At first it puzzled me that the Prime Ministers warning last week against a return to the licence raj was ignored by the media. Only this newspaper,of the twenty I read every day,considered it worthy of page one. Our news channels who suddenly discovered what was happening in Egypt remained preoccupied with hysterical sound bytes from Tahrir Square. It was only after giving it some thought that I realised that the licence raj has become so distant a memory that if you did not live in those times it is hard to imagine what they were like.
As someone who grew up in that era of central planning,licences and permits,I consider it my duty to describe what a shabby,sad,hopeless place India used to be. The economy grew at barely 3 per cent (a figure derided as the Hindu rate of growth) so most Indians lived in absolute poverty. Millions in our poorer states worked as slaves under the euphemism bonded labour. There was a miniscule middle class and even the richest Indians lived poorly by the standards of the world.
The only people who had easy access to the shoddy products of our controlled economy were politicians and bureaucrats. From their fine bungalows in Lutyens Delhi,they controlled quotas and permits as if all of India was their private estate. The rest of us lived with shortages of everything. Sugar,milk,bread,cooking oil,domestic gas,electricity,water and almost everything else was always in short supply. It is not that Indian entrepreneurs were incapable of producing adequate supplies of these things but that government policies ordained that they dare not without a permit or a license. This was based on the flawed economic principle that government factories would produce everything India needed. These factories were run in sloppy fashion by careless officials so an uncontrolled private sector would have put a quick end to them. This is why the private sector had to be licenced and controlled. So successful were these controls that our biggest businessmen could regularly be seen begging for licenses in the smelly corridors of Delhis Bhawans.
It was a very bad time and since it was Dr. Manmohan Singh who ended the licence raj as Finance Minister in the early nineties,it is appropriate that he should be the first person to notice that a kind of licence raj is creeping in through the backdoor. This has manifested itself in the arbitrary manner in which some of his ministers have ordered major projects to close down in recent months displaying exactly the sort of arrogance that was routine in the days of the licence raj. They have been undeterred by the amount of public money invested in these projects and undeterred by the number of workers who have lost their jobs. These things counted for nothing in the days of the licence raj.
So when the Prime Minister spoke at the Delhi Sustainable Development Summit last week,he emphasised that although there must be regulations and standards and these must be enforced,there must be no return to the licence raj. In his words,It is also necessary to ensure that these regulatory standards do not bring back the licence permit raj which we sought to get rid of in the wake of economic reforms of the early nineties.
The warning is long overdue. In recent months the investment climate in India has been so debased by illogical government interference that the Reserve Bank of India was obliged to admit in its latest quarterly report that FDI (Foreign Direct Investment) has dropped by more than 36 per cent. Why should anyone invest in India if investments are not secure? Having just returned from Davos,I can report that this year,it was hard to meet an Indian businessman who was optimistic about India and since the Indian boom has been entirely led by the private sector,this should worry us deeply.
The people who should be most worried are the well-meaning but economically illiterate jholawalas who constitute Sonia Gandhis National Advisory Council. Under their guidance,she has emerged as the Lady Bountiful of Dr. Manmohan Singhs government handing out jobs to the rural unemployed,forest land to tribal people and free food if the NACs latest scheme goes through. All these freebies have been made possible by the fact that the Indian economy,thanks to the enterprise of its private sector,has been growing at a remarkable pace. If Indian businessmen decide that they would be better off investing in some friendlier country,then we could go rapidly back to the way we used to be. So if anyone needs to heed the Prime Ministers warning,it is Sonia Gandhi especially since many of the interfering ministers claim to be acting in her name.
