P Chidambaram on economy: Rules raj, weak manufacturing and limited FTAs

Former finance minister P Chidambaram said the current economic model was a default model trapped in a square of regulation, investigation and enforcement, crony capitalism and bureaucratic hurdles. Speaking at Business Today India@100, he said the existing framework was not based on a deep analysis of the situation on the ground and lacked economic knowledge and expertise.

He said the country was now under a rules-and-regulations raj that was as formidable as the old licence raj. Chidambaram also said that however politically strong the top executive might be, it still required an economic brain.

Referring to former Prime Minister PV Narasimha Rao and former prime minister Manmohan Singh, he said Rao was a political executive while Singh was an economic brain, and added that nobody today could be compared with Manmohan Singh.

Expanding on his criticism of the present system, Chidambaram said, “Current rules and regulations on the statute book are worse than in 1991.

The economic design is trapped in regulation, investigation and enforcement, crony capitalism and bureaucratic hurdles. It’s a rules-and-regulations raj and not a licence raj, but it is as formidable as the old licence raj.”

On the government’s efforts to push manufacturing, the former finance minister said the semiconductor drive was being funded through public money. He said companies setting up semiconductor plants were being subsidised by 80-85 per cent and that it was public money rather than private money coming in.

He asked, “Where is the large plan and vision which Dr Manmohan introduced in 1991?” and said manufacturing was at 14 per cent, adding that this was not a proud product of these initiatives.

On questions related to foreign trade agreements, Chidambaram said these were limited to smaller countries where India’s trade was limited. He asked where the FTAs were with France, the US, Germany and China, saying major partners had not seen agreements concluded.

He said concluding such deals was difficult with the US with a whimsical leader and China with a veil of secrecy on the Chinese economy, and added that apart from the UK, what India had with other European countries was of minuscule capacity and nothing to its gigantic hunger.

Chidambaram also said the country should develop its own manufacturing. He said India imported raw materials, capital goods and accessories from China and, even if it did not have some raw materials such as rare earths, it should build manufacturing capacity to substitute imports. He said the country should have a competitive economy, but competition was shrinking, with sectors such as telecom, petroleum, cement, steel, airports and ports becoming monopolies or oligopolies.

“The Competition Commission of India is toothless, and tell me one recent merger that CCI has stopped,” he added.

In his remarks at the event, Chidambaram said the current economic approach lacked deep analysis and economic expertise, argued that regulation and bureaucratic hurdles had become as formidable as the old licence raj, questioned the present manufacturing push and the reach of India’s FTAs, and called for stronger domestic manufacturing and greater competition across sectors.

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