“People need to be allowed to do business” – The Arvind Kejriwal interview, part 2

February 1, 2014

(This article is website-exclusive and cannot be reproduced without permission)

By Frank Jack Daniel and Sruthi Gottipati

Arvind Kejriwal, Delhi’s new chief minister, stormed to power in the national capital in December on an anti-corruption platform.

His Aam Aadmi Party, or “Common Man’s Party”, uses a broom as its symbol to suggest it is sweeping the dirt out of politics. Kejriwal, a bespectacled former tax collector, spoke to Reuters in a wide-ranging interview a month after getting the top job, from the same modest apartment he’s lived in for the past 15 years. What follows is a lightly edited transcript of the second part of the interview. Reuters will publish the third and final part on Sunday.

(“Allow us to make mistakes, allow us to learn” – The Arvind Kejriwal interview, part 1)

On Monday night — surrounded by idols of the deity Ganesh (known in Hinduism as the remover of obstacles), books on Mahatma Gandhi and the Quran, activism awards, plastic flowers, and of course a broom — Kejriwal sipped a glass of warm water for his bronchitis as he spoke.

Kejriwal’s administration in January barred foreign retailers from setting up shop in Delhi, a blow to Prime Minister Manmohan Singh’s efforts to attract overseas investment and revive the economy.

Singh threw open the country’s $500 billion retail industry to foreign investors in late 2012, allowing companies such as Wal-Mart Stores Inc and Tesco PLC to own majority stakes in local chains for the first time. But companies must ask permission from local state governments before opening stores, a requirement that allowed Kejriwal’s government to block foreign direct investment, or “FDI,” in retail in Delhi. The state of Rajasthan has done the same thing.

Kejriwal’s government has also offered free water and slashed electricity prices, moves critics have derided as populist and dangerous.

Can you share some of your thoughts on the economy? Do you see the Aam Aadmi Party as a socialist party?
We actually don’t understand all that — socialism, communalism, capitalism, right, left, centre. We are common people, we have our own problems and we want solutions. If someone comes and tells me I have a problem of water, if someone comes and tells me that, hey look, there is a solution in Left, we will be very happy to borrow it from there. Or if someone else comes and says, look, there is a solution in Right, there is a solution in capitalism, we will borrow it from there. We are not wedded to any ideology.

Do you think the private sector has an important role to play in the Indian economy?
I think at a very broad level the government has no business to be in business. The government should leave business to the private sector. We have to encourage private enterprise and I think India is a country of entrepreneurs. In India, almost every person is a born entrepreneur — a rickshaw-wallah is an entrepreneur, a farmer is an entrepreneur. A farmer has such high risk-taking capability. A farmer is an entrepreneur, a rickshaw-wallah is an entrepreneur, a big trader is an entrepreneur. A big showroom person is an entrepreneur, an industrialist is an entrepreneur. This entire business and industry is shackled in the rules and regulations — we need to free them from all these rules and regulations. We need to provide them a free environment, honest environment, to do business. If we provide them a good environment, I think India will go ahead leaps and bounds. We have somehow put shackles on the private enterprise. These need to be removed. And people need to be allowed to do business, honest business and whatever impediments are there, obstacles are there in doing business, they ought to be removed.

How are you planning to do that?
All that you need are good intentions. In Delhi for instance, in the last few days we have had meetings on how to simplify the trade in Delhi, on VAT in Delhi, and they are good ideas. You talk to traders, they will tell you. You talk to the people, they will tell you. The wearer knows where the shoe pinches. So you talk to the people who are facing the problem and they will tell you ‘Sir, this is the problem.’ And you apply your mind and the solutions are there, it is not rocket science. Intentions of the people who are governing the system were wrong till now. If you have honest intentions, the solutions are there.

Do you support privatization of state-run companies?
Again, you are getting wedded to an ideology. If we say government sector is terribly corrupt, government sector is wrong, government sector is inefficient, so therefore we say we should privatize everything, I think we are asking the wrong question and the wrong answer.

What is the right question?
Government sector is bad does not mean that if you privatize it, it will become good. Because if you privatize it, and it’s a monopolistic sector, you will set up a regulator and that regulator is also a part of the government. He turns corrupt. So then the regulator plays into the hands of the monopolistic entity. So what is important is, whether an entity is in the government sector or private sector, you ought to improve governance. If you have good governance, you will have good services, whether it is in government sector or private sector.  If you have bad governance, you will get bad services, whether it is in government sector or private sector. So wherever it is possible to have competition, all such sectors should be thrown open to the private sector, there is absolutely no problem. But where you have a monopoly, I think there is a problem. What I think is most important is you ought to improve governance in this country, you can’t brush it under the carpet and say governance is not important. Because government is bad therefore we should privatize. I think that’s a wrong answer. We ought to improve governance.

