India Uncut

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Sunday, September 18, 2005

The little details

Responding to two of my pieces in the AWSJ ("The myth of India's liberalization" and "Good intentions, bad ideas"), Karthik Narasimhan sends me an email which is worth quoting in full, so, with his permission, here goes:
My wife and I are in Malaysia now on a short term assignment for our company, and every time we step out of our house in Penang, we feel the amazing effects of a liberal economic policy. This small, densely populated island off the coast of Malaysia (Penang) is a big electronics manufacturing base (thanks to a Free Trade Zone, and a port that was formerly duty free) and it is easy to see what this has done to the local economy.

There is a booming free-spending middle class, and almost no poverty. Everyone who wants to work seems to be able to find a job, and they are doing well enough to import labor from Indonesia for low-paying jobs. There are signs of development everywhere - new roads, new bridges, new high-rises. And from what I've heard, Penang reflects what is going on around the rest of the country.

Not to say Malaysia doesn't have its problems, but economically, they seem to have found the secret to growth. We see all this, and naturally, the next thing we think is, "When will this happen to India?"

We are doing it backwards, it seems - Malaysia had manufacturing move over here first, and that brought in a support engineering force which slowly grew into a full fledged "high-tech economy." We got some "low-tech" engineering activities first, and are hoping for the trickle down from this to help our economy in other areas.

I know the Government's hands are tied by the Left when it comes to big initiatives on liberalization, but I wish the FM would do some under-the-radar type things that would make doing business in India easy. Privatizing a PSU may not be easy (given the political circumstances) but maybe it would be more effective to say, eliminate the need for a couple of licenses or provide a few tax incentives. Everyone seems so focused on doing b-i-g, visible things - but frequently it is the little details that matter more.
That last paragraph especially struck me. We keep speaking about the political compulsions from the Left that prevent Manmohan Singh's government from pushing major reforms through, but there are so many "under-the-radar type things," as Karthik puts it, that it could do to increase economic and personal freedom in this country. Is it doing anything of the sort? Does it even feel the need for it? What is its vision, precisely, besides being in power?

Cross-posted on The Indian Economy Blog.
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