Wealth creation: Advani’s take

Modern India’s leaders must stop disparaging wealth creation

L K Advani’s speech at CII was a lot better than Manmohan Singh’s: for he recognised the need for the government to match the ambition of the population. [Yossarin has a fuller analysis]

Rather, the soaring ambitions, aspirations and expectations of the Indian people, especially India’s youth, make it obligatory on any government to work with matching ambition. Anything less would mean letting down our people, letting down our youth.

By ambition, I mean, first of all, expansion of the prosperity net to include all those sections of our society who have so far remained either deprived of the fruits of India’s economic growth or received only some crumbs.

What India has witnessed in recent years is growth with widening inequalities. A very responsible person in our public life, a former governor of the Reserve Bank of India—no less—, recently stated that the earnings of 20 richest Indians exceeds those of 30 crore poor Indians. If this is true, it is shocking. Lopsided growth, however high its rate, can never be sustainable. This is the reason why the exclusive talk of 9 per cent GDP growth rate by some people in government or in the business community does not enthuse the general public.

Forbes magazine, which is famous for tracking the wealth of businessmen around the world, has predicted that India will have more billionaires than any other country in the world by 2017. Frankly, this does not gladden me at all. Rather, I would be delighted if, ten years from now, we are able to eliminate abject poverty from India. [via Offstumped]

Unlike Dr Singh, Mr Advani didn’t spout dangerous nonsense about earning less being a national duty. But his discomfort with wealth creation was unwarranted, and is disturbing if it is genuine. It not only misses the point that wealth creation and poverty elimination are not in opposition. It also contradicts the earlier part of his speech about matching ambitions: eliminating poverty is unambitious. Creating the conditions that allow the people to become wealthy is a far more ambitious goal.

Related Link: Atanu Dey’s commentary on Mr Advani’s economic agenda (in a speech to FICCI) in the March 2008 issue of Pragati.

14 thoughts on “Wealth creation: Advani’s take”

  1. Both LKA and MMS grew up in a socialist milieu here in India where ‘profit’, ‘ambition’, ‘getting rich’ etc were bad words. Why income taxes at one point in IG’s rule was over 90% above some threshold, it seems….

    This insanity wasn’t of course confined to India . It was global in scope. What lay chinese suffered before Mahatma Mao departed for his netherwordly abode and the pragmatic Deng Xiaoping proclaimed “It is glorious to be rich” (circa 1978, I think) was far worse than what any Indian leader could have inflicted, even a communist one.

    I was far more enthused by the BJP’s poll manifesto in the mid 90s (before they occupied the seat of government in Dilli) calling for ‘internal liberalisation’. Wow, I had thought. Finally, freeing up India’s opportunities for local genious. Sadly, I’m yet to see enough deregulation and free-marketism in agriculture which sustains 2/3rds of our people. Develvement of financial powers to the local level – cities deciding on what to spend their money, so also with small towns and even village panchayats – is the way to go.

    But am jumping ahead of myself. Let me thank my stars there’s someone in India witha realistic chance of making it to the PM gaddi who understands the issues and is politically secure enough (LKA doesn’t owe his seat in parliament to someone else’s mercy, he was elected directly by the people to the LS. Unlike MMS, I must add) to speak his mind. Recall how the media came up with this weird theory that somehow ‘India shining’ was responsible for the NDA’s defeat in 2004? I never could figure out how it so quickly became establishment consensus. Had the NDA chosen to go with the DMK and not Jaya, they would have formed sarkar again in 2004, IMHO.

    Now again, the media allies of the INC shall wait for India to stumble so that can pin the blame on LKA’s right wing ideas onlee. How better to discredit ’em rightwingish economic policy. The commies will always oppose anything that benefits India and not China.

    Sad state of affairs, must say.

    Lezsee, aagaey aagey hota hai kya.
    /Have a nice day, all.

  2. Both Advani and MMS realize that a significant portion of new wealth creation in India is not distributed fairly. There are monopolists and corrupt people, who have gained immense wealth at the expense of weaker sections and even the state (e.g., an Ambani specialty). No government in India has had a good track record of making the markets fair. The software, IT revolution is perhaps the only one that does not suffer these monopolists as acutely because the source of wealth is external (abroad). Is it any wonder then that people in India associate India’s resurgence and hope with this sector?

    This is a complex problem and situation but you would expect an economist like MMS to be able to articulate it. Instead, we hear ridiculous platitudes from him. Advani also struggles to lay it out like it is but at least his recipe is not dangerous to the nation.

    The murder of Rao’s legacy is a shame. I hope if BJP comes to power, they do something about restoring some of the respect Rao deserves.

  3. I casually mentioned to a senior government official, whom I had met at a party recently, that the parallel (black) economy in India must have shrunk significantly after the liberalization. He laughed and said, “It’s a popular misconception, —. The parallel economy in India is quite alive and well, thank you. In fact, it has grown proportionately, if not more, since the liberalization. The pipeline has been adapted to the changed environment. The black market does not roll back and die when prohibition is lifted, you know. It just moves from alcohol to narcotics!” The problem is not wealth creation, but how much of it is waylaid by corrupt Robinhoods with sticky fingers (to use Atanu Dey’s metaphor)

    Too much power over the Indian economy has been vested with the government. As a frustrated Indian taxi driver said to me (years after liberalization), “Those guys in Madras (now Chennai) and Delhi are leeches. They suck up too much of what I earn driving this car day and night. The only solution, sir, is to tear up the constitution and throw it into the ocean (for those who understand Tamil, athaik kizhichu kadalle podanum, saar), and then begin all over again.” He was certainly not one of those billionaires, but how perspicacious!

