‘The model of development in India is well rooted because it comes up from the bottom’

Shekhar Gupta, Columnist Indian Express, 26 Jan 2011

I’m at the residence of the UK High Commissioner in Delhi and my guest is the incredibly versatile minister, Vince Cable, a senior member of the UK Cabinet and also an accomplished economist whose work sets a benchmark for understanding the global credit crunch. I have been to India around 20 times and this is the second time I have been here as a minister. I love coming to India. I’m here this time following up the Prime Minister’s visit in July with a trade delegation, trying to build trade and investments in India.
Shekhar Gupta: You are a son-in-law of India, in a manner of speaking.
Vince Cable: Yes, I could say that. I was very happily married for 35 years. My wife has died but we have an Indian extended family. We have family in Goa and Mumbai. I love coming back, meeting them again. I do consider this a second home.

Shekhar Gupta: We are happy to see you coming back. I read your speech in Mumbai. You talked about this perilous journey you had made to Mumbai on a boat which was about to capsize with small children on board. Tell us more about that.

Vince Cable: Well, I came to Mumbai in the mid-1970s. And I think it was Emergency time and it was a very different India. I crossed Bombay Harbour where my brother-in-law ran a brewery, and there was a big strike, a gherao, going on there. Of course, because I was young at that time, I have vivid memories of that. It was a very different India from today. In the 1960s, when I first came, and then in 1970s, there was actually a lot of pessimism about whether Indian democracy would survive, about economic growth which was about 3-3.5 per cent and people talked about the Hindu rate of growth, which was very fatalistic.
Shekhar Gupta: You didn’t like that expression.
Vince Cable: I actually wrote a controversial report in the 1980s...
Shekhar Gupta: ...Saying it would double.
Vince Cable: Saying it would double and it was regarded as extremely eccentric. Nobody thought it was possible, but
it happened, of course.
Shekhar Gupta: If you had said that in India, you would have been regarded not just as eccentric, but totally crazy.
Vince Cable: I think that may well be true. But it was beginning to happen at that stage. You were beginning to get a significant growth in agriculture with commercial farming, scientific farming and manufacturing, although it was protected. And then starting with the reforms in the ‘80s and then Manmohan Singh’s more radical reforms in the ‘90s. Of course, the whole place has now sort of taken off and far exceeded the expectations of anybody.

Shekhar Gupta: The only difference is that what you expected manufacturing to do to India’s growth, has actually been done by services. Services was not something that was on anybody’s radar in the mid-70s.
Vince Cable: No, particularly, the whole IT sector. I think the reason services became a growth sector was because, in a way, it was outside the grip of the planning system and the licencing system. It was an area where Indian entrepreneurs could grow without hindrance.
Shekhar Gupta: In fact, Indian entrepreneurs are now the biggest employers in the UK.
Vince Cable: Yes, they are very welcome and they are very good. Our biggest manufacturing employer is Tatas. It’s not just that they employ a lot of people, they also do a lot of R&D, they do skill training, and we are getting more and more Indian companies investing in the UK. I think that’s actually a good message. When I come here, it’s simply on behalf of British companies wanting to invest in India, of course, we want that to happen. But it’s genuinely a two-way process.

Tell me something more about the pessimism you saw in India when you first came in 1965, around the time you got married.
It was a very difficult period, it was before the Green Revolution.
Shekhar Gupta: And it was between the two wars. The ‘62 war, Nehru’s death, the build-up to the ‘65 war... it was a very bad time.
Vince Cable: Yes, there had been the euphoria after Independence which was then beginning to wear a bit thin, and then the disastrous move with China, there was worry about the future of democracy, the economy wasn’t very dynamic. I think all these things combined...
Shekhar Gupta: You could pick that pessimism on the street?
Vince Cable: Yes, the fashionable intellectual thinking in India was, at that stage, pessimistic. It was an utterly different climate from what you encounter today.

Shekhar Gupta: Do you think the other extreme now? Are we like people who would declare victory too soon?
Vince Cable: No, I don’t think so. But what I do see now is that the model of development you have in India is now very well rooted because it comes up from the bottom. It has all this energy, not just from entrepreneurs but from hundreds of thousands of millions of people wanting education, wanting to better themselves. And you feel it on the streets, not just in big cities, but in smaller cities too. And what’s driving growth in India is not trade, but domestic demands.
Shekhar Gupta: It’s consumption.
Vince Cable: Yes, that’s right. And it’s coming out of a very successful commercial farming.

