Monday, May 02, 2005

What keeps India backward ?

From 12.9.2000
36, Middle St.,
Karur - 639 004 (T.N)


The Cheif Minister,
Tamil Nadu

Dear Sir,
Permit me to express my views about liberalisation and privatisation of Indian
economy. The leftists and the ignorant public still oppose the liberalisation process
initiated in 1991 as anti - poor. Uncontrolled Government expenditure and socialism
are root cause of all the problems we have, including poverty, unemployment, corruption
and high inflation and interest rates.
The Govt of Tamil Nadu is no exception. Creating more districts is an classical example
of increasing wasteful govt expenditure. For example, our Taluk Karur was made into a district
at a cost of about Rs.10 crores, while the revenue collected remains the same. Now there are
three officers of IAS rank and more Police officers. But the number of clerks, constables and
other lower level posts remain as it was. The whole administrative set up is top heavy and leads
to inefficiency and corruption.
The state transport corporations are notorious for badly maintained buses, corruption and
mismanagement. The private buses are well maintained and cost effective and are
profitable. The govt.can issue more routes through open auction and sell off the loss making
state transport corporation( about Rs.400 crores can be saved in losses every year). Auctioning
of all routes every three years( just like the auction of permits for wine shops) can fetch
enormous revenue for the cash strapped government and avoid corruption at the same stroke.
Every one knows that the "route" for the existing bus routes are traded (in black) for tens of
lakhs of rupees. All this illegal money can be garnered by the govt through open auctions and
I have herewith enclosed an article of mine which was published on the internet (about the
damage caused by socialistic policies in India.
Thanking You

A critique of Socialists of India:

Who are the real proletariat of India ?

Leftists of modern times have lost their power of rational,objective analysis.
They are seldom realistic or pragmatic. There is a lot of grey area but these
gentlemen view in only black or white, their vision clouded by their ideology.
There are two totally different types of working class in modern India.The
majority (about 80 percent ) are of the unorganized sector( farming, contract
labourers, domestic workers,construction,etc.)They are unorganized, have no
union or identity or awareness about their rights. They are the silent and
invisible majority,exploited and under paid with no protection or benefits.
The other type is the organized sector ;unionized and militant, recognized
and used by all political parties(including the Marxists).The leftists work only
for these pampered elite at the cost of the silent majority.Worst among these
are the government employees ( all PSUs and govt. departments).They constitute
less than 2 percent of the population, but the government spends a major portion
of its budget on them.

We Indians have developed, over the socialist decades,a double standard
regarding work ethics. Any Indian will work sincerely while being employed
by any private organization (otherwise he will be sacked). The same chap, if
he is employed by the government will become lazy, inefficient and corrupt,
but demand very high salary,perks and paid holidays.( there are ,of course,
exceptions). Only in India are the bureaucrats so arrogant and corrupt.The
job-for-life rule with no mechanism for monitoring and correcting inefficiency
has made our government the biggest employer in the whole world.
Most of the PSUs and government departments are overstaffed and
underworked. Worse, all of them are top heavy.Too many officers and
bureaucrats.There is no pyramidal structure in any department.Posts are
sanctioned and created with scant regard for cost effectiveness and need.
If any private company (say like Reliance or Tisco),is staffed and run like
a government department(say Home Ministry), it would have gone bankrupt
in no time.But the government is unable to downsize its ministries.As a result
fiscal deficit is growing dangerously fuelling inflation and poverty.About half of
the government income is used for interest payments alone.Salary for
government employees and defense budget swallows a large portion and finally
a meager amount is left for capital expenditure and welfare. Is this socialism?

Less and less money is allotted for vital areas like education, health and
drinking water schemes while the salary bill bloats.To top it all, the loss making
PSUs are maintained at any cost to the exchequer. (for e.g Air India and Indian
Airlines could have been privatized long back avoiding a lot of loss and trouble)
The money poured to maintain them could have been used for more useful activites.
Most people don't realise that less government interference promotes enormous
growth.The IT industry and synthetic fibre industries are good examples. There is
negligible government control or interference in these sectors and no government
owned PSUs in these sectors ;only private initiative and enterprise. Hence the
enormous growth and employment opportunities.

