EM: India has made tremendous economic strides in recent years. What are your priorities for the country going forward? What is your vision for India?
MS: Yes, India has been on the move, but there is much more that we must do, that we have to do, to realize the vision of our freedom fighters of building a new India free from the scourge of ignorance, poverty and disease. I do believe that the innate creativity and enterprise of the India people, and our respect for knowledge and for institutions like the family and community, will ensure that we realize our destiny. India’s strength lies in its plurality, in its diversity and in the fact that we are an open society and an open economy. If we can find the resources to invest in the capabilities of our people, in their education and health and welfare, and if we can create world-class infrastructure, then I do believe we can show a way forward for many countries seeking a new way forward in an increasingly interdependent world.
EM: A central pillar of your government’s philosophy is the primacy of social justice. Are you satisfied that this commitment has borne itself out through economic policies implemented to date?
MS: No one can ever be satisfied even if one has done one’s best. We have certainly taken many steps to address the problems of poverty, unemployment, agrarian distress and social justice. Our government has, without doubt, done more than most governments in recent years. We are proud of the initiatives we have taken to provide a minimum guarantee for rural employment, to improve rural health, education and infrastructure. Bharat Nirman is one of the most innovative interventions we have made in rural development in recent years. We are taking several measures to increase access to education for the underprivileged, especially the scheduled castes, scheduled tribes, other backward classes, the girl child and minorities.
EM: How do you square this commitment to social justice with pressure for rapid economic liberalization? Are you satisfied with your efforts so far to lift the rural poor out of poverty?
MS: There is no contradiction between our commitment to social justice and equity and our determination to build a more efficient and open economy. In fact, one will enable the other. Of course, greater openness and competition does bring with it the risk of market failure and of structural unemployment. We need social safety nets that take care of the losers and give them the required support to find new sources of employment and income generation. As far as rural poverty is concerned, our experience has been uneven across the country. In some states the problem is more acute than in others. The central government will do whatever is necessary, but we need active intervention and support from the state and local governments for us to achieve results. I do believe that, if we can increase investment in agriculture and in the rural non-farm economy, we can make a sizeable dent on chronic poverty.
EM: What has to take place in terms of liberalization and privatization for your ambitions for India to be realized?
MS: Our experience over the past two decades has shown that when Indian businessmen and professionals find the freedom for the full expression of their creativity and enterprise, the sky is the limit. Not only have people of Indian origin done well for themselves in different and diverse countries, like the United States, United Kingdom, Malaysia and Singapore, but even in India our business and professional leaders have made a mark for themselves whenever we have given them the required freedom and infrastructure support. So, I am confident that if we continue to walk down the path we have set for ourselves, we can in fact realize our ambitions for our country. On the question of privatization, there are differences in perception on how relevant the process is for economic growth and employment generation. Our priority is to increase investment and generate new jobs.
EM: Is India’s current growth rate sustainable? What are the main challenges in maintaining high growth?
MS: For the past two decades the Indian economy has grown at the rate of around 6% per annum. The sustainability of this rate of growth is beyond question. In fact, in the past three years we have been able to take the growth rate closer to 8%. We do hope to raise India’s annual growth rate to the range of 9% to 10%. Our optimism is based on the fact that our savings rate is now over 29% of GDP, and the investment rate is about 31% of GDP. And with a growing young population and as our economy becomes more hospitable to foreign direct investment, we expect a further increase in the investment rate.
In the past year and a half, our policies relating to investment, taxation, foreign trade, FDI, banking, finance and capital markets have evolved to make Indian industry and enterprise more competitive globally. Sector specific mega-investment regions with investments of up to $10 billion in each location are being promoted, beginning with chemicals and petrochemicals, and the necessary policy framework for this is being evolved. The entire energy sector including petroleum, natural gas, power and captive coal mining offer exciting opportunities. Our challenge will be to make sure that we can step up investment and improve the quality of our infrastructure.
EM: To what extent do you see domestic politics and a slow-moving administrative system hindering your mission? What are you doing to make the process more efficient?
MS: I admit that political differences and administrative inefficiency do slow down the process of change. But, I don’t share the view that democracy has acted as a constraint on our growth process. In fact, our democracy has enabled us to create a more participative development process and widen the constituency for reform. It is a slow process, but an irreversible one. There are no U-turns in India. Coalition politics has forced us to have a more consultative process of decision-making that is good in the long run. However, I admit that things can move faster if we had a more efficient administration. Bureaucratic inertia and corruption do act as constraints on faster and more efficient growth