Let’s take Coal India. It’s a huge state-run company. It could have more private sector participation. What would be your solution?
What happened to the privatisation? They tried to privatise it. What happened to that?

Tell me.
What is the moral of the story? The government sector was bad. They tried to privatise and they made a mess of it. So what is the moral of the story? The moral of the story is because governance is bad. Having the right kind of people in governance, having the right kind of people in Parliament is extremely important.

Your manifesto included not having FDI in retail in Delhi. Do you oppose FDI in retail at the national level?
Firstly, we are not against FDI per se, we are not saying FDI should not be in any sector. I think this is something that the decision has to be taken on a sector-to-sector basis. Can you give me a few examples where FDI in retail has been successful in some countries? In how many countries FDI is there in retail?

I think it depends on your definition of success. And it has become dominant in many, many countries.
Three or four arguments are being given in favour of FDI in retail. One it is said, it would provide huge choices for the consumers. I admit that. Second is that it will provide better prices to the farmers. I dispute that. If you can give me any empirical evidence, this is an evidence that can be taken from various countries. Third, is they’re saying, that on one hand farmers would get better prices, on the other hand, customers would get cheaper goods. If you could give me the evidence of that. My party did a lot of research. In U.S. itself, Wal-Mart is facing so much of resistance, right? It has led to so much of unemployment in many countries. In India, when we are struggling so much — there are a large number of people who throng my office every day and they say ‘please give me a government job’ — people are looking for jobs, people are jobless. We can’t have a model where people end up losing jobs rather than getting jobs.

It sounds to me like you don’t think it’s the right model for India or potentially anywhere else.
As far as economic decisions are concerned, no decision can be final. At different points of time, different decisions end up being right. For instance in China, FDI in retail has not played that much havoc because their manufacturing sector was thriving. So to some extent the people who lost their jobs when FDI in retail came, they migrated to the manufacturing sector. Secondly, when there was so much production in the manufacturing sector, they actually needed outlets to market and to distribute their products. So organized retail and FDI in retail actually helped. In India we are just struggling. If it leads to so much of unemployment, I think there will be a problem. So maybe at a future time when we have such thriving manufacturing sector and there is a huge demand from the manufacturing sector to have this kind of thing, we can think about it. But today I think there would be a risk if we do that.

What sectors do you think it could be useful in?
Let’s not go sector by sector. We’ll talk about it later.

It will depend. As I said in principle, we are not wedded to any ideology. Let’s talk on the basis of empirical evidence, and we will form our opinion according to that. As I again and again say, we are not wedded to any ideology. We have no problem. We are neither leftists nor rightists, but we want to discuss things on the basis of logic and evidence.

I’m just interested in where the thinking is going.
Thinking is neither going left nor right, we are right in the centre.

You’re an expert on tax. What do you think…
I think it ought to be simplified to a large extent. It has been made so complex, and in Delhi, we will try some experiment. Today only we had long meetings on can we do some very bold experiments in Delhi as far as taxation is concerned.

Such as?
I can’t disclose right now.

Why not?
Because we haven’t finalised it as yet.

You talk about simplifying tax policy. Will that be in line with the general service tax proposal?
That’s also interesting. That’s also important.

What about BJP talking about abolishing the income tax proposal. Is that a good idea?
No, I don’t think so. Indirect taxes are inflationary. As economy grows, indirect taxes ought to come down. And it’s only the direct taxes which remain the main source of revenue. And that’s the trend of modern developed countries so you can’t abolish income tax.

In the Delhi manifesto, one of the things mentioned was the need to end contract labour.
We’ve set a committee, they’re looking into it. You see what’s happening is a large number of people have been working for 10 years, 15 years, 20 years on contract basis. There’s no permanency of jobs and there is complete exploitation that is taking place. The government hires a contractor and the contractor provides you this much labor. The government pays 10,000 rupees per person ($160) to that contractor. The contractor in turn gives him only 6000 rupees ($96) or 5000 rupees ($80) and makes him sign on 10,000 rupees. The government cannot be party to this entire thing. It’s inhuman, it’s unethical, it’s illegal. We have to stop this. And if these people have been working for the last 10 and 15 years, why can’t they be made permanent?