To contrast the striking difference between government inefficiency and private
sector initiative,consider public sector road transport corporations.While there is a crying
need for more buses, the loss making government owned corporations are unable to
expand fleets or maintain the existing buses in good conditions(mainly due corruption,
inefficiency and over staffing of top management)The private buses are generally better
maintened and less accident prone.The licenses for the routes are sold (in the black
market) for tens of lakhs of rupees.Licenses for bus routes can be decontrolled (like
lorry transport sector) to end all these troubles.But there are vested interests (consisting
of transport ministers, bureaucrats,existing private bus operators and trade unions) who
prevent this so that their monopoly and graft can continue as ever.This is nothing but
crony capitalism masquerading as socialism. Fortunately the lorry transport sector is
totally in private domain and hence efficient and cost effective. All other infrastructure
sectors(like power, telecom, ports and airports) are plagued by similar problems,
arresting growth and development of the economy.

Private banks were nationalized in 1969 by Smt.Indira Gandhi (for purely populist
and selfish reasons).The leftists and the intelligentsia applauded the foolish action. Look
at the result. The NPAs (bad debts) are astronomical and most government banks(like
Indian Bank, UCO Bank)are almost bankrupt.Only budgetary support and government
protection keeps them alive.The private banks(like the Karur Vysya Bank, The Vysya
Bank, TMB, etc) are healthy and growing. All banks operate under similar rules and
regulations (including social sector lending obligations ). One must contemplate the
reasons for the decay of only the nationalized banks, while private banks are healthy.
Kerala is a classical victim of this socialistic farce.There is abundandant water,ports
and a skilled and efficient workforce in Kerala.The banks are awash with deposits.But due
to fear of labour militancy and anti-capital government policy,industrialists are reluctant to
start industries there.As a result highly educated and skilled Keralites are forced to migrate
all over India and abroad in search of employment opportunities.
The leftistists condemn IMF and the World Bank as stooges of western capitalism.But
without their timely support we would have gone bankrupt. USA, in the fifties, afforded us
technology,capital and aid to develop our industries like steel, infrastructure,etc.We ignored
them, while nations like Japan and Malasia utilised the offer and prospered.

Rajaji, a visionary leader, fought against this licence,permit,quota raj all his life. He was
for 'lazzie faire' way of economy.Unfortunately his plea fell on deaf ears.Only in 1991 when
we were dangerously short of foreign exchange did we realise our folly and began
liberalisation and privatisation.

The leftists must be realistic and analyse the perils of Indian brand of socialism that
is still plaguing us.

From : K.R.Athiyaman, 36,Middle St.,Pasupathipayam, Karur - 4
To : The Editor, Frontline ; copy to : Mr.C.P.Chandrasekar & Ms.Jayati Ghosh, Columnists
Dt : 25.09.2000


1. In 1973, Arab countries suddenly revised the price of petroleum. Again in 1979 and 1990, due to politicalsituations the prices fluctuated wildly. To act as a cushion and shock absorber,the government proposed to set up an Oil Pool Account. Evey litre of petrol and diesel was taxed and a surplus amountof Rs.15,000 crores was accumulated in this fund.

2. However, this fund was misused by the government. First this fund was used for waiving the agriculturalloans less than Rs.10,000/- Then it was used to pay the raised salaries of government employees .

3. In addition various surcharges and taxes were levied on petrol and diesel.For example, during the 1990- 91 Gulf War, a " gulf surcharge " was introduced. This war was over in 1991, but we are still paying the -surcharge ! If we examone the pricing closely, may be we will find that we are still paying a tax or surcharge levied during the 1971 Bangladesh Liberation War, 1962 Chinese invasion, 1857 Mutiny andBabar invasion of 1526 !

4. In the past, petroleum prices in the world market have gone up and dowm many times, but in India,theprices always go up, and never come down. Petrol and diesel prices are promptly raised whenever petroleum prices go up in the world market, but when they come down, the government of India and its monopoly oil companies simply swallowed the profits.