Shekhar Gupta: Were you surprised that India seems to have handled economic downturn a little bit better than many other countries?
Vince Cable: Not surprised, because partly India is a continental economy, it doesn’t have that degree of exposure of some other countries. Britain was in a very different position because we have an exceptionally large banking system and therefore, we were hit by the problems in that sector. India sailed through that crisis with very little damage.
Shekhar Gupta: Going back to your visit here in the mid-70s, you used a word, gherao. I’m trying to recall when was the last time I heard it. That was on the front page everyday when I was in school and college in the mid-70s. Did you get to see a gherao?

Vince Cable: Yes, it is an Indian creativity extended to industrial relations. In UK at the same time, we had a lot of strikes. What the Indian unions were doing was, they were locking people out, they were forcing management to stay inside buildings, locking them for days at end. It was a very ingenious but obviously very damaging...
Shekhar Gupta: You never thought of taking their expertise? You were a bit of an agitator.
Vince Cable: Fortunately, we didn’t copy that. My politics was initially on the Left.
Shekhar Gupta: As against your father’s?
Vince Cable: Well, my father was very conservative. He didn’t like my marriage, for example, for that reason. But I respected him. He was a hardworking, patriotic, disciplined man and I have got some good habits from him. But the politics were different.
Shekhar Gupta: How has the Left evolved in Britain since then? Particularly now, you’ve got an incredible coalition.

Vince Cable: Well, the coalition is a unique experiment in the UK in recent years. We had a coalition during the Second World War, we haven’t had one since. Politics since in the UK has been rather tribal, you know—Conservative vs Labour, Right vs Left. The Liberal Party, which merged into the Liberal Democrats that I’m a member of, was a rather small part of the political scene. We have now created a completely new way of doing politics. The current coalition represents quite a wide spectrum, Social Democrats on one hand to Conservatives on the other. We work together very well. Two things brought us together—one was the arithmetic of the election—we had to have a stable government and the only way of getting it was to have a coalition. The other was the sense of an emergency. The budget deficit position was, still is, very serious and the only way was to take tough decisions on cutting the deficit. My department had to cut 25 per cent spending within a year.

Shekhar Gupta: Ideologically, how do you reconcile with that—fee hikes, withdrawal of subsidies?
Vince Cable: No, I’m fully behind the Budget discipline and that has got nothing to do with ideology. The social democratic tradition that I represent in the government is about fairness. We push for a fairer distribution of taxation, but we are absolutely committed to fiscal discipline. As I said, my department had to take a cut of 25 per cent.
Shekhar Gupta: You talk about education a lot. How do you compete with the US system, particularly now that you have cut the subsidy on your own education, tuition fee is going up. Can you compete with America?
Vince Cable: We have a very high quality in higher education system. Four of the ten top universities in the world are British. As a result of these changes we’ve had to make, essentially what will happen is that we are withdrawing public subsidy from teaching but it will now be restored to the universities through fees, which, of course, you don’t pay upfront in the UK. You don’t have to produce cash, you get a student loan which can be repaid over years and years. That loan is organised in a progressive way—if you have a high income as a graduate, you pay more, and if you have low income, you don’t pay anything actually. We have organised it in a such a way that, first of all, there is fairness, secondly, there is a guaranteed stream of income for universities in the future. So, there is every reason to believe that the standard will remain high.

Shekhar Gupta: Tell us a bit more about the negotiation that led to the formation of the coalition government. I ask because in India, we think we’re the gurus of coalition making, besides being the gurus of everything else.
Vince Cable: Well, it was remarkably smooth. There are coalitions in the European Union where they take months to negotiate. The coalition agreement between the two parties was agreed within two or three days.
Shekhar Gupta: Because there was no choice.
Vince Cable: Yes, there was no choice.
Shekhar Gupta: The spirit of the mandate was that Labour should not come back.
Vince Cable: Indeed, that’s right. There was no way of forming a stable government which had the Labour Party at its heart.

