IILM Founder's Day Lecture in memory of Smt. Indira Gandhi-2006
By Mr V Krishnamurthy
My esteemed friend Mr. Habibullah, Ambassador Rajan, Malvika Rai, Anil Rai, distinguished members of the Board of Governors of the Institute for Integrated Learning and Management (IILM), ladies and gentlemen.
There are several reasons for me to feel happy to be here with you this evening. The more important thing being that I am in a centre of learning, rather a center of higher learning, in the midst of so many young boys and girls. Throughout my life, what gave me the greatest satisfaction was interacting with the youth of this country. I honestly believe that the future of this country lies in your hands.
I also convey my appreciation to the Kulwant Rai family for having founded this institute, having successfully imparted education to hundreds and thousands of boys and girls through its 14 to 15 years of existence, and having set high standards in terms of management education. I appreciate greatly the performance of this institute and the credit goes to the founders of this institute, the dedicated faculty as well as caliber of students that came in to join this organization.
The second reason is the subject given to me to talk on. These days I am very hesitant to go out and talk. But the India Gandhi Memorial Lecture brings back to me the early part of my career, initially as a planner and later technologist and business manager.
I had a special relationship with Mrs. Gandhi. So any lecture relating to her, I can’t refuse. I was picked up by her when she was the Prime Minister to be the chairman of Bharat Heavy Electricals Ltd (BHEL), a post people of my age at that point of time never even considered. She took an enormous and unusual step of picking me up at that very young age and nominating me as chairman of BHEL in 1972. She said she was trying an experiment. Years later, she took another unusual step.
In 1981, she asked me to take up and develop the Maruti project. These two are turning points in my life and that is how I came to know her and worked with her for a long time throughout her tenure as Prime Minster.
Her guidance and support to professionals took BHEL and Maruti to such great heights that they became model institutions. They brought credit to India’s public sector and greatly strengthened the economy. I will always remain grateful to the unconventional way Mrs. Gandhi chose some of us to head these institutions.
On a personal note, I want to say that I had the privilege of working with four members of the Nehru- Gandhi family. In my first year of service, I worked with Pt. Nehru in the Planning Commission. Later, I worked with Mrs. Gandhi.
Later, it was my greater fortune to work still more closely with Rajiv Gandhi -- during the 1980s when he asked me to do a special assignment for the Steel Authority of India Ltd (SAIL), which again was a challenging assignment. I was the principal member of Rajiv Gandhi's think-tank. That gave me an opportunity to deal with policies of the Government and in a way I helped him in trying to make the necessary changes at that point of time in India’s political economy.
Today, I work with Mrs Sonia Gandhi in the National Advisory Council and the Rajiv Gandhi Foundation — both Habibullah and I were the initial members.
I enjoyed the confidence of all of them. And it helped me develop institutions like BHEL, SAIL and Maruti. I am very happy that they used me as an instrument of progress. That is the reason why I said that I am emotionally attached to this particular person in whose name this lecture has been instituted.
Mrs. Gandhi had inherited a very strong commitment to India's development programmes from the Nehru regime and she continued on the same path, the hallmarks of which were self-reliance and development of human resources. These were the hallmarks of that philosophy.
The Nehruvian focus was on technical education, skill building and development of science and technology. They were all carried forward by Mrs. Gandhi, in addition to her own special programs on removing hunger and poverty.
Mrs. Gandhi faced major challenges throughout her Prime Ministership and developed nations of that time did their best to isolate India and deny use to us of advanced technology. They did everything to see that our objective of self-reliance failed. We had to depend on few other friendly countries for whatever assistance they could give by way of technology.
During that time, whenever we had discussions at the highest level on the need for advanced technology products, there were so many difficulties that we encountered.
She firmly believed that India should emerge as a major power through its own efforts, skills and resources. And she did not get deterred just because advanced countries did not come to her rescue at that point of time.