  4. Dr. Vaidyanathan if IIM-B has a maverick idea that the presence of black money in India has staved off a real-estate crisis, by making investors undervalue property. If Chidabaram and Manmohan think less like Oxbridgevards and more like Karaikudi-Amristaris they would know how to tap into black money. Given the abject failure of the government to invest its burgeoning revenues productively in health, education, and BSP, there is still a great deal of reluctance to pay into the sarkari tijori. And what sort of an example do you think TR Baalu or Praful Patel set?

  5. “Eliminating poverty is unambitious”?

    Really?! One can strive for superlative growth rates, and a large number of Indian Forbes billionaires, but a society where hundreds of millions live on less than a $1/2/3-a-day is not only a a moral affront but also a social disaster waiting to happen. I agree Manmohan Singh’s speech was atrocious, but the 2 (that is, wealth generation and relative wealth equality) are not entirely mutually exclusive, nor one would imagine, mutually exclusively desirable AND doable.

  6. There is truth in what Mr.Advani says and I’m not sure he needs to be taken to task. Where he should be questioned however is – what indeed did the NDA administration do to alleviate the situation fundamentally? There are still so many impediments to making a living in India, which may be the root cause of a great deal. The Raj still continues and Advani and co did little to change that. In fact, some in the BJP (Mahajan et al) were actively working to create Russian style oligarchies.

  7. Purush,

    Getting people out of poverty is not ambitious because it is a necessity. So merely saying we’ll pull people out of poverty (okay, they now earn $2.10 a day, so what?) is not about ambition, it’s about hygiene. Goes without saying.

    Ambition is when you want to reach out beyond the baseline. And without setting ambitious targets you won’t even achieve the baseline.

  8. ‘eliminating poverty is unambitious.’

    I don’t think so.

    Even if one assumes 20% of our population is below poverty line – believing recent estimates of about 23% – this translates to >200 million people!

    Sure, making everyone wealthy is a worthy aim. But a 10 year goal must be realistic. By any thinking, getting these 200 million guys out of absolute poverty in 10 years (accounting for the population growth in 10 years) will be no mean achievement. So setting a goal of a “zero-poverty” India in 10 years is actually a *very* ambitious goal.

    Another major challenge for us is be to get most of our 60+% population our of their present agrarian livelihood.

  9. Photonman,

    There is no doubt that getting 200 million people out of poverty is a very big deal. But as a vision, and an “ambitious” one at that, does it inspire? As I said, I think it is unambitious because it is realistic. It can be done. How many people joined the middle class since the 1991 reforms to date?

    People generally cannot intuitively grasp the power of compounded growth rates. I invite readers to contemplate what 10% growth over ten years means.

  10. From Planning Commission (March 2007)

    7. The poverty estimates in 2004-05 based on URP consumption distribution (27.5 percent)
    is comparable with the poverty estimates of 1993-94, which was 36 percent. (Table-4) The
    poverty estimates in 2004-05 based on MRP consumption (21.8 percent) is roughly (but not
    strictly) comparable with the poverty estimates of 1999-2000, which was 26.1 percent. (Table-5) [PC]

    4.3% of around a billion, or about 43 million people came out of poverty between 2000 and 2005. Growth rates in those days had not touched 8%.

    My criticism of the UPA government has been that it has squandered away the chance to make this inclusive (ironic, because it did it in the name of inclusiveness). If it had invested in infrastructure, liberated labour markets and freed up agriculture, the growth rates would have accelerated the end of poverty.

  11. Nitin —

    I think we’re arguing for the same thing, except for the fact that pulling 200 million people out of poverty (abject or of whatever kind) is a VERY big deal, and a very ambitious target. Of course, reforms like liberalizing industrial & agricultural policy, reforming labor markets, good governance and investing massively in infrastructure ensure that the economy grows overall, but if that means that inequalities widen unconscionably, which they will without good governance and targeted social investment by the government, then the resulting growth will be unstable, unjust and hollow.

  12. Nitin,

    ‘unambitious because it is realistic’

    So are all ambitious plans always unrealistic? Guess we differ in at least one of the definitions of ‘realistic’ or ‘ambitious’ 🙂

    I agree that the UPA squandered opportunities by not investing enough in infrastructure, labor market and agriculture reform.

  13. Nitin, I thought you were taking Advani on his definition of populism. I am not sure if you are reading Advani right wrt Forbes. I don’t think he’s uncomfortable with billionaires, just that he doesn’t care for them – just as most of us shouldn’t either (unless you are of them!). What he cares for is removing poverty. And his solutions of universal education and health care are eminently sensible and surely lofty – I am not sure why he calls them “populism” – compared to guaranteed employment! It’s another matter if our ultra efficient GOI can deliver.

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