The finance minister has changed the direction of India’s budget deficit by reducing the target for 2010-11 to 5.5 percent.
You really believe it will happen? Go back over the years and see their previous claims.
He has got a lot of praise for that in India. Still you are not impressed. Why?
Even if it happens, it is not being done by sound budgeting. It is from selling off the family jewels if it happens.
Don’t you think a high deficit was justified last year when the government had to spend and help the economy revive?
No. They are just trying to push the problems out into the future rather than solving the underlying problems. Do you really think the solution for a problem of too much debt and too much consumption is more debt and more consumption?
Are we not living in extraordinary times when we have to follow such flexible policies?
We are indeed. They are making the problems worse in extraordinary times which require tough measures to correct decades of abuse.
The finance minister rolled back some of the economic stimulus measures he had announced last year. Would you have preferred to see a complete rollback than a partial one?
Yes. And more.
If you were to set an agenda for the government, what would that be?
Cut spending and subsidies dramatically. Many studies have shown that countries start having serious growth problems when debt is 90 percent of GDP (gross domestic product). India is now [at] 80 percent and will be [at] 90 percent soon under this budget. The subsidies distort the economy in less productive areas.
Did you see any reform measure in the budget?
I see some words for some small steps in retailing and energy. We will see.
India doesn’t have a convertible currency. Neither does China. You have backed China in the past but not India. Why?
I have pointed out scores of times that China is mistaken having a blocked currency. What is wrong with you?
No country has ever become a world player or even a significant economy with a blocked currency.
Some specific global lessons or examples that India can adopt from other countries such as China?
Open your borders to foreign capital and brains. For example, foreigners cannot enter retailing in India, but Wal-Mart etc. are all over China. Your politicians close down free commodity markets every time prices rise as if the markets were making the prices rise!
Farmers can own only very, very small farms so India cannot compete on the world stage, yet India should be one of the great agriculture nations of the world.
What will it take to get you to invest in India?
Some sense of 21st Century reality. Open the economy such as retailing, energy, agriculture, etc. Make the currency fully convertible.
What are the lost opportunities in the budget, according to you?
The same things I just mentioned. Likewise why not start reducing the gigantic debt if things really “are getting better” as he claims?
You have watched India for a long time. Where do you think the country will go from here?
Continue muddling along until the reality of the huge debt to GNP hits home and stops things.
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