Published June 13-23, 2022
A Victory and a Meeting
It was turning out to be another famous victory. He had delivered a third successive washout of the Opposition in the Lok Sabha elections. 2014, 2019, and now 2024. After ten years as India’s Prime Minister – or Prosperity Minister as he liked to call himself – he was now looking forward to the last unfinished business on his agenda. But even as the future beckoned, he looked back at the transformation of a nation.
May 16, 2014. After a surprisingly easy campaign and a comprehensive win that delivered the first Lok Sabha majority for a single party in a quarter century, he remembered the euphoria. Change was in the air. But what type of change? Indians had been denied prosperity by successive governments. He did not want that to be his legacy. He had visited many nations as a party functionary and Chief Minister of his state. He had seen rising wealth in the US and the Western European nations. He had also seen how some countries in Asia had lifted large swathes of their population out of poverty in a few decades. He had campaigned on the theme of bringing prosperity to the poor. The question that now had to be answered: what should he do to make it happen? For the past few months, he had immersed himself in the campaign without worrying about the specifics. As the last votes were counted, it was time to think ahead. He needed to chart a new course for making Indians prosperous.
The very next day, he had received a call from a well-wisher who had selflessly campaigned for him over the past three years. He still remembered the words. “Meet Lee Kuan Yew. Ask him how he made Singaporeans rich. LKY also influenced Deng Xiaoping’s reforms in China. It was a pity that India’s then Prime Ministers did not learn from the Singapore Story. Let’s not make the same mistake again.”
And so it was that a week later, he visited Singapore to meet the man who had built a nation that had become the envy of the world. For two days, he learnt from the master. Question after question. Each one answered with the same precision that had defined LKY’s governance. LKY spoke extensively about the principles of prosperity, and detailed the models that had worked across Asia not just in Singapore, but also in Hong Kong, South Korea, China and Japan. LKY gave a candid assessment of India’s problems as he saw them from afar and his interactions with past Indian leaders. The student had absorbed and formulated his plan. And so it was that the broad contours of his policy agenda were laid.
As the congratulatory messages poured on for his third successive Lok Sabha win, the decade-old Indian Prime Minister was living through the past. He knew the one big action item that lay ahead; this would require all his legendary persuasion skills. Even as he prepared the speech that would make his work over the past two terms almost irreversible by any future government, his mind went back to a similar defining moment almost exactly ten years ago.
Shortly after his return from Singapore after meeting Lee Kuan Yew, he had convened a meeting of a few economists from all over the world to dig deeper into the question he had often wondered: Why had some nations become rich even as India stayed India poor? Only after a deeper understanding of the past could he work through the roadmap for the future. He needed to get the basics right. The handpicked economists walked him through the history of the divergence in wealth creation across the world over the past two centuries. The Industrial Revolution that had begun in Great Britain even as their East India Company set about conquering nations began to change some and then many lives. The theoretical foundations were laid with Adam Smith’s book “The Wealth of Nations” which was published in 1776. The practical implementation happened in a newly independent America with its Constitution in 1789. From an understanding of these developments in the late 18th century through to the works of economists and philosophers like Hayek, Buchanan, Friedman and Nozick, the mental models of freedom and prosperity started getting formed.
So it was that on an evening in early June 2014, he made his famous address to the people of India. He traced the economic history of the past 250 years in India – how the British Raj had impoverished Indians, and sadly, how successive Indian governments after Independence had kept the same rules for exploitation and extraction in place. The result was that even as the skin colour of the rulers changed, outcomes did not – because Indians were still not free. He explained how the development of nations depended on the extent and nature of the freedoms that people have. Cultural, social and economic development required individual, civic and economic freedoms.
He contrasted India with China. Just 35 years ago, both countries were equally poor. But now, the average Chinese earns five times as much as the average Indian. For every extremely poor person in China, there are around 200 extremely poor Indians. How did that happen? How did China do that, and why is India not as successful in eradicating poverty? He answered: China succeeded because the Chinese gained economic freedom. India’s failure is because Indians don’t have economic freedom. And that is what he was going to do: make Indians free and rich.
He called his program for freedom and prosperity “Nayi Disha” – a new direction, a future of prosperity and possibilities. He laid out a plan for the journey ahead. He said that some changes will not be easy, but asked the people for their trust and patience. They had voted for a break from the past, a new future for themselves and their families. He outlined his two intertwined objectives for India’s transformation: Swatantrata and Samriddhi (freedom and prosperity). Central to this was the change in the role of government and its relationship with the people. No longer would the government be the anti-prosperity machine that had denied freedom and prosperity for past generations of Indians by intervening deeply in their lives and driving the best out of India.
