Finance Minister Pranab Mukherjee has set a target for achieving double-digit growth by 2012. Is this possible?
Double-digit growth can be reached not by a minister but by the entrepreneurs, and through hard work of the Indian people. The government can be helpful by liberating entrepreneurship, removing red tape, increasing competition and putting in place a stable monetary and fiscal policy by lowering interest rates. High growth would be the outcome of a stronger free-market oriented policy.
What are India’s growth prospects?
India’s development has just started. Agriculture will make huge productivity gains through improved techniques — like improved seeds, better use of pesticides and GMOs (genetically modified organisms). Auto manufacturing, especially of small cars, will become a major industry for Indians, inside and abroad.
But there’s a big movement against GMOs in India. Even the Ministry of Environment and Forests wants introduction of GM foods postponed.
GMOs work. The fight against GMOs is usually ideological, anti-big business. Is it better to use a lot of pesticides or GMOs?
India is currently faced with high food price inflation. How should this be tackled?
Inflation in India, like everywhere, is first a monetary phenomenon. Price increase usually translates into bad monetary policy: money printing and excess of public debt. As for food prices, the lack of transparency and poor transportation infrastructure can generate speculation.
You have said that India is no longer doomed to remain poor. But according to the Arjun Sengupta report of 2007, over 836 million people in India are spending less than Rs 20 a day.
The report does not explain why the nearly 200 millionstrong middle class, which did not exist 20 years ago, suddenly appeared. Where did they come from? Clearly, there is not only an English-speaking upper class. In order to really evaluate the impact of liberalisation, it is essential to keep the same criteria from one year to the next. If you change those, like Sengupta does, you can demonstrate what you like. And we all know that the report is an ideological operation — to justify more welfare programmes and rebuild bureaucratic influence.
What’s your take on China-India comparisons?
China’s growth is exportbased, and thus dependent on the global market. This makes China’s growth unpredictable and fragile. Moreover, the edge China has is largely due to its low wages, imposed by the Communist Party. Recent strikes in China’s factories, however, show that this workers’ exploitation may not go on for ever.
Being a democracy, India is more focussed on the domestic market, more based on small businesses and innovation. In the long run, the Indian model is more sustainable than China’s.