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Home > India > Business > Columnists > Guest Column > L K Advani

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'India needs a Swadeshi development model'

February 12, 2009

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L K Advani, Bharatiya Janata Party's prime ministerial candidate and leader of the Opposition in Lok Sabha, addressed the 81st annual general meeting of the Federation of the Indian Chambers of Commerce and Industry (FICCI) on Thursday.

In his speech, Advani makes a strong case for Swadeshi, creatively redefined, as a model of development to benefit Bharat, and not just India. Following is the text of his address to FICCI members:

"Shri Rajeev Chandrashekhar, President of FICCI; Shri Laxmipat Singhania, President-Elect; Dr Amit Mitra, Secretary General; captains of Indian business and industry, distinguished guests, ladies and gentlemen:

It is almost exactly a year ago that I had an opportunity to address the annual general meeting of FICCI. I am pleased to be here again.

The next parliamentary elections are so close that we can almost hear their footsteps. A hallmark of the future is that it is uncertain. But there can be no uncertainty about one aspect of the coming Lok Sabha elections.

People's will will prevail. And the world will see that this great country of 1.13 billion people and a zillion diversities has once again effected peaceful transition of power through a grand celebration of democracy.

The bubble of Sensex-generated prosperity has burst

The people of India are going to elect the 15th Lok Sabha at a time when there are formidable challenges at home, in the region and in the world at large. There were challenges last year, too, but they were masked by the rather frothy exuberance in a small section of the economy.

In January 2008, the BSE Sensex had crossed the all-time peak of 21,000. And some speculators were predicting that the Sensex would rise to 27,000 in the first half of 2008. It has now fallen to below 10,000.

This represents erosion in the market value of listed Indian companies to the tune of Rs 40 lakh crore (Rs 40 trillion).

Some people might say that this is notional loss because it is in the very nature of the market index to rise and fall. If this is notional loss, then it stands to reason that the prosperity that we saw in the past few years based on shifting market parameters was also notional prosperity.

In recent years, many greed-driven financial instruments came into vogue. Such undependable devices of the free market economy cannot be the basis for building a truly prosperous nation. They have caused meltdown of the financial system in America and other western economies.

They do not guarantee the steady, sustainable and healthy growth of even the corporate sector, even though the corporate sector constitutes only one of the several important sectors of the Indian economy.

The past decade has demonstrated that the growth that unfettered capitalism produces usually culminates in a bubble. However, when the bubble bursts, the pain and havoc it causes has uneven impact on different sections of society.

Therefore, I am less worried by the fact that the phenomenal family wealth of some of the richest Indians has shrunk by several thousand crores. What worries me more is that India's real economy is shrinking, labour-intensive employment down and with it the modest incomes of millions upon millions of poor and middle-class Indians is shrinking.

The IPL (Indian Premier League) season may not have been affected by the economic slowdown, going by the recent auction of cricketers. But as someone who has been constantly moving around the country, I can tell you that the BPL population of India has become FPBPL -- Further Pushed Below Poverty Line!

Millions of ordinary Indians have lost their jobs due to the sharp downturn in the economy, and many more are experiencing the torment of likely loss of livelihood.

According to the Federation of Indian Export Organisations, 1 crore (10 million) jobs could be lost by March 2009. If it is true, it is a staggering number, almost scary due to the fact that we already have a large underemployed population, most of them young Indians.

I have never seen this kind of despair in my political life

Members of FICCI know very well how each and every sector of the economy has been badly affected by the crisis -- construction, automobiles, capital goods, textiles, gems and jewellery, tourism and, of course, IT and IT-enabled services.

Confidence has plummeted. Both the corporate sector and the common man are equally worried about the uncertain future. I have never seen this kind of loss of confidence in my many years of political life.

Here is a piece of statistics to show the contrast between the mood of optimism in the country when the NDA left office in 2004 and the mood of insecurity when the UPA is about to complete its term in 2009.

The NDA government started with 5 per cent growth in 1998 and left an economy with 8.5 per cent growth in 2004. The UPA started with 8.5 per cent and will leave it at 6.5 per cent, or even lower. The Vajpayee government ushered in confidence and hope about future. Today there is only uncertainty and despair.