The new government would get out of their lives and focus on what it should have done all along – maintain law and order and be a referee. The government would limit its role to enforcing contracts, preventing coercion, protection of property, and providing a stable monetary framework. It would not interfere in the economy. In short, be the “protective state” or the “night watchman state.” All agricultural, manufacturing and services would be produced in the private sector. The population would be highly urbanised. There would be public funding of primary health and primary education, and privately provided vocational and higher education. Social welfare would be provided by voluntary civic organisations. Domestic markets would be freed, and India would be completely open to international trade and investment. Liberty, non-discrimination, non-interference, limited government, and decentralisation – these were the principles for New India. Minimum government, maximum governance.
He also announced the Dhan Vapasi program: starting in six months, every Indian family would be paid a substantial dividend from the monetisation of the public assets that had been controlled by the government. In the past, these assets had been milked by politicians, bureaucrats and their cronies to enrich themselves. No longer. This was the public wealth of India, with every Indian having a share. The money from the monetisation would be returned to every Indian. This would give them the freedom to build their future lives. It would also bring into circulation the idle assets which would be another enabling factor for growth and prosperity.
He ended his speech by quoting Adam Smith’s words written in 1775: “Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.” He hoped the Indian people would respond to their newly found freedoms and chart out their individual paths to prosperity.
Thus began the journey. As people saw the benefits, they took it forward. What had been one man’s vision became the daily actions of a billion. All he had to ensure was that the temptation of intervention was resisted. It wasn’t that difficult, after all.
Prosperity Actions – 1
His first national speech as Prime Minister in June 2014 laid out the agenda: getting government out of people’s lives and their businesses. It started with Dhan Vapasi – the monetisation of public assets and the return of the wealth to the rightful owners, the people of India. The more he had dug into it, the more he had realised how large and deep the Indian state was. Control on land and minerals via government establishments had not only rendered many useful assets unproductive but had also opened the doors to massive corruption. Hundreds of public sector enterprises had created a deep patronage system. This was what had ensured that those in power enriched themselves at the cost of the Indian people. He began the process of dismantling this wasteful machinery.
The first set of public assets that was monetised was Lutyens’ Delhi. This was a British legacy — where the British Rulers lived lavishly at the expense of Indians. Indian netas and babus had continued to live as lavishly — again at the expense of Indians — as the British did. Now it was time for them to go. This was the action that drove his popularity sky-high. People saw him as a person “willing to walk the talk.”
He cut taxes – doing away most needless taxes whose only purpose was to run a bloated and wasteful government. He eliminated income taxes. The few taxes that remained were brought down to single digit percentages. The many GST slabs need to be reduced to a single tax rate. He thus ensured that not only was more money left in the hands of the people, but also that the government itself was forced to shrink in size. The lower taxes acted as a magnet for global capital, industries and talent – and this in turn boosted the creation of better paying jobs.
Since the public asset monetisation would take time, his government borrowed US$2 trillion from global markets – backed by the public assets. Of this, a trillion dollars was to be used for Dhan Vapasi for the first three years, and the other trillion dollars for funding infrastructure in India. He explained to the people that debt is not bad when it is used for funding activities that have a high return on investment. India was borrowing against the future wealth creation that would enable it to repay the loans. The world was awash with loanable funds. There were trillions of dollars invested at zero or negative interest rates. Therefore when India promised a positive return, loans were easy.
With money in the bank thanks to Dhan Vapasi and the tax cuts, people got the purchasing power that increased demand for goods and services. This increase in demand pushed industries to create jobs at an unprecedented pace. This created the prosperity flywheel.
Prosperity Actions – 2
He set about freeing sector after sector. The first and most important was education. As LKY had explained to him, no nation had ever become rich without an educated population. For far too long, the Indian state’s interventions had hobbled the sector. He got rid of the government controls. The free market was allowed to operate in education. Any firm, any corporation domestic or foreign – was now able to provide any educational services at whatever terms and conditions they saw fit. Dhan Vapasi had already put money in people’s hands, enabling them to pay for education.
