is recognised by all.

However, during the last one year misgivings about the globalisation process have become more and more pronounced. This is evident from the increasingly vigorous protests in Seattle, Prague, Bangkok, Melbourne and even Davos!

Are these protestors a group of misplaced individuals? And what are they protesting against?

Some of the placard-wavers have cynically commented that they are against everything. But, a serious analysis of the protests will show that we cannot ignore the fact that there are many misgivings cutting across nations; that there are apprehensions which are shared across borders.

"If it is so self-evident that globalisation leads to increased opportunities, enhanced growth and real income, why are these not being universally accepted?"

Is it a communication failure? Is it merely an image problem?

Is it that governments are unable to ensure that the fruits of development percolate to the grassroots? Or, is it that globalisation is increasingly being perceived to be elite-driven, conferring benefits on large corporates while bypassing millions of poor and marginalised people? In India alone the number of such people is nearly 300 million.

We need to ponder over these questions and come up with acceptable, convincing responses.

The effectiveness of these responses would partially lie in accepting that while globalisation affords unbounded opportunities, these opportunities go hand in hand with obligations. The privilege of being a global player must be matched with the responsibility of making the process universally acceptable by making it universally beneficial.

We in India are conscious that the rapid changes brought about by technology and globalisation have to be addressed with care and caution.

We have to spread the benefits among all our people and manage the process of change with sensitivity.

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