Seven Easy Steps To Growth

First, you should thank yourself that you are not a professional economist but a practical politician with his ear to the ground. If the economics of a government is good for the people, then they will reward the politicians . When the previous government was heading for defeat, many within the then ruling Congress party feared that it is the reforms which were doing them in. But now it seems that the villain of the piece was bad governance and the whiff of scam and scandal. Look what is coming out of the woodwork!

You can thank yourself a second time because, unlike Narasimha Rao, you will not simply cling to power for its own sake. All know how you have threatened to go back to Karnataka with your three suitcases and called the bluff of the Congressmen who threatened to withdraw their support unless you played ball. This lack of hankering for the high chair in Delhi gives you a rare political freedom to do what needs doing.

You lamented that after all that your government has done to clear pending proposals for foreign investment, it is still to take off. But sometimes, one act sways the mood, undoing the collective impact of all the other acts. Remember the cancellation of the Enron project and what it did to our great reputation for honouring contracts. I fear something similar may be happening to foreign confidence in your government after what Mr Ibrahim has said about foreign investment in aviation. If he makes Gulf Air and Kuwait Airways withdraw from Jet Airways and India the same way as Mr Fernandes threw out Coca-Cola, it will set the clock back by two decades. What makes it so serious is that Mr Ibrahim is your trusted lieutenant and political trouble-shooter. If you do not take care of him he will take care of all the foreign investment that was to come.

Second comes the issue of interest rates. All businessmen, irrespective of whether they believe in a level playing field just for themselves or for everyone, are agreed that if the present high interest rates do not come down, then growth will. The Reserve Bank can put more money into the system by giving back a part of what it has so far been impounding, but that will not be enough. If the government keeps trying to take away that money by offering higher and higher interest rates for its own borrowing, then the whole purpose will be defeated. So please tell Mr Chidambaram to go slow on his borrowing programme.

What is more, even if the government does not mop up the extra money, it may not automatically flow into the accounts of manufacturers. There is a financial middleman, the banks, in between. How I wish, as you also must, that we could simply ban them, as Rajiv Gandhi did for some other middlemen. The banks are sitting on loads of money which is playing havoc with their profitability but will not lend because the officers (babus, if you ask me) who have to do the lending have decided in the era of quality lending, it is safest not to lend or do so only at exorbitant interest rates.

You cannot force a person to lend by issuing circulars and then hold him responsible if the loan goes bad. Lending by fiat belongs to the era of RBI directed priority sector lending. Officials must be made to believe that they are like businessmen who must take some risks. An officer who has been actively trying to expand his banks business should not worry if, say, two out of the 10 loans he has sanctioned go bad. So, third, you must take care of the banks.

Since the whole problem revolves around controlling government borrowings without letting the deficit ride, a big help can come from PSU disinvestment. Your government has done what the previous one could not, appointed a disinvestment commission after achieving a consensus on disinvestment and codifying it in the common minimum programme. Even the choice of the commissions members has been widely acclaimed.

But just like Indian players who lack the killer instinct and foul up at the very goal mouth, the disinvestment commission has been kept non-functional. After two months, its chairman does not have his terms of appointment and the commissions powers are yet to be spelt out. The result is that the commission cannot appoint its staff, pay consultants and even buy air tickets for its members. Do you know that the commissions chairman has just been served notice that the allotment of his government accommodation has been terminated and his water and power connection are liable to be cut off. Isnt this a scandal? What if the World Bank president comes to hear of this. Fourth, after you have taken care of Mr Ibrahim please ask Mr Maran to take a little care of the commission.

Fifth, you must also keep an eye on the finance ministry. It is full of whiz kids. The ministry seems to be getting too close to the captains of Indian industry. Emboldened by the lack of import duty cuts in the Budget and the proposal of non-voting shares, the Bombay Club has expanded itself into the India Club and started asking for all manner of restrictions on foreign investment.

You were right to ask businessmen why India is behind other countries. They have also to share the moral guilt for Indias backwardness. The big houses were a beneficiary of the licence-permit raj. If tariffs come down and investment comes in, it will benefit the Indian consumer. And believe you me, there are more consumers among voters than industrialists and their family members. If you facilitate growth, India will sprout a hundred industrialists, more dynamic than the those in the past.

At the Assocham, you confessed that you were not an economist like Dr Manmohan Singh. But you can do what he couldnt or wouldnt. He tried to reform everybody but carefully left aside the finance ministry, his own backyard. Now is the time to clean up that Augean stable. The finance secretary is to be congratulated for asking the institutions to prepare and enforce a code of good corporate governance in the companies to which they lend. But what if a wicked Congress government comes in when you pack your suitcases for Karnataka and starts favouring individual industrialists?

For the institutions to be impartial and professional, they have to be independent. So sixth, why not make them truly publicly owned, by lakhs of small shareholders so that their managers do not ever again have to take orders from the likes of Pranab Mukherjee. And while disinvesting in the institutions, why not disinvest in the healthy banks too, so that their officers can work in a commercial atmosphere and take legitimate business risks without fear of vigilance enquiries. If you do this, your name will go down in the history books in bigger letters than Dr Manmohan Singhs.

Yours sincerely,

PS: And seventh, before you go back, please give Bangalore a new airport. The present one looks like a cattle shed.