The next was to get the cycle of job creation underway. For that, two things needed to be done: reforming agriculture and eliminating the bottlenecks that plagued manufacturing. India did not need half its population in farming – many of them were barely eking out a subsistence existence. Agriculture had always been plagued by government controls. What farmers buy, from whom they buy, whom they sell to, how they sell, at what price they sell – government regulations had starved farmers. Farmers could not even sell their land to non-farmers making exit from subsistence farming almost impossible. He removed restrictions on land use and created a free-market agricultural sector. He gave farmers freedom, saying that they did not need more subsidies which come with controls and constraints. Agriculture became more remunerative with the consolidation of small farms and fewer people, which drove mechanisation.
The path to prosperity and upward mobility lay in opening up the economy to get manufacturing going so that higher paying jobs could be created. He got rid of import tariffs. LKY had explained to him that a tax on imports is a tax on exports; open up the economy and let the magic work. He also undid the draconian land acquisition and labour laws. Initially imports rose but so did exports as firms took advantage of the low tax base and easing of land, labour and capital laws and rules which created the necessary conditions for businesses to grow. Surplus labour from the farms got absorbed in manufacturing and incomes started rising. Consumers also got the best products at the lowest prices.
He devolved power to the states and cities. This helped decentralised decision-making, bringing it closer to citizens. People’s problems were best solved at the level closest to them. India desperately needed new and better cities. As LKY had explained to him: the story of prosperity was the story of urbanisation; villagers do not become rich. By getting the states to decentralise power and funds to the cities, he ensured that the third tier of government started functioning. A slew of urban reforms made directly elected mayors accountable to the local populace and kickstarted the urbanisation drive.
Over the first year, he abolished most of the Central government ministries to right-size government. His big focus was on ensuring speedy justice. Police reforms at the state-level and judicial reforms at all levels ensured that the wheels of justice moved speedily, and were shielded from political interference. “3-2-1” reforms ensured that all pending court cases were cleared within 3 years, any new cases adjudicated within 2 years, and appeals settled within 1 year. This increased trust in the state and was another enabler for the growth of investments and job creation.
He removed reservations based on caste and religion. He said that all policies must follow the “generality principle” which mandated that all citizens must be treated equally by the government. He explained that discrimination created perverse incentives and damages social cohesion by creating animosity and resentment between groups. Past governments had actually encouraged religious conversion by providing privileges to specific religious groups. This was clearly immoral and must be prohibited. It was ethically wrong for the state to discriminate among citizens who are individuals worthy of equal moral worth and respect.
And so the foundations for a Nayi Disha for India were laid. The first year was hard work, but eventually very rewarding. Like free people everywhere, Indians too flourished. Once uncaged, no one wanted to go back to the licence-permit-quota-raj of the past. Wealth creation became a booming India’s new religion.
By the end of the first year, the engine of prosperity had started humming. The elimination of hundreds of regulations and high taxes unleashed the long suppressed entrepreneurial energy of Indians. The virtuous cycle of prosperity and poverty reduction started kicking in. The dependency of people on the government reduced; they realised that their future was in their hands. The Indian Dream was born; hard work could create a better life in a few years. This was a big change from years of dependency on government handouts, which while it gave immediate relief had led to long-term stagnation.
As Prime Minister, he became the communicator-in-chief. He travelled across the nation, selling his idea of New India with his Nayi Disha agenda. Freedom was a new phenomenon for most and took some getting used to. “You mean I don’t have to ask for permission? I don’t need a licence?” was a common refrain he heard. Every such comment brought a smile to his face. He listened to those who were fearful of the changes and told them that the cost of freebies the government had handed out all these decades had been their future. They had paid for every free grain and drop of water – many times over. The “perpetually planned poverty” schemes of the government only kept the politicians and their parties in power; they did not enrich the people.
Through his regular explainer videos on social media, frequent press conferences and weekly town halls wherever he went, he got the key message across: We are going to leave you alone, so you can get rich. This was counterintuitive to a nation used to being commanded from the top. And yet, as people everywhere have shown, when left free they rise and prosper. Incentives work, and there was no greater motivation than creating a better tomorrow for themselves.
Day after day, week after week, month after month, year after year, he hacked away at anything and everything that came in the way of freedom and prosperity. He wanted a second-term to ensure that the revolution kept going and the good work of the past five years was not undone. When elections came in 2019, his simple questions to people were: Are you better off now than you were five years ago? Do you want to go back to the bad ways of the past which caged you or do you want to stay free and get rich? The resounding success in the elections gave him the answer.
