Fifty years after India got independence, Pranab Mukherjee says that India’s economic progress has been satisfactory. There have been aberrations like the low economic growth, but, then there are historical reasons behind it. Regarded as one of the best Finance Ministers from a developing country in the eighties, Mukherjee, in an interview with T. V. Lakshminarayan, says that India needs a consensus among the political parties on economic policies. These should be on the lines of the national defence policy and the foreign policy. Competitive populism should give way to balanced growth-oriented policies.

How do you think the Indian economy fared in the last 50 years? What has gone wrong, and where?

Overall, if you talk of these 50 years, I will not say it is wrong in the sense that we had one great advantage. Our developmental expenditure was substantially supported internally. External support was very limited. If you start from the First Plan in the decade of the 50s, our rate of savings was 10.77 per cent and investment was 12 per cent. This means our external support was 1 per cent. In the 60s, our rate of investment was around 16 per cent and the rate of savings 13.5 per cent. That meant our external support was only two-and-a-half per cent. In the 70s, external support practically became nil. It was just 0.15 per cent which was nothing because our rate of savings was 19 per cent and the rate of investment also around that figure. In 1980-85 and 1985-90, the external support was 1.45 per cent and 2.37 per cent, respectively. In 1990-92 it was 2 per cent and in 1992-97, in five years, it was 1.37 per cent.

I agree that our level of growth was very low. From 1951 to 1979, in 30 years, our rate of growth was around 3.5 per cent, which was jokingly called the Hindu growth rate. This happened because we had less investment and we did not want to have heavy doses of external support.

Why did we have to do that?

We had to do it because after World War II the whole world was divided between two power blocs. The super powers provided financial support to enhance their sphere of influence. A country like India, which chartered an independent foreign policy, cannot be a camp follower of any super power. So we did not get support from external sources to the extent that many other countries like the South-East Asian countries got. For example, the master plan initiated by the USA after World War II for reconstruction was tied up with the foreign policy angle. So India could not avail of that master plan. Examples could be multiplied. If you look at our development, like in the 50s, our rate of investment was 12 per cent. In the Eighth Plan our rate of investment was 25 per cent. We have doubled the rate of investment because we have doubled our rate of savings. That means our external support has been minimal. That has been India’s strong point.. The second strong point of India on the economic front was that we had to grow with a high rate of population growth. No other country has had to face the population explosion. And, it has happened in two ways. The rate of mortality has gone down and the life span has increased. The life span was 32 and today it is 56. The rate of mortality has gone down but the rate of birth has not reduced. So when we started our development plan, India’s population was 350 million and today our population is 950 million. Therefore we had to go for a three-fold increase in everything, and this is very difficult. The third factor was that compared to many other countries we were subjected to constant drainage of resources. For near 200 years India was exploited. So we had to build up everything from scratch since Independence. So if you take an overview I will say that our performance is not bad.

What have been our strong points?

We have built up a huge infrastructure, industrial and human. We have the largest number of technically and technologically competent personnel. We have the third largest reservoir of human talent in the world. In purchasing power parity we have the fifth largest economy. Self-reliance I have already indicated. Today, from being a net importer of food we have become self- sufficient. If you look at the 200- year-old history of British rule, after every 10 to 15 years we had a famine. Apart from maintaining law and order and securing the protection of order, the third important job of the Government of India was to eradicate hunger. There was a regular office to handle famine relief. There was a famine court. But, despite all this, India has been able to achieve self-sufficiency in food production. We are self reliant on food, we are self reliant on most of our machine building industries, chemical industries. We are near sufficient even in very sophisticated technology. These are our plus points. At the same time we have minus points. Our minus points are that we are inefficient in the use of resources, both human resources, physical resources and financial resources. For example, the cost of installation of 1 MW of thermal power is around Rs 5 crore. And if by installing 1 MW thermal power plant, the capacity utilisation is 50 per cent or 60 per cent, it means that by investing Rs 5 crore I am getting a return of Rs 2.5 to 3 crore. This is a tremendous drain on our resources. It happened in the public sector. For the huge investments we made we did not get the expected returns. The third point is we should have built up a work culture suited to an independent economy. But our work culture was one of fighting against the colonial exploiter and the same attitude continues. As a result, the objective with which the public sector was set up could not be achieved. Another weakness, of course, is the regional disparity. The level of development in different parts was so uneven. Since ours is a democratic country and we have the largest pluralistic society, levels of development are also in varying degrees. To harmonise that was not a small thing. And the problems we had to face were many — Partition, famine, impact of the World War and after that the three wars, including the Kashmir war, the Chinese war and the Indo-Pak war.