What is worse, the government is in denial mode. Its leaders are shirking their responsibility for the current economic crisis by saying that it is due to 'external factors'. When the prices of essential commodities needed by the aam aadmi were rising alarmingly last year, we had heard a similar alibi from senior representatives of the government: it is due to 'external factors'.

I remember that some decades ago, the governmental leadership at the time used to attribute any problem facing the country to the ubiquitous 'foreign hand'. Those in the UPA government are saying the same thing today with regard to price rise and economic downturn. The only difference is that they have replaced the 'foreign hand' with 'external factors'.

This is a self-serving explanation. Since the Indian economy is relatively less dependent on external trade, it is a vain attempt to hide the government's own gross mismanagement of the economy.

The prices of food items rose in spite of fairly good monsoons for the past four consecutive years. The people have had to suffer mainly due to the government's lack of pro-active planning, close monitoring of shortages, and efficient public distribution.

The situation got worse because of the knee-jerk and shortsighted inflation-control measures. Interest rates were raised. Liquidity was sucked out of the system. All this throttled business and industry. In my interaction with captains of industry some weeks ago, almost every participant said that the crisis was deeper than is admitted by the government.

All of them agreed that businesses are facing a virtual credit famine. More than them, I know that it is the small and medium companies, entrepreneurs, farmers and traders who have been badly hit with higher interest costs and lack of credit.

Unfortunately, a majority of the stakeholders in the Indian economy are not on the stock markets and, therefore, have never been the focus of the UPA government.

Lack of leadership has impaired infrastructure development

Removal of infrastructure bottlenecks has been widely recognized as a precondition for high and sustainable rates of economic growth. Apart from education and healthcare, it is the most important investment one can make into the country's future.

The past five years have been largely a wasted period from this point of view. I would like to ask the prime minister: Is the global economic crisis to blame for the fact that the National Highway Development Project launched by the Vajpayee government, which is the most ambitious infrastructure project since Independence, has been moving at a snail's speed?

Are any external factors to blame for the fact that only 7,000 MW of installed power generation capacity was added last year, whereas China added 100,000 MW in the same year? Even today, for every $1 that India spends on infrastructure, China spends $7.

Whose responsibility is it to sort out the open and prolonged conflict between the human resource development ministry and the Knowledge Commission, which is thwarting much-needed initiatives in expanding opportunities in higher and professional education for young Indians?

The lack of attention to infrastructure development is particularly inexcusable because the UPA government had a very favourable economic and business climate, both domestically and globally. As I have said, the NDA government had left the economy in good shape. The global economy was at a never-before expansion phase and this global expansion was letting countries all over the world access capital and credit flows in never-before quantities.

The UPA government had an unprecedented opportunity to use this global expansion to put India in an orbit of high growth on a sustainable basis. It squandered the opportunity because it lacked decisive leadership and commitment to good governance.

Now with the liquidity boom that fuelled much of global and India's growth for the past five years finally over, the credit to sustain India's growth rates and finance massive infrastructure projects (estimated at $500 billion until 2012) will be a formidable policy challenge.

Who's in charge of the finance ministry -- of government?

At a time when the country is facing one of the worst economic crises in recent decades, the finance ministry has remained headless for the past two-and-a-half months.

With Prime Minister Dr Manmohan Singh convalescing -- I wish him speedy recovery -- India now has a second part-time finance minister in Shri Pranab Mukherjee. He is someone for whom I have a lot of admiration.

But when the same person also heads the largest number of GoMs that any prime minister has created since Independence, one can only conclude that here is a government that is incapable of taking firm and timely decisions. Surely, India deserves better.

India deserves better on yet another count. Whenever I meet representatives of the business community, I hear almost unbelievable stories of corruption. The instances of political corruption and corporate corruption that hit the headlines in recent times have besmirched the image of both India's democracy and India's business.

The 'Cash for Votes' scandal in July 2008 was the most shameful episode in the history of Indian Parliament. The ugly role that money power played in subverting the verdict of elected representatives has sounded a note of warning that all is not well with our democracy.

That all is not well with our corporate sector has been brought home with dramatic effect by the Satyam [Get Quote]/Maytas scandal.