How do you propose to finance bringing in so many more people? It obviously has a fiscal impact.
They are already being paid their salaries. It’s just that they’re being exploited. There’s a middleman who’s keeping part of their salaries. We need to remove this middleman. There will hardly be any additional costs.

How do you propose generally in Delhi to finance your proposals such as reducing the cost of power and issuing some free water. At least in the medium term, there will be a government burden on the subsidy, right?
How much is it? The total budget of Delhi government is 40,000 crore rupees ($6.4 billion). The subsidies that I have announced is 242 crore rupees ($38.7 million). Still there is such a hue and cry. I’m told that golf course in Delhi, the cost of that land is, someone told me, is I-don’t-know-how-many-thousand crores of rupees, the land that has been given to golf course. And it has been given to them at 15 lakh rupees ($24,000) a month. So when you subsidize the rich in this country, no one minds that. But when you say that we will provide subsidized electricity to the poor people in the country, or when we say that we’ll provide subsidized water to the poor people, all hell breaks loose. Why subsidy? Why subsidy? Why subsidy?

The argument against subsidies, for the rich or the poor, is they encourage excess consumption, they’re a weight on finances and make it harder to invest in longer-term stuff
We’ve considered all those objections and we arrived at the conclusion that this ought to be provided.

What do you think you should do about the golf course?
I just gave an example. I read it on the Internet yesterday. Someone sent this argument to me on the Net that this is what people are saying, etc.

So do you think you should raise the rents paid?
I’m not saying that.

Opposition and media have accused you of a class divide.
Aam Aadmi Party is one party which is classless, which is not gender biased. There are middle class people, lower class people, there are labourers, there are rich people, there are poor people, all kinds of people are part of Aam Aadmi Party.

What would your overall message be to investors? Should they be concerned that AAP will pursue populist policies?
Yesterday, the son of a very famous industrialist came and met me. And he said that many people are asking ‘What is your economic policy? What is your economic policy?’ and he said that I will define your economic policy in two words — and that is “honest politics”. Economics is not the cause. It is the outcome of honest politics. Good economics is the outcome of honest politics. He said there are a lot of people who say whether this government will provide development. He said governments do not provide development. It is the people who provide development. Government creates an atmosphere, an environment for doing business. Government provides you security. Government provides you justice. Government provides you safety. Government provides you corruption-free governance. And then the people blossom. The people do their business. The government doesn’t do business with the people. And he’s so right.

(Editing by Robert MacMillan | Disclaimer: This article is website-exclusive and cannot be reproduced in any form without permission)

After stunning debut, AAP scrambles to dispel doubts


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It would be interesting to hear more about the lack of gender bias he mentions, especially given his emphasis on jobs. According to the National Sample Survey Office survey conducted in 2009- 2010, the share of women employed on
was only 13.8% in urban areas in India (not sure what it is in Delhi but bound to be low)!

Posted by Carolvlassoff | Report as abusive

Interesting personality, tough chap, will definitely see some changes in New Delhi!

Posted by Inasu | Report as abusive

that is why anna said to u not to start politcial party…because then u have to administer the state when u become a cm…u you cannot be a cm…centimental man…u have to be a chief minister and belongs to all and control all and not only people who voted for you…just listen to guru otherwise this what u will land up…neither a neta or a servant…

Posted by radhupoy | Report as abusive

I think Arvind has given clear and unambiguous answers in this interview.
We must think above the stereotypes of left,right,socialist…
We should not be left or right but always be Upright…
Models are never fixed they are fluid…they must change from time to time.
Economic Solutions should evolve as per Time and Geography ,Population and
Traditions,Socio-economic conditions and History of the region.
Economic Models can not be copied from so called successful economies…they
are “Region specific”and “Time Specific” and have to be evolved continuously.
A model successful in one set of socio-economic conditions may prove to be
blunder in another.
Essence Of Economic Solutions lie in “Good Corruption free Governance”,FEARLESS
enough to take Path-breaking decisions.
And therefore having the Right kind of People in Parliament is Extremely
Extremely Important to Aim For “Honest Politics” in this Country
of 125 Crores.

Posted by AbhayOneIndia | Report as abusive

just talks !

Posted by DrRupani | Report as abusive