Economics: An Open Letter to the Prime Minister

Dear Prime Minister,

You must get many letters from people all over India. You are a very busy man, I am sure. I am just a fellow Indian citizen. I will not say that I am a “concerned” fellow citizen, because that would be hypocritical of me. Like most of our fellow citizens, I have been spending much of my time securing my own financial future, and frankly, I have done precious little to serve our great nation.

Much like most of our politicians, wouldn’t you say? The difference of course, is that I am a private citizen, and have not taken an oath to serve our nation. Our politicians have, and most of them abuse their sacred oath the minute they get into government office. But the purpose of this letter is not to remind you of such unpleasant facts, since you have to deal with these disreputable people every day. You know this much better than I do.

So what is the purpose of this letter, you may ask? I am getting to that. As a reasonably well-educated and socially aware fellow citizen, I feel I am entitled (and qualified) to make a few suggestions regarding how our country can be better governed. As a participant in our great if chaotic democracy, it is my right. I genuinely believe that I have something useful to say and that my views probably reflect those of the “silent majority”, those Indians who work hard, pay their taxes, and fervently hope that life will somehow get better for them and their families.

Over the last ten years or so, our country has made great strides towards prosperity. I read recently that the poverty rate has fallen from approximately 35% about twenty years ago to about 22% today. That is a very impressive achievement – not of the Indian government, but of the hard work and commitment of the Indian people who have seized the opportunity that partial economic liberalization presented them with. Of course, you were in some ways the architect of this, when as Finance Minister in 1991, you opened up the bankrupt Indian economy to the prevailing winds of globalization. Of course that decision was not made voluntarily, but under great duress, as the Indian economy at the time was tottering on the brink of collapse. Doomsayers (from your own party and of course from those “protectors of the poor” our leftist parties) said that Indian companies would not be able to compete. They said that Indian industry and entrepreneurs would be wiped out.

Fifteen years later, we can safely say that they could not have been more wrong. The Indian economy has been growing at a tremendous pace. Indian private sector companies have not only survived competition from their global peers, but in many cases, have beaten them. There are enough examples of this, as you are well aware. A new confident educated middle class has been created – people who study hard, work hard, pay their taxes and contribute immensely to the growth of this great nation of ours. I like to think of myself as one of these many millions.

However, there is much to do, as you are aware. Governmental reform is still non-existent. The government (which you represent) is still, lazy, corrupt, inefficient and unaccountable – a huge drain on our country’s resources. Why is that? As the Prime Minister, I strongly urge you to focus on governmental reform and not get diverted by non-issues such as how much Chief Executive Officers of private sector companies are making. I realize that this will not be easy – but then nothing worthwhile is.

One of five Indians still lives in abject poverty. A large proportion of the Indian population is functionally illiterate – they can sign their names, but that is about it. Our government-run primary education system (especially in North India) has ceased to exist. Our road, rail and port infrastructure remains in a shambles, obstructing economic growth. You must have noticed the pathetic state of the roads in Mumbai, our nation’s commercial capital, during your visits. A large proportion of our population does not have access to safe drinking water. The power situation in all our states is a disgrace. Apart from greatly inconveniencing us, it acts as a hindrance to economic and industrial growth, as many parts of our nation have to go without power for as much as eight to ten hours a day. I also know that despite this, electricity tariffs in certain parts of our country (my hometown Mumbai for example) are the highest in the world. Our forests and wildlife are vanishing at a rapid rate, many of our rivers are polluted and our environmental track record is a mess. Our judicial system is such that even the simplest litigation takes years (sometimes decades) to resolve.

The objective of this letter is not to blame you or your government. The objective is to suggest a few “high-impact” areas that you and your government could focus on to improve the living standards of a billion people. Of course, there are many vested interests involved who would not want this to happen – from politicians in your party and the opposition, our bureaucrats in the Indian Administrative Service (IAS), and others such as your leftist allies. They are all part of the conspiracy to keep India poor and backward, because they benefit from it. By the way, I feel that our bureaucrats are much like the eunuchs in the ancient Persian and Roman empires. These eunuchs had no direct power and they fought no wars, but they had enormous influence on the way these empires were administered. They were “file-pushers” and the ones responsible for the downfall of these mighty empires. Sorry – as a student of history, I could not resist drawing that parallel. I am sure you see the similarity, dealing with stone-walling bureaucrats every day.

So what are the broad areas of policy that I request you to focus on? There are many. But I realize that it is not possible for you (or anyone) to focus on too many things. The three that make the most sense to me are: Infrastructure, Foreign and Indian Direct Investment and Primary Education. These are not radical suggestions and will not upset the apple-cart too much. But they will make a huge difference to our lives. They have been elaborated below:

