India in the 21st century: An interview with Arun Maira

Folgender Beitrag entstand während des Global Economic Symposiums, das am 4. und 5. Oktober 2011 in Kiel stattfand. Alle Artikel sind auf economicinsights.eu zu finden.

  • Arun Maira is an elegant man with grey hair, strong tractions and a smile that makes him look like a boy. He seems pretty vital for a 67 old man. Living in Dehli, India,  he serves there as a member of the economic planning commission. He had studied physics before working for Tata Group for 25-years. Later he was with the Boston Consulting Group. He publishes articles and books.
  • The Planning Commission of India is a governmental institution, that gives directions for economic development in five-year plans. Until 1990s the policies were rather restrictive, following socialist ideas. Since then, economic policy has changed and the economy opened up. The latest,eleventh five-year plan is for 2007 to 2012.
  • In an interview in the wine cellar of the hotel Atlantic Arun Maira talks about India’s economic situation, the need of participation in a democracy and an a better system in the “new normal”.
India’s economy was liberalized in the early 1990s. Why is there still a planning commission?

Arun Maira: Because there was one. When things change it takes a while. Two years ago, when the new government came, they asked the question you are asking. And the answer was: No, we should not have a Plannig Commission. The challenges in India are a lot of change for the country. For doing the right thing you need to have a kind of radar. The planning commission need cannot say the people what to do or not to do like 50 years ago, but you can give them very good insight and information. This required to be fulfilled by somebody and the best organization available is the Planning Commission.

So it is rather a think-tank?

The Planning Commisson is situated at the right level, chaired by the prime minister. It invites experts in different fields to its members, like myself in industry. It is a think tank embedded in government, so it is like an official think tank.

India is one of the fastest growing economies. What is the basis for this?

One is that we have very large unfulfilled potential. We have a lot to improve in terms of productivity and efficiency. Second is that we are a young country, so there are a lot of people with energy and new minds. This also gives a boost.

The prices have been rising for a while. Do you think, inflation could become a problem for the growth and slow it down?

The prices rise especially in food items, which raises the pain for the poorest people in the country, and there are lots of them. This results in political pressure to do something about the inflation. What can be done by the central bank is to increase interest rates to dampen the demand, but this also dampens supply. And so it can have a countereffect, of actually reducing availablilty and therefore increasing the prices.

What are the biggest challenges for India in the next decades?

We have a very large number of people coming into workforce. In the next ten years we need to create 300 million more jobs. If you don’t do something the economy won’t grow. The other more serious problem is the social and political problem that will arise if lots of young people don’t have jobs. The second challenge is that choices have to be made for the future. And these choices need to be understood by everyone in a democratic country, because they can vote. You don’t even have to wait for an election. You can stall the process of governmental decision making by your protest. So the people at large need to understand, where the country could be if certain things are done and where if certain things are not done. The people in the country need to see, where the country is going. The plans cannot be expressed anymore in numbers, like GDP or saving rates numbers, because they mean next to nothing to most common people. So you need to talk to people in images and languages that they understand. The challenge is to have a method of participating in the political planning.

How do you want to achieve this?

By asking the people. We are having to use simpler tools. The internet ist not used by too many people, in percentage only one fifth of the country. The rest has to be reached by more conventional media processes, like newspapers and television. To create a national conversation we need tools and processes, in which people are included in the planning of the future of their country.

There is often the comparison between India and China. As far as I see China has the one-child-policy, which will lead in demografic trouble, whereas on the other hand there is India with a pretty good demografic situation. Could this lead to the situation that India will be the number one?

Right now, with China having so much payment reserves, it is able to buy itsself out. Your demografic profile helps to get growth. But even if you don’t have a good demografic profile, but a lot of money, you can still be a very rich country, because you can invest in various other ways. So China does have that advantage. The consequences of one child policy are not only economical ones, but also bad for society.

The Indian state of Gujarat that has had double-digit growth rates for years. How come? Why is that specific state so successful?

Gujarat is a state in the west of traders and people who have been in business for centuries. When you open up the economy in a liberalization those people will be the first to take advantage of that opportunity. This is what enabled Gujarat to start getting growth in GDP-terms. Another question is in terms of social indicators and environmental sustainability. If you have a triple line view of progess, then Gujarat is doing extremly well in terms of economic growth, but not so good in respect to sustainability and social improvement.

Do you think the debt crisis in Europe and the United States can anyhow affect India’s development?

I am sure it will. Anything that is so big in another part of the world will affect India in a connected world. You cannot say, I am completetly isolated from it. One view, and which I think is right, is that since India is not that connected dependent on the western world, that will be less affected. How and when is always uncertain, but it will affect the trade and financial inflows to India.

Do you think the financial crisis changes economics or do you think it will go back to before the crash?

I hope everything will not go on like it was before. Economists say, and I am not an economist, that we are going into a “new normal”. So even economists are recognizing that the way the economy was growing in the previous 20, 30 years is not the way it can be. The new way will include new ideas of what is good and what should be done. The idea of what is good, which was in the past more GDP, more wealth, more consumption, maybe will not be the idea that will rule in the “new normal”. We need to have a system with more equity and more fairness.

Foto:

© Fotograf Renard Kiel

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