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On BJP's economic policy - three notes - Observer and Economic Times

Advani, an editorial, a letter ()
1996. Decemebr

Title: On BJP's economic policy - three notes
Author: Advani, an editorial, a letter
Publication: Observer and Economic Times
Date: Decemebr 1996.

NOTE ONE - Advani's comments
Title : Advani hits out at policies favouring MNCs
Author : Observer Corporate Bureau
Publication : The Observer
Date : December 12, 1996

Bharatiya Janata Party president L K Advani on Wednesday
stressed that without a national consensus, the challeng-
es facing the country could not be met with confidence
and success.

"But national consensus is not conceivable where politi-
cal untouchability is practised" he said while addressing
the luncheon meeting of the 69th session of Ficci here.

"The BJP is the mainline political force today and yet,
the disparate congregation of all unlike-minded parties
ruling today have made political untouchability vis-a-vis
the BJP the main fulcrum of their politics. This is very
reverse of the fundamental requirement for protecting the
national interest," the BJP leader emphasised.

He said that absence of a level playing field, coupled
with policies favouring multinationals was the prime
reason for the erosion of the country's domestic indus-
trial base and added that the Bharatiya Janata Party was
against such policies.

Foreign investments could not be the basis of the coun-
try's planning process and policy, Mr Advani said.
Throughout the process of economic liberalisation, which
began in 1991, the country's indigenous industrial base
had been eroded, he added.

According to the BJP leader, the present economic crisis
was mainly because of the present political instability
in the country.

To make matters worse, the economic policies of the
present government were complicated, irrational and
opaque, he said. Unless transparency was ensured in the
various policy guidelines, there was little scope for the
economy to come out of the present crisis, he asserted.

The liberalisation process was in response to an economic
crisis, the BJP leader said, adding that the Congress
party never had economic liberalisation formally on its
agenda.

On the contrary, the BJP had always favoured economic
liberalisation and this was on the agenda of the party
long before even the party was formally launched in 1980,
Mr Advani said.

Before this, the Jan Sangh, too, had favoured economic
liberalisation, Mr Advani said in an attempt to demolish
the prevailing notion that BJP was anti-liberalisation.

Stressing that transparency and accountability were
imperative to a good business ambience, Mr Advani ex-
pressed satisfaction on the growing importance of corpo-
rate governance in the present juncture.

"Rules and regulations, if antedated, need amendments,
but if there are gross violations even after amendments,
then the guilty should be dealt with firmly," he
stressed, indirectly referring to the present charges of
Fera violations against some corporate houses.

According to Mr Advani, the five expectations from a
sound economy were - generation of real wealth in the
form of cornucopia of goods and services to meet the
needs of the people, creation of employment opportuni-
ties, developing physical as well as social infrastruc-
ture, protecting environment and consciously enriching
the cultural and spiritual base of the society. It was
more than evident that the Indian economy had failed in
all these regards, he inferred.

The BJP president highlighted the lack of national con-
sensus on economic policies as one of the major reasons
for the present economic crisis. Quoting Japanese expert
Takeshi Hayashi, Mr Advani said that the conditions under
which industrialisation began could not be the same for
every country: the only common element required was a
national consensus.

NOTE TWO: An editorial
Title : Contradictory BJP
Author : Editorial
Publication : The Economic Times
Date : December 13, 1996

BJP president L K Advani's clarion call is that Indian
industry needs protection from the allegedly marauding
multinational corporations. Never mind that Indian
tariff levels remain amongst the highest by international
comparison. At the same breath, Mr Advani says he wants
"made in India labels all over the world." There is a
fundamental flaw in such a prescription for public poli-
cy. It is not just wishful thinking. It is misplaced
atavism of yesteryears. Mr Advani, .of course, can think
loud of Indian industry becoming globally competitive and
export intensive by operating in a cosy, protective
domestic environment. But in the real world of business
and commerce, economic logic and not rhetoric hold sway.
And our experience in the last 50 years amply, and sadly,
bear out the fact that globalisation and opening of the
economy are really two sides of the same coin. The 'in-
fant industry' thesis was used to build massive tariff
walls for domestic industry in the last five decades. And
India's share in world trade steadily declined from 3.6
per cent in 1936 to barely 0.5 per cent. Since the 1991
reforms albeit partial and half-baked India's share in
world trade has marginally improved, thanks to the great-
er opening of the economy.