5. So to save us,the taxes and surcharges should be lowered and abolished. Oil monopoly must be abolished immediately. Foreign companies should be allowed th compete with the Government oil monopoly. Let the cheapest oil win !


Politics survives on cliche and slogans.Certain words become popular
at certain times, only to be replaced by other words at other times. After
1991 there was a spate of these words of the age. Liberalisation,paradigm
shift and indicative planning were the new buzz words. But after all these
years,the progress actually achieved is quite low. Why ?

We have the knack of taking only the shell and leaving the core behind.
We had a cursory look at the S.E.Asian countries,China,Korea and Taiwan,
discovered that these countries grew by allowing liberal doses of foreign
investment,and so be it. In India of course some money came in, there was
a lot of growth in computers and software(the IT sector) and suddenly people
were getting more worth for either money in TV,fridge,car and other white goods
but now even this trickle is drying up. What went wrong again ?

We went wrong in finding the proper order of things.we have a 100 million plus
literate labour force, and we need jobs for them. So first we need foreign
manufactures to start their production from here.But this needs power, I mean
electricity,not muscle power or voter power ,so we should have started with a
lot of power plants ;of course there were Enron and Cogentrix, but they never took
off. Why? Because we insisted that our SEB & should be the intermediary between
Enron and the consumers,SEB with all their "transmission losses" of 22%free
electricity to farmers,huts and politicians,and inefficiency. Compare the
transmission losses of BSES, the private company which supplies uninterrupted
and stable power to Bombay city. Transmission losses of BSES is very low
compared to that of SEBs. Highly efficient and cost effective.It would be wonderful,
if we have a similar set up all over India.

The best course would be to start numerous industrial estates- with a private
power plant, that the power company and the manufactures in the estates negotiate
the price ; keep out the SEB and IAS officers and trade unionists and politicians. Then
soon you will have an industrial estate and thousands of jobs ; no money the part
of the govt, and no commissions,"kickbacks",negotiation teams and foreign tours
either. But we went the bureaucratic way,and are still negotiating about power
purchase price,etc.Even Lenin recognised the role of electricity as for back as 1920.
Our bureaucrats are yet to catch up with early Twentieth Century.They will reach
21st century sometime after 2150, I hope.

Then the second step would be to allow the foreign manufacturers to employ
us - the Indians of course the unemployables like our burecurcrats, politicians,economists
,& trade union leaders cannot expect any job from the foreigners. But there are other
and lesser Indians in their millions,who are capable and to work. We were preventing
them from working under a foreign management,saying that the American(or the
Japanese or the Koreans) will underpay them .And we are not giving them employment
ourselves.Being underpaid is much better than being unemployed. We will not employ
the millions-nor will be let them get employed by foreigners.except if they manage to
crawl out of India to the middle east or Singapore.Have you seen an electronic/computer
product of late? I have seen Siemens monitor, Casio digital diaries,Sony peripherals,and
lot of other things,all made in China.It would have been "Made in India"but for our ignorant

If we fear too much that the foreign companies may exploit an labour,we could have
framed labour agencies, run by Indians,that would take up labour contracts with the
foreign companies.But we didn't. The reason is that, we are still suffering from east India
Company syndrome, believing that given half a chance,the "imperialists"will turn that
into a colony No sane person, especially a capitalist with money to invest,will dream of
"conquering" India again - we have spoiled India too much to be of any use to anybody.
The Indians are not the hardworking,intelligent,artistic and honest people that they were
in the 17th 18th or 19th century.So we need not worry about away colonialism-direct or
indirect.No western country will be eager to take up the headaches of the Indian Republic.
Third, we should have scrapped all the nonsense public sector units like the Bicycle
Corporation of India, ET&T,Indian Telephone Industries,etc.(of course not BHEL, NTC
and some others)and put all the money into primary education. We should stop all the
useless scheme operations from 1955(DWCRA,SITKRA, and others),dismantle the
Block Development Office whole sale,and instead spend the money thus saved in printing
primers for children in all the Indian languages. We didn't and we won't.

