The Hindu Business Line : Victims of insularity

Naxalites, and defiant leaders of Kashmir and the North-East complain that government has kept them poor. In truth, they are poor not because the government has given them too little but because they have had no vision. They are insular; they do not want to be in the mainstream. They are unaware of how the world has changed. They know how to make headlines but not how to make bread and certainly not how to make butter, says P. V. Indiresan.

HERE is a true story I got from the horse's mouth itself. A senior IAS officer made it at long last to the coveted position of Chief Secretary of his State. He went to convey the good news to the matriarch of the family, a ninety-year-old aunt. After listening to his excited account of how he got his promotion, the old lady blessed him with the words: "You have always been a good boy. I knew you would do well. I pray that soon you will become tehsildar."

Like the old lady, there are many patriarchs and matriarchs among our leaders, administrators and intellectuals who cling to ninety-year-old ideas. A small share in the dwindling and none-too-fertile surplus land is the greatest blessing that they like to confer on our poor youth. Times have changed; our economy has moved beyond its agrarian past, and yet the mindset has not changed; the view is still clogged.

Within the past one week, both a senior leader of a Left party, and a top executive of national chamber of commerce advocated hitching the future of our economy to agriculture. Undoubtedly, in absolute terms, agriculture is growing, and should grow. However, the share of agriculture in the economy is declining; it will decline even more and should do so for the good of our people. If we can maintain a seven per cent growth rate, by the year 2020 the share of agriculture will dwindle to 10 per cent.

Admittedly, the hope these days is not about primary agriculture but on its more glamorous variation of food processing. No doubt, food processing offers better scope than agriculture by itself. Even then, the share of food consumption, which is currently around 50 per cent, will go down by 2020 to 25-30 per cent even as the consumption of non-food items will increase from the current level of 50 per cent to 70 per cent or so.

There is a traditional saying in rural Karnataka that an increase in the consumption of paan is a sign of prosperity. That is a rustic's way of confirming Engel's Law that in a growing economy, consumption of luxury goods will grow faster than the consumption of necessities. Hence, if we want to wish anyone well, we should direct them towards the production of luxury goods. Tying them to necessities is no different from wishing a Chief Secretary to become a tehsildar. (Some people deem luxury goods to be sinful. Then, they should not complain about poverty.)

In the new vision for the backward areas — from Naxalite-infested parts of Andhra Pradesh, to Kashmir and the North-East — economic growth is the panacea for political ills. The government has announced large financial packages, and creation of new jobs. Higher budgets are a sign of quantitative progress, but they will not necessarily guarantee greater progress, nor will they guarantee a better quality of life.

When Kashmir or Manipur becomes more prosperous, consumption of luxury goods will naturally increase. A smaller and smaller proportion of luxury goods will be produced locally, and a larger and a larger share will be procured from outside. To balance such purchases, the state will have to produce more goods that are saleable outside its boundaries. Such goods will have to be globally competitive both in cost and in quality. Backward states like Kashmir or Manipur will not graduate on their own to the global class. They will need new entrepreneurs, new technologies.

Money does help. However, even large sums of the kind promised will not fructify unless they are accompanied by an infusion of competent entrepreneurship and competitive technology. Unfortunately, political leaders of backward parts of the country, whether they are from Kashmir or the North-East or Naxal areas are allergic to outsiders however competent and valuable they may be. They are inward looking; they do not welcome outside talent, nor do they welcome new ideas.

In the past and in modern times too, many poor nations have grown rapidly; many others with far greater growth potential have languished or even dwindled. The nature of their culture made that difference. Bangalore and Mumbai are rich because they kept their doors open; Kashmir, the North East and tribal areas have remained poor because they have kept their doors shut. The richest man and the richest woman in India are both in Bangalore; they are both rank outsiders. Political leaders from backward areas complain, quite correctly too, that they have been neglected. At the same time, if they look honestly into their hearts, they will realise that they were neglected because they did not welcome talent, investment and ideas from outside.

There is a fable of a very ambitious man who was inordinately jealous of his neighbour. God accepted his pleas and granted all he wished but on condition his neighbour will get twice as much. Moved more by jealousy than by ambition, the man wished that God will take away one of his eyes in the expectation his neighbour will lose both of his. Most insurgent leaders in our country are of that type: they prefer to make others more miserable than to make themselves happier.

Will Kashmir, or the North-East or Naxals welcome a Azim Premji or a Kiran Majumdar? The Naxals have actually demanded that Infosys, Satyam Computers and the like should be thrown out and the land those firms have "grabbed" should be returned to the locals. What benefit will result if the hundred odd acres these firms have occupied, and have produced thousands of jobs, are returned to tribal farmers?

Naxal leaders had a choice: They could have asked for more investments from Infosys and Satyam Computers and more jobs for their people knowing full well that would be accompanied by a large influx of outsiders; or they could have preferred to protect their insularity, their culture, but at the cost of unending poverty. Those leaders have chosen to reject new winds from outside, they prefer to remain mired in poverty merely to preserve what they think is high quality culture. Unfortunately, if they want true prosperity, those aspects of their culture are precisely those that are not worth preserving, and deserve to be discarded.

There is little hope that these insular people will open their doors to others. Yet, one compromise based on the Malaysian model is worth trying. For the past fifty years, Malaysia has practised vigorously the Bhumiputra policy of giving preference to the Malays, and ensuring that Malays retain a lion's share of the economy. At the same time, they vigorously welcomed foreign investment and foreign businesses on condition that the Bhumiputras had majority share.

That policy has worked well; from a very poor agricultural economy, Malaysia has graduated into a vibrant industrial and service economy. By investing in Malaysia, many foreign firms have enriched themselves, probably even more than the Bhumiputras did.

At the same time, Bhumiputras are now richer than what they would have been otherwise. They hold their head higher than what they could have done otherwise.

Government grants have their value; they suffer also from serious limitations. If backward areas want to transform themselves the way Malaysia has done, they should welcome foreign capital - not merely financial but more significantly human and technological.

More government jobs too will not help much either: what progress needs is not more jobs but more work, productive work. Unfortunately, government jobs do not necessarily translate into productive work.

It may be too late for the Central Government to rethink its offer of outright grants. If it is not, it should offer matching grants only; grants matched to what these States attract from the market. Likewise, it would not create ad hoc jobs but matching jobs only; matched to whatever new entrepreneurs create.

The policy should not be job creation but job multiplication: for every job created by the government, private enterprise should give birth to several others.

Naxalites, and the defiant leaders of Kashmir and of the North-East complain that the government has kept them poor. In truth, they are poor not because the government has given them too little money but because they have no vision of their own. They are insular; they do not want to be in the mainstream.

They want to preserve the past and are unaware of how the world outside has changed. Like the old lady in our true story, their vision is that of becoming a tehsildar and no higher. Their capability too is limited: They know how to make headlines but not how to make bread; certainly, they do not know how to make butter.

(The author is a former Director of IIT Madras. Response may be sent to indresan@vsnl.com)

This is 137th in the Vision 2020 series. The last article was published on November 15.

More Stories on : Economy | Terrorism | Vision 2020

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Engagement by economics

Labouring for nine, you brother mine

`You name it, we will make it'

Victims of insularity

Default by stealth: The declining greenback

A big deal in US retail

Law's course

LIC clarifies