As Nirma has demonstrated by successfully taking on
Hindustan Lever, MNC invincibility is a myth. In the
first place, a local MNC subsidiary would face the same
hurdles as any Indian corporate when it comes to, say,
raising finance from the domestic capital market or high
interest rates, paucity of infrastructure or unreliable
suppliers. A high import-intensity, on the other hand,
is a prescription for high costs in a highly price-sensi-
tive market. We need to lower tariffs to be able to
compete with the more dynamic economies. We need to
source capital goods and intermediates at lower duties.
Reduced protection would also provoke Indian industry to
seek markets abroad. And increased competition can only
improve domestic industry's efficiency. It is not that
MNCs have arrived on domestic turf and overrun Indian

industry. Many MNCs have burned their fingers in the
process and are rethinking their strategy. Opening up is
but a two-way street and a vista of opportunity. Ask Ajay
Piramal, who has just taken over Boehringer Mannheim, the
German drug MNC.

Title : Contradictory BJP
Author : Editorial
Publication : The Economic Times
Date : December 13, 1996

BJP president L K Advani's clarion call is that Indian
industry needs protection from the allegedly marauding
multinational corporations. Never mind that Indian
tariff levels remain amongst the highest by international
comparison. At the same breath, Mr Advani says he wants
"made in India labels all over the world." There is a
fundamental flaw in such a prescription for public poli-
cy. It is not just wishful thinking. It is misplaced
atavism of yesteryears. Mr Advani, .of course, can think
loud of Indian industry becoming globally competitive and
export intensive by operating in a cosy, protective
domestic environment. But in the real world of business
and commerce, economic logic and not rhetoric hold sway.
And our experience in the last 50 years amply, and sadly,
bear out the fact that globalisation and opening of the
economy are really two sides of the same coin. The 'in-
fant industry' thesis was used to build massive tariff
walls for domestic industry in the last five decades. And
India's share in world trade steadily declined from 3.6
per cent in 1936 to barely 0.5 per cent. Since the 1991
reforms albeit partial and half-baked India's share in
world trade has marginally improved, thanks to the great-
er opening of the economy.

As Nirma has demonstrated by successfully taking on
Hindustan Lever, MNC invincibility is a myth. In the
first place, a local MNC subsidiary would face the same
hurdles as any Indian corporate when it comes to, say,
raising finance from the domestic capital market or high
interest rates, paucity of infrastructure or unreliable
suppliers. A high import-intensity, on the other hand,
is a prescription for high costs in a highly price-sensi-
tive market. We need to lower tariffs to be able to
compete with the more dynamic economies. We need to
source capital goods and intermediates at lower duties.
Reduced protection would also provoke Indian industry to
seek markets abroad. And increased competition can only
improve domestic industry's efficiency. It is not that
MNCs have arrived on domestic turf and overrun Indian

industry. Many MNCs have burned their fingers in the
process and are rethinking their strategy. Opening up is
but a two-way street and a vista of opportunity. Ask Ajay
Piramal, who has just taken over Boehringer Mannheim, the
German drug MNC.

NOTE THREE: A response

From:
Ashok V Chowgule
Kanchanjunga
72, Dr G Deshmukh Marg,
Mumbai 400026.

December 13, 1996.

Sir,

This has reference to the news report "Gowda, Manmohan battle
at FICCI" (Dec 13). Dr Manmohan Singh has 'quoted Nicholas
Kaldor, saying the economic prosperity of a country depend on
its entrepreneurs...' He is entirely right here. Toyota and
Nissan became world known brand names because General Motors
and Volkswagen were not allowed to set up plants in Japan.
Samsung and Daewoo have become established brand names because
Sony and National were not allowed to set up plants in Korea.
It would be interesting to understand what steps were taken
to encourage Indian entrepreneurship when Dr Singh was in a
position to do so, first as a bureaucrat and subsequently as a
minister.

Dr Singh is also right when he says, "Poverty cannot be
removed by subsidies." Once again, a thought occurs as to
what he did to eliminate (or at least reduce) subsidies while
he was in a position to do so.

Answers to these points will go a long way in determining what
are the steps that we need to take to solve the problems being
faced by our country. Similarly, Dr Singh could also
enlighten us which sections of the Congress manifesto for the
1996 general elections dealt with solving these economic
problems. It is well recognised that these problems can be
solved only through debates and discussions, which will enable
us to arrive at a consensus. Dr Manmohan Singh in "The
Unfinished Agenda", (The Observer of Business and Politics,
Nov 21, 1996) said, "My teacher at Cambridge University, the
late Lord Nicholas Kaldor, used to emphasise that the
effectiveness of any economic and social system is determined
fundamentally by the character, motivation, ethical standards
and the mind set of all those who make the crucial decisions
of the nation's social and economic life. These include
politicians, top civil servants, top businessmen, top
scientists and technologists, top academic functionaries as
well as trade union leaders."

Yours sincerely,

(Ashok Chowgule)

To:
The Editor,
The Observer of Business and Politics,
Court Chambers, Fourth Floor,
Lokmanya Tilak Marg,
Mumbai 400 002.


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