If we have to depend on our own resources and skills -- it is always a difficult road. But Mrs. Gandhi was very confident about India's ability to stand up to external pressures. The pride of India was paramount in all her actions. I can quote many instances where she showed extraordinary courage in defending the integrity of the nation and upholding its pride. I want to highlight one or two incidents to make my point. Not many of you will remember that after the 1971 war with Pakistan and the 1974 Pokhran explosion there were lot of official and unofficial sanctions on India. When India exploded the nuclear device in Pokhran in 1974, international sanctions were such that they made it impossible for us to complete some of the ongoing projects, particularly the nuclear power plants in Rajasthan.
The problem was how to get on with at least the ongoing projects. At that same time, she wanted to show to the world we would not surrender. She demonstrated that India could produce nuclear energy despite the stoppage of all possible import of equipment which had got stuck. I was one of the people who was part of this programme and I must say she motivated us as no one else. With whatever technology and knowledge available with the Bhabha Atomic Research Centre, BHEL and Larsen and Toubro, we got going.
I'm happy to say that we completed all those nuclear power plants without some delay but at the same time demonstrated to the rest of the world that inspite of sanctions we could complete many of our projects. And this was possible largely due to Mrs. Gandhi's faith in India’s ability to stand on its own.
It was a hostile global environment and the other alternative was to abandon our programmes but that was not what she wanted. That was against the nature of Mrs. Gandhi. She refused to compromise India's sovereign policies and preferred to take the other road. The bigger the threat from the outside, the stronger was her response. The courage that she displayed at that point of time was tremendous and a great lesson to all of us working with her.
Another time, I saw her acting with tremendous courage. Without any experience and with very little support from any outside country, the way we did our oil exploration programmes was commendable. We had to do it because we wanted to be self-sufficient in the energy sector. When the oil price shot up in 1971, she gave a great push to oil and gas exploration.
With great risk, the Oil and Natural Gas Corporation (ONGC) drilled extensively in Assam and the Bombay High. Can you believe it that at that point of time, the whole world had refused to give us even a single oil dredging machine for deep drilling? When the Government of India went in for buying these drills there was not even a single offer from any nation.
That has how she used to motivate us and it was actually BHEL that researched to achieve and build the oil drilling rig with which we could continue with our programmes. The push she gave at that point of time to ONGC today shows us in good stead and ONGC has become one of the biggest players in the oil field.
Mrs. Gandhi's economic policies were swept by the kind of adversities which no successive Government ever faced.
The environment on the financial and industrial fronts was not encouraging. But she believed that private enterprises had not grown to the fullest extent to take the responsibility of running key infrastructure areas. This is the reason why she emphasized the primacy of the public sector for India's development. In her time, the public sector controlled more areas of economy and its role rapidly increased.
I would like to point out here that despite her emphasis on public sector, Mrs. Gandhi was not against the private sector or its growth as it is generally believed. I know by experience that she did not adhere to any ideology but used ideologies to achieve her ambition of making India a great power.
Till 1980, India’s private sector suffered not only from licensing but also from technological and financial limitations. Only few could grow and diversify their technical activities. It was during Mrs. Gandhi's time that some of today's biggest names in textiles, petroleum, pharmaceuticals and the automotive sector got their breaks. Let me illustrate another case where she showed extraordinary flexibility in terms of public-private partnership (PPP).
She had been under severe strain about the Maruti project for the small car. She thought her own prestige was at stake.
She was convinced that the concept of people's car was very good and, therefore, nationalized Maruti to develop the concept under the Government. She brought me to head this and make the people's car a reality. After studying the project and the economic environment, some of us felt that the Government's policy in regard to foreign investment in the automobile sector needed to be changed.
At that time, there was a total ban on foreign investment in the automobile sector. I told her that the ban on foreign investment should be lifted if we have to move fast and that we should allow foreign equity participation to achieve the objective of modernizing India’s automotive sector.
When she got convinced about this, she cut out the red tape and allowed us to adopt a policy to support India’s development. The policies were changed and the Japanese partner was allowed to have 40 per cent equity in the company.