We should have allowed everybody (Indian,Foreigners, Indian + Foreigners) to enter into
the basic amenities- roads,phones,transport,etc. We didn't and if we did allow them,that is
after lots of its' and buts,only into basic service not into cellular, or with so much restrictions.
We did none of the realistic and proper things. We made some superficial changes
and there followed some superficial developments. We don't have the capacity to understand
the steam age capitalism. We don't understand the modern economics.For example, an
average American earns 240 times more than an average Indian but consumes electricity
equivalent of 8750 Indians ! This shows how cheap electricity is in USA. All around the
world, right from the days of Pharaoh, bulk consumers always get a discount. But under
our E.Bs and telephone department, the more you consume, the costlier the unit price is !
Weirdest logic !

I do agree that administration cannot be run like a business. But then administrators cannot
run a business. Let our bureaucrats accept this.

To sum up, to really develop India,

1.The power production needs to be increased manifold. Preference should be given to Thermal
power, using natural gas, oil and coal , in that order. The oil should be imported by the individual company at its own cost, not through RBI's foreign reserves. These Power companies should be
allowed to sell the power to who ever that desires it, at whatever price they choose, preferably
restricted in area. Let SEBs continue to function till our people are exorcised of their phobias
about private sector - may be forever, I won't mind.

2.The foreign companies should be encouraged to "source" their manpower from here and establish manufacturing facilities. No "Single window clearance" , "Automatic approval" , "Fast Track Options"and other bureaucratic nonsense, but declare Eco-friendly industries like computer parts and electronic items, etc totally free. The ministry of Environment is not at all protecting the environment, but has become another way of harassing the few unsuspecting investors. The sooner it is dismantled, the better. Hazardous industries are still going on just as ever. Remember : in India, one more monitoring/controlling/clearance authority means one more palm to grease, that's all.

3.Allow total and fair internal competition. No "MRTP" Acts and commissions are needed but all the district consumer forums should be allowed to prosecute the erring companies on their own.
In our country, till our institutions acquire a fair measure of integrity, the only way of preventing corruption is decentralisation. The ancient Athens had a Supreme Court whose judges were impossible to bribe - simply because there were 1000 judges ! Authorise every district forum to prosecute and you make it impossible for the companies to bribe their way through !

4.Concentrate on primary and secondary education. In future, an illiterate will be at a grave
disadvantage. the primary education should be in the mother tongue, simple and rigorous.
The syllabus needs to be pared down for the primary education.

5.Steel, Aluminum and other metals and alloys should allowed to be imported freely.Only free
competition will enable our indigenous producers to become really efficient.Only when Indian
consumers and other downstream industries get the best and cheapest steel, will our economy

6.Dismantle goverment monopolies of Oil sector. Let the cheapest oil win.
Of course, Indians will be finally forced to take up these steps. After all didn't Spencer say " Man will do the rational thing, but only after exploring all other possibilities " !

From : K.R.Athiyaman, 36,Middle St., Pauvai, Karur - 639 004 10.11.2000


This question may seem absurd. What could be there in technology to
understand ? You need only to know the technology, not understand it.
After all, the related term is know-how, not know-what. And even if it is
argued that there is something to be understoodabout "technology", surely
India will understand it. Are there not Indian satellites ? Have we not
mastered the nuclear science ? And we have our own super computers,
you know.

Still there is something about technology that we did not understand.
Surely our achievements are insignificant compared with what we could have
achieved and what our capacity is.It may spring to the mind that we are a
poor country, half illiterate and backward and that we have missed the first
phase of industrialisation due to the colonial rule. Let us see how these
factors need have prevented us from becoming a technological society.
The most crucial thing that we didn't understand about technology is that
it is dynamic and not static. There is nothing wrong about not developing a
particular technology and importing it.No country could develop all the
technologies it needs. Importing a technology is not new to us.The art of silk
weaving was imported from China and so was the technique of paper making,
block and screen printing, fire works and gun powder. The idea of currency
was developed by the Hydians,and that of paper currency by the Chinese.
Steel making was developed by the Indians. All the people, at sometime
or other in their historyhave imported technology. The British acquired the
technique of making rockets (for war) from Tipu ! So there is nothing wrong
about our technology imports during the fifties and eighties.