Shekhar Gupta: We in India innovate with our coalitions because our coalitions are bit more complex than yours. We have coalitions of the willing, the unwilling, the resentful and the respectful, the loyal and the devious—all kinds of people. And then we have innovations like Common Minimum Programme and a coordination committee. Are you familiar with any of the stuff that’s being done here?
Vince Cable: I am sure we can learn from you and you can learn from us. We have also been very, very radical. We are in the process of privatising the Royal Mail, which the previous governments weren’t able to do. We made big and controversial changes in higher education. Actually, the coalition government has been radical.
Shekhar Gupta: Just to clarify, I was not being pompous as to suggest that you learn coalition making from us. We haven’t been very good at running smooth coalitions. We have run coalitions, but we’ve had more ideological conflicts and contradictions between them. Look at The Daily Telegraph’s sting that got you into trouble (which reported that Cable said he could “bring the government down” if he resigned). That’s the kind of statement the Left in India used to make almost everyday on TV channels—”I can pull this government down.”
Vince Cable: That was a little bit out of context. Anyway, I’m getting on with my job, As far as I’m concerned, that’s more important.

Shekhar Gupta: What are the issues that engage your attention when you come to India, when you talk to your Indian counterparts?
Vince Cable: The big theme is trying to build up the trade relationship and two-way investment flows. I think India and Britain ought to have a very close relationship but we are below potential. I’m not entirely sure why. I think the British were preoccupied with the European Union for a long time, building up our commercial links there, maybe people in government and business didn’t pay sufficient attention to the way world economy is changing, the changing centre of gravity towards emerging economies like China. Maybe we were not quick enough to spot that. Maybe also, the way India was changing. Anyway, we have grasped the necessity to to build much more closer links with India. That’s why David Cameron came here and I’m following up with a trade delegation.

Shekhar Gupta: Where does this change come from—is it Cameron, the entire Cabinet or the coalition—for this sort of unquestioned optimism about India?
Vince Cable: It comes from several things. I think it comes from the recognition in the UK that we had to rebalance our economy. We thought we were doing well; but actually not.
Shekhar Gupta: Tell us what Dr Vince Cable means by ‘rebalancing UK’s economy’?
Vince Cable: It was growth by strong consumption supported by consumer debts. We had a housing collapse, a banking system which became complicated and dangerous. We now know, moving forward, that it isn’t just a question of growth. It’s growth that is driven by private investments and exports. So we’ve got to look outward and as we do so, we recognise the world economy is a different place. Most of the growth and dynamism is now in emerging markets like India. So, we have to make a strong long-term commitment here. We now have a very clear commitment to building up trades, welcoming Indian companies to UK and encouraging a two-way flow. I think we do recognise it is not about a sudden burst of energy and a lot of declarations. It is about long-term relationship building. That’s why I have come back and we will keep coming back.

Shekhar Gupta: Are there issues in India that worry you, barriers that still exist?
Vince Cable: Well, there are some barriers. I talked to the Commerce Minister this morning. We have got a good relationship. He made the point that we can’t pull down all these barriers overnight and there is a gradual and irreversible process of liberalisation.
Shekhar Gupta: I would call it a homeopathic process of reform.
Vince Cable: Until very recently, it was inconceivable that India would open up its retail sector.
Shekhar Gupta: And the ironical thing is the impetus for these have come from a sudden increase in the price of agricultural commodities. So, organised retail is actually seen as a solution to price fluctuation.
Vince Cable: Yes, indeed. You can see the commonsense of it. There is a lot of waste getting from farm to shop, lack of refrigeration and proper transport. Obviously it’s Indian companies that are going to lead this process but we have big retail chains that can contribute something.
Shekhar Gupta: Can you tell us about your book, The Storm?
Vince Cable: I wrote that as the (financial) storm was beginning to break. It was very clear to some of us five years ago that the kind of boom that we had—not just in the UK—was not based on a solid foundation. It was a disaster waiting to happen.

Shekhar Gupta: When you started writing, did people dismiss you as the spoilsport?
Vince Cable: I did have some famous exchanges with the British PM of that time, Gordon Brown, and he swept all this aside.
Shekhar Gupta: What is the one thing he said then which you now think he would regret having said?
Vince Cable: His response to me was, ‘You are just being silly. What’s the problem?’ But there’s no point claiming credit for things in the past. I’m now in government and we’ve got to do these reforms. That, of course, includes sorting out the problems of the economy and sorting out the problems of the banking system. I am in the middle of it and I’ve got to do it all rather than write about it.

Source: http://www.indianexpress.com/news/the-model-of-development-in-india-is-well-rooted-because-it-comes-up-from-the-bottom/741889/0