“That government is best which governs least” – Henry David Thoreau, ‘Civil Disobedience’.
Thoreau’s essay, including the above aphorism, resonated powerfully with a then-young Indian lawyer in South Africa. Mohandas Karamchand Gandhi, embarking on his satyagraha movement, even translated the essay for Indian readers. Gandhi believed deeply in empowering the individual and the communities of India. His vision was of a vibrant democracy whose economic prowess would stem from the nation’s multitude of villages, which housed the majority of Indians. It was a fundamentally different world view than the Fabian Socialism of independent India’s first Prime Minister, Pandit Jawaharlal Nehru.
It took a near fatal economic crisis in 1991 for India to decisively adopt the Gandhian vision. The heavy hand of the state was lifted by the administration of Prime Minister P. V. Narasimha Rao, whose then Finance Minister Manmohan Singh set about dismantling the “licence raj.” Freed from the onerous shackles imposed by a dirigiste economy, India’s talented, creative, and innovative entrepreneurs swiftly demonstrated that they could match, and at times lead, the world. India became an international phenomenon thanks to economic liberalisation, and in the process regained its rightful place on the global stage.
The revolution initiated in 1991 has demonstrably enriched India and its people. Yes, there are still issues of equitable distribution of wealth and the creation of a fair and just society. But those are issues that face almost every nation in today’s globalised, hyperlinked and widening GINI co-efficient world. India is hardly alone in grappling with such issues, though its population of 1.3 billion presents major challenges.
To my mind, overcoming these challenges requires that India stay the course on economic liberalisation rather than returning to the regime of the “licence raj.” It requires even more fundamental reforms and massive investment in basic sectors such as infrastructure and education. It requires, above all, a change in mindset in both the public and private sectors, as well as society at large. Government no longer knows best (if it ever did!). Governments the world over should focus on what they are supposed to be doing anyway: Govern effectively. That means setting the rules transparently; implementing the rules fairly; creating a level playing field – then getting out of the way and allowing the market to work its magic.
Elements of the private sector, too, need to adapt to the rapid changes brought about by a world moving at warp speed. Prepare to compete, for competition is here, whether one likes it or not. Junk the protectionist mentality. Focus on the bottom line, of course, but not at the expense of the community.
At the risk of sounding immodest, let me elaborate with an example from the sector I am most familiar with – aviation. The recent government reforms on investment in the sector prompted AirAsia to partner with the redoubtable Tata and Bhatia groups to set up AirAsia India. We are convinced that bringing to India our ‘Now Everyone Can Fly’ message, realised through our low fares, will help fuel air travel, help boost local economies as well as the national economy, and help Indians fulfil their dream of taking to the skies in even greater numbers. As a low-cost carrier, we focus on secondary cities. And we believe there is immense potential in this strategy, because just the six largest cities account for almost two-thirds of domestic passengers in India, while 57 small airports account for just 14 percent.
But while we will do our part, governments and airport authorities need to do theirs too. Airport charges and government taxes on aviation fuel need to be reviewed and reduced. And there needs to be a major change in mindset in how airports are perceived. Back in the day, airports were regarded as projects of national pride and prestige. Hence, no amount was spared in building them. These expensive airports, seeking to recoup their cost of investment, then imposed heavy fees and charges on their main clients – the airlines.
But today, air travel is powered largely by low-cost carriers. Just look at Southwest Airlines in the United States, Ryanair and EasyJet in Europe, and AirAsia in the ASEAN region (almost 50% of intra-ASEAN air travel is now on low-cost carriers, and the percentage is growing). Low-cost carriers just want simple, utilitarian and functional airports, no need for marble tiled floors or granite countertops or premium lounges. These simple airports cost much less to construct, hence they can charge much lower fees – thereby attracting more airlines to operate there.
The reduction in quantum can easily be made up, even exceeded, by the increased volume of air travellers. According to one estimate, every Rs. 100 spent on air transport generates benefits worth Rs. 325 to local economies, while every 100 jobs created in air transport adds another 600 jobs in other sectors.
A specific example of the sort of revenues tourism can generate is this: AirAsia flew 1.2 million visitors to Bali in Indonesia in 2011. If 1 million of them were tourists spending three days in Bali, and if each spent $100 a day, that would be $300 per person. Multiply by 1 million, and our company directly contributed $300 million to Bali’s economy. In Indonesia, each dollar spent in the tourism sector has a multiplier effect of 10. So a single airline alone has contributed $3 billion to Bali’s economy in 2011.
Most of this money stays in the local community, while also generating massive revenues for the local government through taxes. A liberal economy not only provides consumers with more choices, but more competition only makes corporations better.
I am not advocating the “cowboy capitalism” that almost brought the world financial system crashing down in 2008, sparking the Great Recession from which much of the world has yet to recover. Nor am I calling for the unforgivable abdication of responsibility and accountability by government institutions and regulators.
What I envision is an India empowering and enriching local communities, thereby helping create – through a model of enlightened capitalism – a more fair, just, and equitable society that can sustain economic growth for generations to come.
In the spirit of Nehru’s famous ‘Tryst with Destiny’ and in keeping with the Gandhian ethos, the dawn of India’s liberal economy needs to be extended beyond 1991 to provide its talented, creative, and hardworking 1.3 billion people the opportunity to carve out their own economic destinies.
Tony Fernandes is the Group CEO of AirAsia. Before joining AirAsia in 2001, he was Vice President, Southeast Asia, for Warner Music.
This article was written exclusively for Gateway House’s Independence Day special report, ‘India’s Liberal Agenda.’ You can read more exclusive content from Gateway House here.
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