1. Infrastructure: Here I request you to focus on and “fast-track” three things. They are:
a. Completing the “Golden Quadrilateral” highway system that was initiated with so much fanfare by your predecessor, Mr. Vajpayee. I also request you to find some way to improve the pathetic state of the roads in our major cities. I know that this is the responsibility of the municipalities involved, and most of them are extremely corrupt. However, there are ways that this can be done – by tying Central funds disbursed to actual results delivered on the ground, etc. You know how the governmental machinery works much better than I do. As a PhD in economics, I am sure that your grasp of economic history is very sound. You must know how the United States government introduced the “Food for Work” program in the 1930s, during the Great Depression. Millions of unemployed Americans were provided food and dormitory style housing in return for which they helped build America’s national highways. This highway network is still the most comprehensive one in the world – seventy years later. This “Food for Work” program provided food and employment to millions and also helped pull America out of the Great Depression. Why can we not start a similar program here in some of our more backward states?
b. Reducing power transmission and distribution losses - As you know, the business of providing electricity to consumers has two parts to it – power generation and power transmission and distribution. Adding new power generation capacity is a time-consuming and expensive business and will require much effort in attracting the necessary private direct investment. However, the second part – power transmission and distribution can be resolved much more easily. I have heard that about 30% of electricity generated in India is either stolen or not paid for. This is a staggering statistic. This is because of corrupt officials who take bribes from consumers who do not want to pay their electricity bills. How can this be stopped? Quite easily – turn over power bill collections to the private sector and pay them a small commission on the amount of money they collect. If Reliance Energy, for example was responsible for collecting outstanding power bills, I am sure that power theft (and distribution losses) would come down significantly. This would mean more money to invest in new power plants, building of new capacities, availability of uninterrupted electricity – a nice “virtuous cycle”.
c. Work is already being done on a “super-fast” rail freight corridor between our major cities, and that is a good step your government is taking. I know nothing about ports, so I will not venture an opinion on the modernization and enhancement of our ports. I am sure you have qualified experts in this area.

2. Foreign Direct Investment, Special Economic Zones and opening up the retail and insurance sectors:
a. Your allies in the ruling coalition government the leftists, have been fighting you tooth and nail on this. I am sure you are thinking – with friends like these, who needs enemies?? But the fact remains that if India’s economic growth is to be permanent, it needs to be all-inclusive and benefit people all across our vast land. The best way to do this is to set up Special Economic Zones in the hinterlands and offer companies tax breaks to set up shop there. Another way to ensure all-inclusive economic growth is to open up the retail and insurance sectors to private investment (Indian and foreign). This would create millions of jobs where they are needed most – in the Nandeds and Bhagalpurs of our country. It would provide a quantum leap to our economic growth and reduce the migration of millions of people to our large cities – which of course are already over-burdened, dirty and crowded.

Opening up the insurance sector would also provide huge sums of long-term funds that can be used for large nation-building projects such as irrigation, power generation, afforestation, etc. There is no down-side here; it is just a question of mustering the necessary political will to do it. Clear, transparent land acquisition policies need to be put in place as far as acquiring agricultural land for Special Economic Zones (SEZs) is concerned. The problems we have faced in this area are largely due to the lack of such a policy.

3. Primary Education For All: Most of us have watched with dismay as your government has repeatedly put its foot in its own mouth as far as education is concerned. We have watched with disgust as time and again, the topic of caste-based reservation has become a major political issue. If either you or your loved ones are ill, would you prefer to be treated by a sub-standard physician who shouldn’t have gotten into medical school in the first place? I do not think so. Reservations are valid – for economically challenged students, irrespective of caste, gender or religion. The caste system in India is a national disgrace and should be abolished, not perpetuated. It would be far better to focus time and money on overhauling the primary education system as it is currently exists. But you know the nature of the problem, I am sure. Even a layperson such as me has seen programs on the BBC and various Indian news channels showing how government-run primary schools (especially in Northern India) are bankrupt and without even blackboards or roofs on buildings. Many teachers do not even bother to show up at school.

How will our millions of young minds be educated if this is the case? How is the performance of these government-run primary schools currently being measured? As a taxpayer, I know that I have to pay something called an “education cess”. I have no problem paying this. But I would like to know how the money collected is being utilized. This is a reasonable request. This is also a problem that is easily corrected. The running of these schools in rural areas should be handed over to the village “panchayats” (councils). No parent would like to see their child illiterate. There should be financial incentives for parents to encourage them to send their girl children to school. I am sure you will hear howls of protest from the people currently responsible for running these governmental schools (the “eunuch” bureaucrats). But you need to cut the Gordian knot here and make a decision. It is also very important to focus on English being taught at the primary school level. 175 million Chinese kids (and adults) are learning English because it is the future as far as jobs and careers are concerned. This is true for India as well.

There is much more that can be done to benefit our great nation, especially in reforming state and municipal governments, since they are the ones ordinary people such as us have to deal with. That would be the subject of another letter. I realize that none of the changes I have mentioned above will be easy to bring about. But you have chosen to become the Prime Minister of our country and that job is difficult. You owe this to us – all one billion of us. If you can accomplish just these three things, we will be in your debt forever.

Also, I am not just an armchair critic. Show me evidence that you mean business in these areas – especially in primary education, where I feel I can contribute, and I will join you. I am not yet a parent, but I have friends who are, and I realize how difficult it is for young children to get admitted to good schools in India. If I ever choose to have or adopt children, I would want a better education system for them. So my decision is based on rational self-interest – just like the great economist Adam Smith used to say. I hope that rings a bell.

Sincerely,

Sandeep Gupta