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Ashwin Mahesh

Why not swadeshi?

Increased internal liberalisation, combined with a reduction in foreign domination -- this is the party line on economic development that the BJP is offering as an alternative to the operating guidelines of Manmohan Singh and Palaniappan Chidambaram. And so we have moved from unhindered liberalisation to liberalisation with a human face to liberalisation with an Indian face. Indian stock markets can barely hide their glee, and no doubt smart investors all over India are cashing in on the promise of swadeshi.

The early swiping is equally afoot, and Pritish Nandy and Varsha Bhosle brought a fair share to Rediff with scathing attacks. Economic nationalism, Nandy pointed out, is a sign of the weak, and protecting the incompetent can never pave the way to success. His Tata hymns aside, the point is well taken. The numerous dubious achievements of past swadeshi posturing that Varsha outlined were equally on the mark.

Still, before we decide that swadeshi is a lot of fuss over a dud idea, let us ask a few simple questions. Try this -- should Indian companies become world class performers or not? Take any company with the potential to be truly great, or even one that merely has a good idea but has made no name for itself so far. Do we honestly believe that these organisations, constrained by their late starts and relatively higher costs of raising funds for their future plans, will be able to compete fairly with their counterparts around the world? If the answer is no, then we owe it to ourselves, not just the companies, to give them the chance.

Don't get me wrong, I am not advocating that the Rahul Bajaj government be given a free hand. But I don't see made-in-Italy scooters as the long-term solution either. We must balance the immediate consumerist craving of the relatively affluent with the potential employment opportunities and financial well-being of the less privileged. Even a trickle-down capitalist theory of development must remain subject to the concerns of the vast majority of Indians who are poor. It is the burden and the promise of free societies.

Does protectionism short-change the Indian customer? In the short run, yes. If Honda or Aprilia can make better bikes than their Indian counterparts, the unavailability of such bikes does cheat the customer. But the whole point of protection is that it be designed to ensure that some Indian companies eventually will build world class products. A lot more customers will benefit then. With more lasting results, too.

Seen in that light, swadeshi is less dubious. The level playing field is a myth; it has never existed, and it is not in our interest to create it now. It is true enough that in comparison to potential foreign competitors, many Indian companies do not measure up. But is it not desirable that this situation should change? And is it not reasonable that if the situation is to change, Indian companies must be allowed to find their feet first? Citibank and ABB didn't get to be top-class in unregulated industries, no matter what their CEOs now claim. All the modern champions of free trade have built empires by restricting it in the past!

Of course, that's not to say the BJP has got its economic act right. The problem with current proposals is that they ignore a fundamental truth -- the national interest is not necessarily identical with the economic interests of the large industrial houses. Indian nationalism does not reside in Bajaj House, and the trick is to promote the national interest without favoring the particular interests of individuals, as has been the case with Maruti. Making distinctions between 800cc cars, 880 cars, and 900 cc cars is sickening, to say the least. We must be vigilant that such insanities are not passed off as protecting the national interest.

We need broad guidelines that do not favor individuals or particular companies, and we need to phase these out gradually. A time-table to withdraw protection must be established, and far more importantly, adhered to. An efficient and service-oriented Bank of America does serve the interests of more Indians than an Indian owned relic of the age of nationalisation posing as a bank. The State Bank of India does deserve a shot at being a mega-player, but that interest should not outweigh the interests of the customers forever.

A close study of the past won't hurt, either. Remember the last time a government decided that our national interest would be greatly served if it barred foreign companies from competing with Indian ones? Remember also that the same government decided that a strong India depends ultimately on the government participating in all important industries? And what did that give us -- Coal India, State Bank of God Knows Where, and sundry other employment agencies masquerading as businesses. Not surprisingly, they ran to their own clocks, presumably made by HMT.

Swadeshi should not mean that we are about to repeat the catastrophe of nationalisation all over again. Even the khadi-wadis ought to be able to see through that particular fabric. The flaw is both obvious and easy to correct -- it is senseless to embrace the notion that the government can decide a priori who the winners and losers shall be. The objective must be to create globally competitive organisations without regard to their current positions, not necessarily to turn the existing ones into such entities. If this one standard is adhered to, then it may be possible to promote Indian companies without shortchanging the customer indefinitely.

Whether swadeshi is a dumb idea posing as the national chariot, or a great idea, which without our watchfulness can easily stumble over the greed of well-connected individuals and corporations, remains to be seen. For now, it is enough to see that if India must be prosperous, then at least some of that prosperity does hinge on ownership; merely being employed by the wealthy is no substitute for wealth. How we create this ownership will largely determine the longevity of any prosperity that arises from the early efforts.

Naivete, it is generally held, is the inability to separate one's dreams from pragmatism and reality. For a few months now, I've explored the truth of that claim, trying to determine if the prosperous and powerful India I dream of is really such a far cry from anything we might actually build. It isn't easy to tell if "Made with pride in India" can ever replace "Be Indian, Buy Indian", but not knowing the difference has made me an optimist. And if a temporary dose of swadeshi can turn some of those dreams into reality, why not?

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