But this is not simply a corporate scandal. It is also a governmental scandal, since it is impossible for such a huge fraud, involving allotment of lucrative land and plum infrastructure contracts, without the involvement of those in power in Andhra Pradesh. Then there is the huge scandal in the telecom, in the purchase of Scorpene submarines. . . the list goes on.

Swinging from one imbalance to the other

Honest introspection is an attribute of responsible leadership when faced with a crisis. Strangely, the Congress response to the crisis is self-congratulation!

According to recent newspaper reports, its president has stated that 'India has been saved' because of the policies of Jawaharlal Nehru and Indira Gandhi.

The same party also claims that India was earlier saved because of the policy of economic liberalization initiated by Dr Manmohan Singh when he was the finance minister in P V Narasimha Rao's government. His reforms, in effect, dismantled the pseudo-socialist regimes constructed by the Nehru dynasty.

Obviously, both propositions cannot be true.

Development historians know that the Soviet model inspired Nehru's belief in the public sector occupying the commanding heights of the economy. Throughout the '50s, '60s, '70s and '80s, true entrepreneurship in India was curbed by the license-permit-quota raj. The ones that did flourish, did so by state patronage or crony-capitalism.

This stunted India's growth and necessitated the economic reforms of the early 1990s. However, in the past nearly two decades, India has swung to the other extreme by trying to imitate the American model of free-market capitalism. As a result, agriculture, the informal sector and labour-intensive manufacturing sectors of the economy, which create maximum employment and self-employment opportunities, have suffered prolonged and systemic neglect.

The shame of thousands of farmers committing suicide that we experience today is a direct result of the new imbalance created since liberalization and globalisation. The rich-poor and urban-rural divide has become wider than ever before in the past two decades. This has given rise to many undesirable consequences.

I may point out here that many senior leaders in the UPA government, including the prime minister, were at one point strong votaries of swinging to the other extreme of globalisation.

On March 18, 2006, Prime Minister Manmohan Singh told a global audience in Mumbai that the Reserve Bank of India [Get Quote] would prepare a roadmap on full capital account convertibility to fully integrate the Indian financial system with the global. Later, of course, in September 2008, Dr Singh did a U-turn, just as he had done a U-turn on the need for a special anti-terror law.

He said, "The foremost challenge is to insulate India from the ill-effects of the international financial crisis."

Swadeshi, re-interpreted creatively, is the answer

The Bharatiya Janata Party is committed to addressing this dangerous imbalance. We believe that the new as well as the entrenched developmental challenges before India cannot be met by carrying the influence of either free-for-all capitalism or freedom-killing communism.

What India needs is a robust, self-confident Swadeshi (nationally-oriented) model of development, which is rooted in the ideals of democracy, equality, justice and integral human progress.

The concept of Swadeshi should neither be discredited as archaic or outdated, nor interpreted by its proponents in a narrow sense. India has never clung to ideas and ideals that are stagnant and impervious to the needs of changing times.

The basic philosophy of all-round human development has been enunciated by all our great thinkers. Mahatma Gandhi did so with deep insight and firm conviction in the 20th century.

My own ideological guru, Pandit Deendayal Upadhyaya, articulated this philosophy persuasively in his treatise, Integral Humanism. He had warned us in the 1960s that although the Soviet Union and China could not be the model for India (for that is what the Leftists used to say those days), we should not think that American-style capitalism is the model India should follow.

If I were asked what a creatively re-interpreted Swadeshi would stand for, I would enumerate the following five points:

1. Swadeshi means that national priorities must override policies that have benefited only a minority and largely excluded the majority in the nation's progress.

In other words, just as the centre of gravity of the world economy is shifted from the West to Asia, the centre of gravity of our national economy must shift from 'India' to 'Bharat' -- to agriculture, revitalization of our villages, small and medium enterprises, and unorganized and informal sector of the economy.

Bharat includes not only the rural population but also the urban poor and middle-classes. Swadeshi does not believe in an antagonistic relationship between 'India' and 'Bharat'. The two are interdependent and integral parts of our nation.

2. Similarly, it sees no conflict between the public sector and private sector. There is no place for dogmatism in favour of or against either, since both have to be strengthened.

