Time for a change
India’s Prime Minister Manmohan Singh gave a vague speech on India’s Independence Day, promising faster than 6.5 percent GDP growth this year without answering any of the tough policy questions which the government faces. Something better was possible. Here is the speech Singh should have given:
The Indian economy is in its toughest period since the economic liberalisation of 1991. Then we made tough political choices, taking on vested interests and opening our economy. The results were impressive: a GDP growth rate of more than 9 percent, and hundreds of millions of people lifted out of poverty. That growth has allowed our government to finance such programmes as the national rural employment guarantee scheme, and huge subsidies for food, fertiliser and fuel.
But in recent years, the opening of the economy has slowed sharply. The Indian people still demand that the government provides these basic goods, but they are no longer ready to make the sacrifices needed to pay for them.
As anyone who manages their family’s finances knows, if you spend more than you earn, it can only end in financial disaster. Today India is doing just that. The government spends $90 billion more than it brings in through taxes. The country imports over $183 billion more of goods than it sells overseas.
Our growth rate will fall below 6 percent this year. It’s easy to blame the rest of the world, but the answers lie closer to home. That’s good news. If the problems are of our own making, the solutions are also within our grasp.
It is time to bring out the same medicine that worked so well two decades ago. I plan to open our labour markets to make it easier for business to employ people. I will allow the market, not the government, to determine fuel prices. That way our supply of energy will increase and the power shortages which blight more than half the nation will be eradicated. And I will scale back the tentacles of the state, so that needless red tape no longer creates opportunities for corruption and holds backs entrepreneurs.
Some new policies may be deeply unpopular with entrenched elites or with those who benefited from the old wasteful practices. But It’s only by making tough choices that India can again grow rapidly. A strong economy will truly be a monument to our independence as a nation.