She and Rajiv Gandhi gave us total support to the new experiment. The rest was history. Maruti become catalyst for the modernization of India’s industry in general and automobile industry in particular. I can say with pride that the foundation of economic reforms was laid by Mrs. Gandhi as evidenced in this case. Success was not immediately visible, but it was a slow beginning. Rajiv Gandhi was actually related to it but his was too brief a period to complete the agenda.
Ladies and gentlemen: India’s political economy has undergone considerable change since the days of Mrs. Gandhi. From the controlled regime, the country has moved into an era of liberalization where many barriers like domestic versus foreign, private versus foreign have been lifted. Serious efforts are on to integrate the Indian economy with the rest of the world.
Let me state several strengths, but at the same time, some of the more important weaknesses. The international perception about India is very positive to deal with - the world believes that India is the fastest growing economy.
The youth demographic profile suggests the average age is 24. We are going to be the youngest nation for several decades. Inflation is under control and the saving rate reasonably high. External payment position is comfortable. Investment in the corporate sector is satisfactory. Industrial growth has started going up from 7 per cent in 2004 to around 11 per cent in the last six months. There is an increase in competitiveness as you see in many industries.
At the same time, weaknesses are noticeable in many areas -- infrastructural inadequacies are serious constraints on growth. The rate of growth in agriculture is going down, something that is a cause of concern. For the past few years, agriculture has not been doing well. And that has brought tremendous distress to rural people. Then there is poor performance in many social areas like health and education.
The price of energy, particularly of international oil, is high. Regional imbalances in India are growing and more importantly, there is inadequate growth of employment opportunities.
The present Government is alive to these problems. The National Common Minimum Programme envisaged by this Government seeks to address many of these present shortcomings.
It wants to ensure economic growth at least of 8 per cent and in a sustained manner to generate employment so that every family is assured of a safe and viable livelihood. More importantly, this Government realizes the need for more balanced growth between agriculture, industry and services.
The growth plan should ensure this balance so that the benefits flow to all sections of the society and to all regions of this country.
Let me illustrate what we mean by balanced growth. Industry today contributes 27 per cent to India’s gross domestic product (GDP). The share of services has increased from 42 to 50 per cent while the share of agriculture has come down from 31 to 22 per cent of GDP. Manufacturing accounts for only 17 per cent of India’s GDP. This is very low -- as more than 75 per cent of our exports are of manufactured goods – for the healthy and balanced growth of the Indian economy.
And there is also the need to create the right type of opportunities for people coming to the job market. And then to increase our share of global trade, manufacturing activities should be somewhere between 32 to 35 per cent of GDP. In China and Asian countries, it is nearer 40 per cent.
As against that, Indian manufacturing constitutes only 17 per cent of GDP. The problem today is that due to this imbalance, manufacturing has not kept pace with the needs of the situation, creating tremendous strains on the Indian economy.
The manufacturing sector grew at the rate of 7 per cent during the last several years. This rate of growth needs to go up considerably. It has to be planned and we have to work for it. The competitiveness of Indian manufacturers has to go up for a variety of reasons.
The competitiveness of our manufacturing has not been all that good in many areas – this has to be improved. It is for this reason that the present government has formed the National Manufacturing Competitiveness Council which has a large number of industrialists, academics and policymakers. It has been addressing many problems of the manufacturing sector – how to make it more competitive and remove the constraints.
The council has formulated a national strategy for manufacturing which has been accepted by the Government. Most of the major nations, whether USA, Japan, China or Korea, clearly state that development of the manufacturing sector is crucial to the growth of any nation.
When we talk of increasing India’s share of the global trade beyond 1 per cent it won’t be possible unless we are able to considerably increase manufacturing operations. As 70 per cent of our exports are of manufactured goods, we can safely conclude that manufacturing should grow at the rate of 12 to 14 per cent and I would say 14 per cent. The last decade has seen as average growth rate of 7 to 8 per cent. It is a difficult task and long haul but ever since we made a beginning, it has been only an upward movement. We have nearly reached up to 10 to 11 per cent and hopefully further efforts will take us to the goal of 14 per cent.
