Niti Aayog: When Singapore’s Deputy PM left Delhi’s intelligentsia speechless

Singapore’s Deputy Prime Minister Shanmugaratnam delivered NITI Aayog’s first lecture on ‘Transforming India’ at Vigyan Bhavan in New Delhi on Friday. It was an articulate and lucid exposition on the issues of development, and not necessarily on economic liberalisation though there is that bit on de-regularising land acquisition and labour laws. It was not the main thrust of the speech, but it is common sense that people hear what they want to hear. He said that labour laws as they exist now only protect 20 per cent of the work force in the formal sector, and the 80 per cent in the informal sector are not helped by it.

Shanmugaratnam put forward some unorthodox ideas, which make huge sense from the point of view of Singapore, but which also pass general muster in a limited sense. He contested the economists’ assumption that it is demand that drives growth, that domestic demand can sustain economic growth. He argued that it was supply that needs to be managed so that trade dynamic can be sustained. The common economic wisdom is that if demand is sluggish, and inventories pile up, it is not a good story. But from the point of view of Singapore, a demand-driven economy is not a good one. Demand fluctuates but the supply chain should never slacken because sustained employment depends on it. It is a Singapore problem. It cannot sustain unemployment.

The second contested idea he threw up in the speech was that it is exports which drive growth, and that the theory of domestic demand firing growth is not faulty. He said that with 18 per cent of the world’s population, India’s share of world trade is a mere two per cent. He feels that India’s export potential has not been tapped sufficiently. He thinks that the India-China, and India-Asean (Association of South-East Asian Nations) trade volumes at three per cent is much too small. He argued that intra-Asian trade – and what he has in mind is China, India and Asean – holds promise for greater economic activity in a world racked by recession. And he is also of the view that high exports and high imports is the way to keep the dynamic of global trade. Remember this is again a Singaporean view. If trade flows collapse, Singapore, the entrepot, cannot survive. He has persuasively argued that it is good for India to export more and import more.

There were other pertinent but equally problematic remarks in his speech. He said that over-academicisation of education is bad, that producing more graduates makes them unemployable and that this is a problem not unique to India, that it is a problem that is found in China, Japan and South Korea as well.  He also said that increasing budgetary allocations is not the way to improve the education system, and he said that Singapore’s budgetary allocation for education is modest.  It is all about how you are managing the system – providing good teachers, teaching the right skills. But consider the opposite point of view. India needs more graduates, more doctoral students to create that critical mass which will provide the thrust to scientific and technological breakthroughs. But Shanmugaratnam again, and rightly so, talked from a Singaporean viewpoint.

There were two other issues. He said that the gap between the few big companies and the smaller ones is much too large in India, and that there is need for many big companies like the Hindustan Lever, the Tata Consultancy Services (TCS) and Sun Pharma. The reason that India does not have a large enough number of big companies is a little too complicated. It might have more to do with the global configuration of markets at a very general level, and the competition between the powerful countries and the not-so-powerful ones.  

He brings back an old interesting idea that cities are better than villages because cities encourage innovation and they expose to people to new ideas. Singapore is a city and he proudly points to Singapore being the most racially diverse city anywhere in the world. But more important than the restating of the old idea of cities being better, he talked about open neighbourhoods in Singapore, where the advantaged – in economic terms – and the disadvantaged live next to each other, and there are common public spaces where they interact with each other. There are no “gated neighbourhoods”. Now, will this idea appeal to the meritocratic middle class in India with its visceral hatred of anything that shows signs of socialism? The well-off Indian middle classes want smart-cities where they can live in exclusive neighbourhoods.

It seems that those who have been bowled over by Shanmugaratnam’s speech have not heard all of the things that he had to say.