‘Business by the businessmen alone. There is little room for bureaucracy and politics in it’. This is the basic structure of economic governance on which all the successful global economies are thriving on, including that of our neighbour India.
It has been reported that India is expected to post its highest-ever foreign direct investment of $83.57 billion for 2022. This is quite a news and defies all predictions and forecasts.
During the last two years (2020 and 2021) India remained embroiled in one crisis after another. It remained in the grip of unprecedented protests by farmers (kissan andolan) against the passage of three farm-related bills by its parliament that the farmers considered a threat to their survival.
The protest lasted for 1 year and 4 months with sit-ins at Delhi and in different locations in the Punjab. These protests ended upon the repeal of all the three bills.
India is rightly ranked as a country that suffered the most during the Covid-19 pandemic. India officially recorded more than half a million deaths due to coronavirus, whereas the World Health Organisation (WHO) has put the number of deaths in India due to the pandemic at around 4.7 million, which is the highest in the world. India accounts for almost one-third of Covid deaths globally.
The BJP’s embrace of Hindu majoritarian politics has seeped into government institutions. Muslims all over India protested with sit-ins and rallies against laws and policies that systematically discriminate against Muslims and stigmatize those who are opposed to government’s certain policies and actions. Recent communal violence in Delhi claimed lives of 53 people; 40 of them were Muslims. India remains in the grip of communal tension.
Each political upheaval predicted a slowdown of the Indian economy and constituted a negative outlook for prospective investors. None of this happened.
India’s economy sustained all these political shocks. Its stock exchange and currency remained stable while the investor confidence persevered; it even increased by capitalizing on the gaps offered by the global economies due to the pandemic.
To find an answer to the sustainability of India’s economy one has to go back to the 1990s. Dr Manmohan Singh, an economist and statesman, was appointed country’s finance minister in 1991 at a time when the country was on the verge of an economic collapse.
The IMF (International Monetary Fund) agreed to bail it out but only against cash-able collateral of India’s gold reserves that had to be transported to Europe to place them in its custody.
In the next five years at his disposal (1991-96), Dr Singh implemented out-of-box reforms. He devalued the rupee, lowered taxes, privatised state-run industries, and encouraged foreign investment. He framed laws and rolled out reforms that liberated the businesses from the yoke of bureaucratic control and insulated them against political upheavals.
He meant “business by businessmen and businessmen alone” and installed systems and processes to make this happen. This well thought-out and carefully executed plan of liberalisation ushered in an economic boom.
Since then, India has not looked back and ever since then it has recorded an exponential growth in its economy. India has not taken any financial assistance from the IMF since 1993. Repayments of all the loans taken from the Fund were completed on 31 May, 2000.
Congress won the May 2004 parliamentary elections and Sonia Gandhi got Dr Manmohan Singh elected as the Prime Minister.
She gave him one mandate: Boost the economy of India and improve the conditions for India’s poor, who generally had not benefited from the country’s economic growth. Singh in his back-to-back tenures (2004 -14) took the Indian economy to new heights.
The government of BJP under prime minister Narendra Modi, too, pursues “economy is first” policy religiously. Today, the economy of India is virtually in the hands of businesses.
The role of the government is that of a regulator. Political upheavals have little influence on the economy of India. Such is the case of all the front line and emerging deregulated global markets on the path of success.
Pakistan’s economy is not a liberated one. It is nowhere near “business by the businessmen alone” ideal. It is highly vulnerable to changes in political dynamics. For example, the recent vote of no-confidence against the sitting Prime Minister and the events that his government’s ouster triggered profoundly added to the country’s economic woes with the stock market going into the deep red, rupee exponentially losing its value against dollar and the country’s panic-stricken Prime Minister and Finance Minister running helter-skelter to friendly nations with a view to soliciting loans and pleading with the IMF to resume their programme on some concessional terms.
Under the prevailing model of economic governance structure, the nation, at its very best, may on and off achieve some incremental growth but nothing compared to other deregulated economies that achieve their exponential growth.
Copyright Business Recorder, 2022
The writer is a former President, Overseas Investors Chamber of Commerce and Industry
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