Manmohan Singh at India Today Conclave ’07: “India in the midst of exciting things that often go unnoticed”

(NOTE: This article was originally published in the special edition of India Today Conclave in March 2007.)

“India is at the forefront of showing the world the way to address one of the greatest challenges facing humanity in the modern world. “The challenge here is to prevent the so-called ‘clash of civilizations’ and to enable not only a ‘dialogue’ between cultures, but also to create a ‘confluence of civilizations’,” said Prime Minister Dr. Manmohan Singh at the India Today Conclave 2007 in New Delhi. On Dr. Singh’s keynote speech was followed by an insightful conversation with INDIA TODAY Editor-in-Chief Aroon Purie And INDIA TODAY Editor Prabhu Chawla:

Q In many ways you are the father of reforms in this country and we are experiencing unprecedented growth in our economy. But if you look closely, the economy has grown in areas that you actually liberalized and took away from the government – telecommunications, civil aviation and the IT industry. Now you have rightly placed emphasis on spending money in social areas. But where is the guarantee of success? Politicians are accountable to voters, businessmen are accountable to shareholders, but the bureaucracy is accountable to no one. You have the expenses, but where are the results? Investments in education, health and all social areas are also a worrying part of a growing economy. I wonder if an option would be taken to make the bureaucracy more responsive and attuned to the needs of the public.

A Let me say that I do not want to claim that there is nothing wrong with our bureaucracy, but having been a bureaucrat for much of my life, I sincerely believe that our bureaucracy is often unnecessarily vilified. It is said that there are dishonest and inefficient bureaucrats, but what impresses me is that our bureaucracy is so committed to national goals and national ethos despite low salaries. However, I recognize that in a rapidly changing world we need to reflect on our new ways of doing things. Spending must be converted into results and that is why I set up the Administrative Reforms Commission last year. I sincerely hope that we will soon have a plan for measures to improve our bureaucracy.

Q At a conference two months ago, you said that in the next five-year plan we will spend $350 billion to $360 billion on infrastructure. We all accept that India’s growth depends heavily on infrastructure. The concern, however, is: how do you plan to finance it and can the policy framework of this infrastructure be published soon? How do we develop innovative strategies? Will it be a public private partnership (PPP)?) or anything else? You also talked about SAARC. Can Asian countries create an Asian currency to finance Asia? How did the Euro-dollar come into play, because by 2009/10 we could have five trillion dollars available in Asia and another five trillion dollars in the Middle East. Are they all wasted just buying bonds and selling gold? Any thoughts on this?

A I don’t think the time is right for an Asian currency like the euro. In my opinion, a common currency requires a certain level of coordination of domestic economic policies, which is not necessarily on the cards in Asia today, but that is a dream. This is a goal that we should all have, because one day the convergence of our economic policies would lead us not only to a common market, a community of Asian countries, but also to a common currency.

Now, going back to your first question about infrastructure, I think there are a lot of good things happening. If you had asked me this question five years ago, I could not have imagined that our investment rate would rise to 34 percent of our GDP, that our savings rate would rise to about 32 percent of our GDP, and given the young profile of our workforce India’s savings rate will rise significantly in the coming years. And I am confident that if we continue to create an environment that encourages risk-taking and saving, the lack of resources will not be a problem in financing our infrastructure needs.

That doesn’t mean we don’t need new strategies, new perspectives. We need a strong, vibrant debt market for long-term investments because public utilities need a long-term perspective. They require the ability to mobilize funds from the markets over the long term and therefore this is an area where we need to act, and quickly enough. Instruments such as PPP and profitability cap financing are now well established. Whether you look at roads, telecommunications, airports, seaports or our railways, there will be new experiments with PPPs. I think a lot of exciting things are happening in our country, but since we are too close to the events, we don’t often notice them.

Q The Special Economic Zone (SEZ) policy was intended to take India to the brave new world where we can take on the manufacturing might of China. But today, political parties are suspicious, farmers feel that their land is being unjustly taken away, and civil society represented by NGOs considers these policies extremely subversive. What are the serious flaws in the SEZ policy and would you consider completely overhauling it?

A The SEZ has established itself as an instrument of economic policy. However, when implementing it, we are confronted with some problems that cannot be dismissed. It is the strength of our democracy that when we identify deficiencies in our policies, we can put mechanisms in place to close those gaps in our performance, and one of those gaps is that when it comes to land acquisition for public purposes, There have been inadequacies in the design of compensation to ensure that the interests of all those affected by land acquisition are effectively taken into account.

We will address these concerns through more humane, effective and equitable land-dispossessed resettlement policies. It’s in the wording. There are some delays in the implementation of the announced measures regarding the special economic zone, but I believe that we should address these concerns if we want the measures to be successful in the long term. India is a democracy and democracy sometimes seems capricious. These decisions are in many ways irreversible and it is therefore very important that we pause a bit about any gaps in performance, design and implementation before acting. The cost of delay will be much lower than the cost of scrapping the wrong policy, regardless of the human, social and economic consequences.

Q My question relates to the demand of a political party in Jammu and Kashmir for demilitarization, troop reduction and some other related issues. I think it is an important demand because it has an impact. I am not saying that the demand should be given in, but it has several implications such as that professional judgments can be sidelined for political reasons, we could have problems with center-state relations, political coalition partnerships and even the Politicization of national military issues in a larger context. May I ask your opinion on two things: firstly, how do you see this and secondly, all of us in this country would like your assurance that professional advice on such matters will not be marginalized for political reasons?

A Let me be clear: professional advice will be given full consideration wherever it is relevant and there is no question of marginalizing it. Therefore, I think this misunderstanding or misjudgment is baseless. The other thing I would like to say is that we are in the process of discussing these matters with PDP chief Mufti Mohammed Syed. He came at my invitation and I do not want to have any dialogue with him through the media or public platform. It is not my place to enter into a discussion on this topic.

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