What was wrong about it was our failure or inability to develop it further.
This is a result of treating technology as a static method of manufacturing.
When one learns a particular method of making chains, one doesn't master
the technology. To elaborate on this example, there are two ways of learning
technologies. The first is mechanical repetition of some movements. If we
watch a carpenter making a chair, we can learn making chains, by simply
imitating him. But we will get only the copied of the original,may be with slight
changes, fortuitous or deliberate. The second way is understanding what a
chair is : that a chair has a seat, a reclining plane, handrests and legs; that
a chair can havefour legs or simply the same tube bent all around the bottom;
that the reclining surface can be moldedwith the seat ; that the handrests can
be integral with the legs. Now we can make chairs for various designs - two
long plates for legs,the seat aesthetically shaped, the curves flowing, etc.Now
we have truly mastered the technique of making chairs.

It need not be rubbed in that we learnt technology the first way.We imported
not technology, but only assembly lines. Only someone who understands
technology can make technology our of assembly lines. To others, it is a
mere repetitive assembly line. To further handicap is, we had put on the
blinkers of import substitution. To us, mastering a technology meant 100 %
indigenisation and nothing more.To quote a solid example, we bought the
phone technology for ITI and started production here. We took it apart and
found that this spring was imported ; so let's make it. That diaphragm was
imported ; so let us make that. Thus we indegenised it 100% and thought
that we have mastered the technology of making phones. By that time, others
have moved on from dial to push button type. Now we bought that technology.
By that time we mastered that the cordless technology appeared !

The Hindustan Motors started manufacturing cars sometime in the fifties.
Its Ambassador line is still continuing. But the changes made in its are few.
And, if at all there are any changes, they are : i) imported or ii) much behind
the contemporary technology. Hyundai imported an assembly line from Suzuki
in 1969. Now they are designing cars all by themselves. 100 % indigenisation
in manufacturing may not be possible. What is necessary is 100 %
indegenisation in design - the concepts.

Why are we incapable of understanding technologies ? The main reason
is that in India, there is a huge gap between theory and practice. The engineers,
who are supposed to master the technology, don't have first hand experience
with the machines. Ferrari, the famous car designer, has no formal qualifications.
Yet no Indian automobile engineer can match him. Forget Ferrari, most Indian
automobile engineers cannot even repair their own car ! How can we expect them
to design a new carburretor or spark plug or engine ? In medieval Europe, surgery
was done by the local barber, while the doctors supervised it from a distance !

In our country, the labours handle the machine, right from erection, and the
engineers supervise it ! You can very well imagine the results. When some Indian
engineers joined Hyundai plant near Chennai, they wereasked to take a personal
role on erection, and they promptly fled ! No technological improvement is possible
till one "understands" a machine and has hands on experience. In India, the
mechanic who"understands" an engine lacks the theoretical background and the
engineer with the theoretical background has no hand on experience.

An even bigger stumbling block is there in developing new technologies. The
next stage in a technology can come from a totally unexpected field.
Understanding a camera and film developing will not enable you to design a
Polaroid camera ! For example the dot matrix printer was an improved form
of typewriter. There is the ribbon and there is the printing head. The
improvement was that instead of individual letters there is a small hammer.
Now, however much you "understand" the dot matrix printer, you cannot
develop the laser printer out of it, which is the next stage. It came from a
totally unexpected area ; laser combined with xerography ! The only way out
is to encourage basic research which may (or may not) yield unexpected
benefits. India is handicapped here also.

The second most crucial thing about technology development is that a
commercially driven development is cheaper, quicker and more practical
than an institutional/ bureaucratic technology development. It is true that more
new technologies came out of institutional and / or government labs than
commercial labs. But once a technology is marketed, it is developed further
only by the commercially motivated. There is no use in developing technologies
if they are not commercially used. To cite an instance, the erstwhile USSR
successfully competed with the US in space technology. It launched the first
satellite, the first cosmonaut, the first probe to the moon,etc .Still, the US was
successful in one sense.The first satellites of both countries went up in 1957.