In view of the recent global experience, the public sector needs to be further strengthened in the financial system and in core sectors like energy.

3. Swadeshi is not antithetical to cooperation with the international community, just as the concept of Swaraj was not.

Nevertheless, its cornerstone is national pride and the belief that the India of our dreams has to be built only by our own genius, with our own efforts, and principally with our own natural and capital resources. India's problems need Indian solutions.

4. Swadeshi wholeheartedly embraces the knowledge and products of modern science and technology. It holds, however, that our country should revive its own rich and diverse knowledge traditions and emerge as a major contributor to global scientific and technological progress, instead of remaining mere consumers of outside knowledge.

5. Swadeshi affirms that business and economy should serve as a means and not an end in themselves, and the higher possibilities of human progress should not be sacrificed at the altar of acquisitiveness, consumerism and environmental destruction.

The time has come to further enrich the meaning of Swadeshi by incorporating the learnings of India and other countries in recent decades, and especially taking into account the fact that the world has become smaller and nations have become more inter-dependent than ever in history. I appeal to all thinking Indians to participate in this endeavour.

Today the entire world is groping for answers to the multi-dimensional crises facing humanity. The world rejected communism emphatically. Now the ravages of unbridled capitalism have come to the fore, forcing even America and other western countries to rethink their development philosophies.

The cover feature in the latest issue of The Economist magazine is on the theme: The world economy: The return of economic nationalism. In a way, the rest of the world is also turning 'Swadeshi'.

Clearly, there is an urgent need in India to do course-correction. My party, if elected to office, will do it with the cooperation of the business community and all other sections of society.

Our agenda: Good Governance, Development and Security

Friends, my colleagues in the party and the NDA are currently engaged in preparing our Agenda of Governance. The three pillars of this agenda are Good Governance, Development and Security.

It will be our endeavor to replace the pervasive mood of despair with a strong sense of optimism. For this, we shall do so by doing what a government ought to do: Govern. And govern well.

1. The days of weak and compromising leadership will be over. India demands strong leadership today. No more will the office of prime minister be devalued, as has happened in the past five years in which 7 Race Course Road has become subservient to 10 Janpath.

2. We shall adopt an approach of zero-tolerance towards both terrorism and corruption. Institutions of governance will not be misused to protect either one's own or target rivals, as has happened brazenly in the past five years.

3. You can expect the most ambitious push since Independence in the rapid development of every infrastructure sector -- power, energy, roads, railways, ports, airports, and rural and urban infrastructure. Shri Atalji's dream project will be completed by ensuring that that there is not a single bad road anywhere in India, because every good road connects every Indian to a brighter future.

4. The river-linking project will be taken up for implementation in all feasible cases.

5. The central objective of everything we will do in economy is creation of employment, more employment and still more employment. Therefore, any enterprise that creates employment opportunities will receive priority attention and incentives.

6. I have already indicated that our approach to reforms is fundamentally different from that of the Congress. We believe in structural reforms aimed at giving agriculture, small and medium enterprises and the informal sector their rightful place in the future growth strategy, and not in reforms that are aimed at creating bubbles in stock markets and speculative investments or making a handful of Indians billionaires.

The present economic tumult only underscores the imperative not only for investment in the infrastructure lifelines of the economy but also for checks and balances that ultimately only the state can and must provide.

7. I have repeatedly stated our collective vision should be to make the 21st century India's century. This vision can be realized only by recognizing that India's most precious resource is its people, especially its children and youth.

This resource cannot be enriched and energized without best-in-the-world quality of education. We are committed to a massive enlargement in the opportunities for affordable and quality education for our young population.

It will be our endeavour to see that every school in India has Internet-enabled education, and further that the entire sum total of the world's knowledge is available to every child in India, in his or her own language, 24&7, free of charge.

With these words, I wish all the best to FICCI as it completes yet another eventful year in service of India. I join you in applauding the outgoing president, Shri Rajeev Chandrashekhar, for his dedicated work. I thank him and Dr Amit Mitra for inviting me to this function.

And, together with you, I extend a warm welcome to Shri Laxmipat Singhania, the incoming president.

Thank you."

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