Manufacturing is strategically important to any nation. Globally, manufacturing activities are acquiring a new dimension with a robust trend to source products from low cost countries.
We have experience, we have a large pool of skilled manpower and we have established raw materials. With this, I believe, India has the potential to emerge as a major manufacturing hub for the global market.
In addition to this, 7 to 8 million boys and girls are expected in the job market in the coming years. We have to find them jobs outside agriculture. I believe that unless manufacturing is stepped up, it would be extremely difficult to provide gainful employment to this 7 to 8 million boys and girls coming into the job market.
We have identified through our studies the constraints in terms of increasing manufacturing activities and there are general constraints affecting industry as a whole. There are certain specific constraints to each vertical of manufacturing operations. The general constraints are inadequate infrastructure, high transaction costs, lack of flexibility in the labour market.
Inadequate emphasis on domestic research and development and inadequate training facilities for rural masses is another area of worry.
Let me also say that it is going to be a paradoxical situation --- on the one side, I am saying we are the youngest nation and on the other, I am saying that untrained boys and girls are coming into employment market. Unless training is taken care of and skills are developed at various levels starting from the artisan level, what you are doing to hasten the stride will halt.
Why? Because we are going to have situation in which we will have lot of people but without employability. So we have sector-specific problems which we are addressing. With the help of industry associations, administrative ministries and state governments, we are in the process of formulating schemes, projects, plans, or whatever you have call it, to remove the constraints and make Indian manufacturing as competitive as possible.
With these efforts, India should gain the economic strength as envisaged by Mrs. Gandhi. Ladies and gentlemen, we live in an era when great changes are talking place as Ambassador Rajan mentioned in the beginning and I wonder whether every one of us here is able to comprehend these changes fully.
There are compulsions of globalization and everyone seems committed to the need for globalization. Many of the efforts that I outlined before are part of India’s effort to globalize. Of course, globalization bring opportunities and at the same time threats to traditional identities which means greater uncertainties. Some of the opposition to globalization stem out of these threats. The expression globalization itself is difficult to define on most occasions. It tends to be defined in terms of the economic dimension, which indeed is important.
But there are cultural and social dimensions to globalization too which are equally important. This is what Mrs. Gandhi had emphasized at that time. It should benefit all parts of the globe, all sections of the people in every part of India. All sections of society must be benefitted and not just some region or some sections.
The present Government in its National Common Minimum Programme is trying to address this problem and correct the distortion that has crept into our past policies. They are working at seeing to it that the benefits reach the less-privileged sections of society at the same time attempts are being made to record a high rate of growth. India is fast changing. I believe that in the next two years, we will be able to sustain a growth rate of 10 per cent. The transformation in India will transcend all economic issues.
India is a country today with much more confidence about its economic promise and potential – a country that now believes that the promised tryst which destiny can be fulfilled in full measure. Being a young country, India should be better poised to adapt to the uncertainties and distortions resulting from globalization.
At the same time, one must be conscious of the divide that exists in India. We see great strength displayed by India in managerial capabilities, software and outsourcing. But, at the same time, there is also a 19th century rural economy. And the benefits of globalization have not reached this section of the rural population.
All of India needs to feel that it is a partner in a programme which will benefit all, not some. In this context, I feel an integrated learning process adapted by this institute and the training imparted by it to the young boys and girls to take an integrated view of India’s problems is very sound and laudable.
I congratulate all of you in this institute, particularly the faculty in training the young generation to live up to the ideals of Mrs. Gandhi and the founding fathers of this country.
Those of you who are studying here, I’d say that never before India offered such large and challenging opportunities to boys and girls. Ambassador Rajan also said that we are going to be in very promising times. We are in the most exciting phase of India’s development and you all are the privileged few who will gain from this cusp by the knowledge gained in this institute.
You have great role to play and you must succeed in achieving your cherished goals.
Thank you very much.
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