Yet, as early as 1964, US found commercial use for the satellite, when it
telecast the 19694 Olympics ! Soon private companies began to build
satellites, and our first Insats were built for us by a private concern, Ford
Aerospatiale. In that aspect, i.e. making practical use of technology, US
was ahead of USSR, only due to its commercial instincts.Our technologies
are notoriously unviable, precisely because our motto is "self reliance at any
cost"- and you cannot afford "any cost indefinitely. That's why, in spite of our
successful Insat system,till 1998 (when the rules were changed) our own
private channels used foreign satellites - because ISRO never cared about
making money. And if you cannot make money out of a technology sooner
or later, that technology will fail to take root.

All our "technological achievements" suffer from the same defect - they are
just showpieces and not commercially viable. Take C-DAC. It has developed
a few software packages - a word processor, a spreadsheet, etc. There are
free packages of exactly the same kind, developed by individuals. Yet we
boast this was"achievement" - because the ministers are technology-illiterates.
Two years ago, INSDOC listed as its"achievement" the bringing out of two
databases in CD. Yet there are scores of libraries bringing out dozens of
databases every year. If this is pointed out the stock reply is that ours is a
resource poor country, that we cannot afford to imitate the rich. But precisely
that is what must be noted : we spend unrealistically huge amounts to bring
out these two CDs - because of "Science at any cost" - slogan. A foreign
company couldhave been contracted to do the same thing cheaply. Year after
year we repeat and confirm the results of experiments undertaken by some
foreigner. Cryogenics, where we had a little lead a few years ago, is now
never talked about. Dr.A.P.J.Abdul Kalam once pointed out that ISRO scientists
had made a light weight caliper for a handicapped child. But it was not
commercialised, nor the technology transferred to some company that
makes calipers. What is the use of that technology ? One showpiece of
caliper ?

Whenever somebody points out that the cost of space research is exorbitant,
the reply is that the spin-offs will benefit everyone. But where are the spin-offs ?
Surely 30 years of research would have left a few spin-offs. Where are the
companies using that technology, and what are the products commercially
available ?

We are not importing technologies, we are simply importing assembly lines.
The HAL is the best example. Right from MiG - 21, every few years, a new kind
of aircraft would be acquired from USSR and its technology "transferred". Yet
HAL never developed so much as tarpaulin covers for these aircrafts. The ICF,
Chennai acquired the technology of railway coaches in the sixties. Now (2000)
it is again shopping for technology. The private sector is no better. Ashok
Leyland, Hindustan Motors and chemical factories shop for "new technologies"
every few years. The least we could have done is abolishing the R & D in all
these organisations and save a few rupees.

Compare this, let us say, with a market dominated by small manufacturers.
The motors and pumps of Coimbatore are of world class - at least in quality,
since they also imitate the foreigners and do not have in house R& D. May
be only cut throat competition will force the companies to care about its

Reverse engineering is almost unheard of in India - except among the
manufacturers of fake "foreign goods". High rates of taxation and bureaucratic
stranglehold ensured that these manufacturers will never improve their quality.
History shows that Japan and Taiwan and Korea, all started their manufacturing
history with shoddy goods and then moved up. The quality of Japanese goods
before World War II was horrible. Yet they improved. Our "cheap manufacturers",
on the other hand, find that they are better off remaining where they are - when
they make a fake citizen watch their profit is high - because they just bribe their
way - but when they try to market it under their own brand name, they attract
may be 15% sales tax, in addition to the bribe. So it is better to make fake
foreign goods than cheap but genuine Indian goods. Thanks to the "quality" of
the Indian goods during the era of "protection", foreign goods enjoy a high
reputation among our people. Our people are willing to pay Rs.500/- for a "citizen"
watch, even when they know it is a fake, but won't pay Rs.300/- for the same
product if it is marketed under an Indian name !

