Acclaimed author and former CEO, Procter & Gamble India, Gurcharan Das, has emphasised the importance of the Indian government maintaining its momentum on reforms.
Praising the Centre for bringing in reforms such as the Goods and Services Tax (GST), which gave the country a unified tax structure, and the production-linked incentive or PLI scheme for manufacturing, Das added that the government must continue on the path of reforms and strive to create an industrial revolution, the critical ‘middle phase’ in the path to becoming a developed country, which India skipped as it emerged into an IT services powerhouse since the turn of the millennium.
Das was in conversation with Rahul Ahluwalia, founding director at Foundation for Economic Development (FED) for the third episode of FED Dialogues, a series featuring conversations about the many perspectives on India’s economic growth.
“It is now 30 years since the reforms began. In this period, India has grown at almost 6% annually on average. For a democracy, especially an argumentative, feisty democracy such as ours, it is unprecedented in the world. So, we should be very proud of this growth. However, the reality is, and this is where we have failed, we have not created the jobs and an industrial revolution,” said Das, adding that while India has had incremental and “frustratingly slow” reforms, this has added up.
So today, with improved road mileage, port handling capacity, a robust digital infrastructure, and the absence of measures such as ‘quotas’ on production that curtailed the growth of private enterprise, India is in a much better position to follow the model of the Asian Tigers – Hong Kong, Singapore, South Korea, and Taiwan – of prioritising the production and export of low-tech, labour-intensive manufactures.
Das highlighted the need for much-needed reforms in land acquisition, implementation of labour codes, and farm laws. “No matter who forms the government in 2024, these reforms must be the priority. As a result of the reforms in the ’90s, India has pulled 400 million people out of extreme poverty. The middle class has grown from 10% of our population to 30% today. If we do these reforms, it will help India grow the middle class’s share to 50% of our population, at par with China.”
Stressing the need to implement and “sell” the reforms to Parliament and the public, Das shared how the PV Narasimha Rao government in the ’90s was almost apologetic about bringing reforms that liberalised the Indian economy.
“I was driving to work and heard on NPR (National Public Radio) that the reforms have stopped. It said the left wing of the Congress party might even reverse the reforms. The news scared me, because I believed India had attained its true independence, its economic azadi in 1991. I shot off a telegram to Manmohan Singh, asking why no one in the government was selling the reforms to the public. Margaret Thatcher used to say that she would spend 20% of her time doing the reforms and 80% of her time selling them to the public. And Deng Xiaoping in China said it doesn’t matter whether a cat is black or white as long as it catches mice (understood today as signifying Deng’s pragmatism on economic affairs and his single-minded pursuit of GDP growth). These two converted their respective countries, while we were almost apologetic about our reforms. In the end, Narasimha Rao didn’t convert Parliament, or his party members, let alone the public.”
On the reforms being undertaken today to incentivise labour-intensive manufacturing, Das praised the government’s PLI scheme.
“It’s a good idea. Generally, I’m very wary of industrial policy like that. But we have had success with cell phones, and their export will grow exponentially. Similarly, it will happen with laptops and other consumer electronics items. So, we should continue to reward labour-intensity without making the company uncompetitive. For a company, very often, it’s a close call – should we hire more people, or should we buy the latest machine? We need to create large companies who are exporters.”
“If I were Mr. Modi, I would tell Adani, Ambani, and all the big guys to make huge factories, which employ hundreds and thousands of people. That would be the way to do it. The PLI schemes should also have a sunset clause on tariffs, so we’re not going to treat domestic manufacturers as ‘infant industry’ forever. After 5-6 years, the tariffs will come down to global levels so that India can join the global supply chain.”