Now if you have to move into the 21st century you should avoid competitive populism. Secondly, we should identify the areas where state should intervene. The state should not intervene in all areas. It should intervene in critical areas which are specifically identified. In this regard there should be a broad consensus on our security policy, foreign policy and economic policy. The major political parties should decide what should be the level of fiscal deficit, what should be the level of subsidy, who will be the targetted group for subsidy, what would be the code of conduct for foreign investment, what would be the impact of our investments from abroad, the areas where we would like to have investments, our relationship with other trading blocs, and our attitude towards export.

Definitely. First to Indians, then to foreigners.

Regarding Foreign Direct Investment there is a controversy. Will we be able to attract FDI on our terms?

No. You can’t. You have to clearly decide where you want FDI or where you don’t want FDI. If you identify those areas then the FDIs will come. For example, in infrastructure you can get investments provided you create the conducive conditions for them. After all, people who have money will like to invest their money and make profit. Nobody is coming for charity. Now if you cannot create the conducive condition for earning profit by making investments they will not come. And, you cannot put too many restrictions on these issues.

You think India can achieve a GDP growth of 7 to 8 per cent?

Seven to 8 per cent GDP growth means 32 per cent investment. Seven per cent growth is possible because we have already achieved 25 per cent savings. With hardwork we can achieve savings of around 26 to 27 per cent and if we can have around 1.5 per cent external support, then I feel that 7 per cent growth is possible. Secondly, we should not have a very high target before us and, thereafter, have a problem in pursuing the target. I do feel that 7 per cent growth is possible. Also we should desist from competitive populism.

There is also this problem of wasteful expenditure. Resources get diverted. For instance, Rajiv Gandhi had pointed out that only 17 paisa out of a rupee reaches the target for which it is meant. There is a need to improve the delivery system. For that institutional changes have to be made, like devolution of more power to the panchayats. In an era of coalition politics we are seeing some States manipulating packages and resources. What happens to balanced development?

That will distort a balanced growth.

There is a difference. India has the largest pluralistic society. It has democracy and at the same time we are experiencing political instability. Their culture and our own culture is very different. Those people are very hard working. On the top of that in the initial stage of opening up their economy they got the benefit of investments from Non Resident Chinese. Now imagine the map of China. Look at its surroundings. Singapore a rich state. Malaysia a rich state. Hong kong very rich. Taiwan very rich. These rich countries have a large number of Chinese there. So from there they brought investible surpluses to the Chinese mainland. Now look at the surroundings of India. Bangladesh, Afghanistan, Nepal, Maldives, Bhutan, Sri Lanka and Pakistan. We have non resident affluent Indians but they are in far off places. Though we are getting some support from them it is not to the expected level.

No. I don’t think so. The Planning Commission is not an executive body. It is the body which formulates the Plan. We need a body like that because ours is a federal structure. And, for that federal structure to make an integrated plan you require an organisation where the Chief Ministers and Central ministers sit together and work out the developmental plan. You have the expertise and you have an objective approach. So the Planning Commission has made a very valuable contribution. There is a need for planning because as I mentioned earlier, there is a need for state intervention. But state intervention should be selective. And, how can state intervention take place without an instrument being available at hand? Here the state does not merely mean the federal government. The Planning Commission looks after the interests of the federal government and the provincial governments. That is why the National Development Council, which consists of the state Chief Ministers, Central Cabinet ministers presided over by the Prime Minister, is the master of the Planning Commission. The federal government alone does not control the commission.

Disinvestment in the public sector should take place to expand its own activity. I am against disinvestment to bridge the budgetary gap. That is not proper. But as I cannot give money to the public sector through budgetary support, I would not mind if the public sector makes its own funding arrangement by disinvestment. But it should be used for building capital asset. It should not be used for consumption expenditure. If you use this to build another capital asset, there is no problem.