When we are coining slogans for the public consumption, care should be
taken about their subtle psychological effects. During the British rule, we
chanted "Good government is no substitute for self government" there by subtly
implying that self government won't be good ! And in the fifties, we proclaimed
"Indian goods - self reliance - even if it is costly and inferior". This attitude
certainly ensured that Indian goods will be costly and inferior - because we
have decided to buy them, so the manufacturer has no incentive to improve
them !

The third important aspect of technology is its cost. Here also, our myopic
ignorance led us to spoil our progress.Every product or service will be costly
when introduced. But further technological improvements will bring down its
cost, making it affordable to many. X-Rays, Photography, radio, T.V., Computer,
all were much costlier when they were introduced. And so were pens, paper,
aluminum (Napoleon had an aluminum plate ! ), tea, Xerox, bicycles, etc. Yet
in a few years time, technology will make them within the reach of many. Ford
sade the automobile cheaper. Sony made the transistor radio. There are
numerous examples. Yet all these examples staring in the face, our policy
makers divided things into two categories - those used by the rich and those
used by the poor ! The things that the rich use today will reach the poor
tomorrow. If one is really socialistic, one must ensure that even the poor has
access to these goods today itself. But our logic was inverted and perverted.

If the poor can't afford it,the rich shouldn't get it. We implemented this policy
through our tax system - the "costly" things are taxed more - because only
the rich use them thus ensuring that only the rich could afford them forever.

We taxed air travel so heavily that even today it is prohibitively costly to the
majority. During the same period, around the world, air fares progressively
became cheaper and more people traveled by air because it became cheaper
and vice versa. But in India, in the year 2000, thousands of people are forced
to spend two days - 36 hours atleast, to travel from Tamil Nadu to New Delhi.
And we are going to compete with Japan and Germany ! Show me one
developed country where people are forced to loose man hours. Yet it is
certainly possible to offer air travel for the same sector for Rs.1500/- per
person compared with Rs.500/- for the train. This is solely due to the addled
policy makers. Air travel is for the rich - tax it, tax it - till only the rich can
afford it. Let the others crowd into trains and spend days on end. Who
cares ?

Nationalisation of Air India and Indian airlways in the fifties and preventing
the private sector from running efficient air services(until recently) was the final
straw. Indian airlines became highly inefficient and costly. Same "foresight"
was shown in taxing electronic goods. In 1971, the government slapped a 40%
tax on the fledgling electronics industry. The industry promptly died.(Remember
G.D.Naidu of Coimbatore and cheap transistors he mass produced) Companies
that started to manufacture calculators folded up - leaving the field wide open
for the smuggled Casio calculators. Today over 95% of all calculators in India
are Casio - duty paid or smuggled. IBM went out of India in 1975 - just when
the computers were within the reach of big companies. As a result our
computerisation drive was postponed by 20 years. Let us not forget that
Computers became [popular in India because of a lucky accident - Rajiv Gandhi
encouraged it. Otherwise the rusty Devilal or the communists would have banned
them indefinitely and dragged us backward.

Thus, taxation should take a long term perspective. Since this is very difficult,
(who could have predicted the reach of Internet today ?) the best course is to
tax hi-tech items and services at an ad valoreum and low rate uniformly applied
- sales tax of 3% and service tax of 2%.

It is never too late for a people to catch up with the rest of the world, and more
importantly, to gain a lead in technology and research. Japan, Korea and China
are good examples. But this rapid development cannot be achieved merely by
"allotting" 2% of GDP to "research"(of which 1.5% would be taken by
"administrative expenses") or by similar stunts. Only an open, fair and free internal
competition could have achieved it, but now it seems too late. The next best
alternative is to encourage foreign manufacturers to start their production in India.
By this, in the next 15 years we could achieve state-of-art design capacities.

Therefore it is fair to conclude that our policy makers never understood what
technology means. It is not proving your abilities to the world, but using them
to improve your standard of living. Designing and making a better truck or
telephone network or pylons is certainly better than launching satellites but
importing paper. The sooner we get rid of our inferiority complex that drives us
to merely imitate the developed countries at enormous costs, the better.

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