The Second Term
For him, the second term as Prime Minister was more about playing defence than offence. The changes had been done; it was about ensuring that they continued. The freedom he had brought to the people was still fragile; it had to be deepened and become ingrained. This needed time. Another five years and the memories of a mai-baap sarkar would be history. People would never again warm to a government that interfered in their lives and businesses.
Early in the second-term came the crisis that shook the world. Covid started raging through countries. Even as many nations shut down, he decided that any national lockdown would be disastrous for people, especially the poorest. He advised the elderly to exercise caution and shelter at home, and everyone else get on with their lives. With a population not willing to break the economic momentum that they were seeing for the first time in their lives, the people went about their lives with confidence in the healthcare system.
He could not stop all deaths and the successive virus waves. At times, some parts of the country were overwhelmed with medical emergencies. But he did not let the wheels of the economy stop because he knew that a restart and return to the status quo would be disastrous. The growth story was still fragile and any rash actions could set Indians back by a few years. The pandemic put a brief pause but did not substantially reverse the growth momentum. His belief in people was borne out. By letting people make their decisions, he had resisted calls for unilateral actions that would have devastated lives and livelihoods. The nation emerged stronger post the pandemic – the open economy ensured more investments and jobs.
After the pandemic subsided, he began looking ahead to ensure that the momentum of economic freedom was not lost. While per capita income had doubled in his first term and was on track to double again in the second term, India had a long way to go to catch up with the rich nations. Prosperity needed to reach every family. He restarted his travels and continued educating people, especially the young. They were going to be the builders of the New India; their work had just commenced. They needed to understand the power of freedom and markets. They needed to believe that tomorrow will be better than today. There was no room for complacency. The hard work ethic needed to continue even as incomes rose. Even as the age of superabundance beckoned, it would be the actions of Indian entrepreneurs that would create the “exponential” future.
The 2024 election victory had been a foregone conclusion. Indians had responded to their freedom. Innovations and new technologies built on each other, creating a better life for all. No one now looked at the government for anything other than keeping them safe and their borders protected – which is what it should have always been. Indians knew the world they were creating would lay the foundation for great prosperity and mass flourishing in the years to come, and no one wanted to change drivers mid-course. As a two-term Prime Minister, he had delivered on the agenda he had set out ten years ago. The electoral mandate was his for the taking.
India 2024 – 1
As he sat in his room in the summer of 2024 flush from an electoral hat-trick, India’s most transformational Prime Minister – the one who made Indians free and prosperous – reflected on his journey, the country and people that had been transformed, and his own road ahead. There was one big unfinished action that needed to be done for the nation, a personal decision to be taken, and a future roadmap to be crafted for the betterment of humanity.
For the first time in history, Indians controlled the destiny of their nation, not emperors, kings or kakistocrats. Freed from the chains of successive governments that had made doing business harder and harder with each passing year, the people had taken it upon themselves to use their newly found economic freedom to create better lives for themselves and their families. The Dhan Vapasi initiative had unlocked trillions of dollars from under government control and put wealth into the hands of the rightful owners – the people themselves. As sector after sector was freed up from government interventions, a virtuous cycle led to the creation of well-paying jobs and rapid economic growth. Technology accelerated the transformation as Indians built on the latest advances in computing and energy. What the West did over a century, what China took a generation, India had achieved in a decade.
If India kept its growth momentum, in less than a generation, the annual income of the average Indian would have gone up by a factor of 10. Their wealth would have increased even more. India by 2040 could become the world’s largest economy – ahead of the US and China. No other country would be producing more than India by 2040. This was something which was last true a thousand years ago.
What the 2014-2024 Indian Revolution did was to make Indians richer and put the nation on a path to greatness it had last seen a millennium ago – before the invasions by foreign powers began. With the advantage of its younger population, cheaper energy and piggybacking on technological innovations, India was powering ahead to become the production and innovation engine of the world.
What gave him great satisfaction was that India had done it as a democracy – building on a meritocratic liberal capitalism like the West as opposed to the political capitalism practised in China. India had consistently ranked among the top 5 in economic freedom in the past five years – quite amazing when its rank was 100+ a decade ago.
India 2024 – 2
Extreme poverty had been eliminated. The percentage of people engaged in agriculture had dropped from nearly 50% in 2014 to just under 10% — even as food grain production had risen rapidly with the removal of laws that kept farms small and farmers chained. Manufacturing and services were absorbing Indians in huge numbers. India now had 3 universities in the top 10 compared to none in the top 100 a decade ago. India’s patent filings – a measure of local innovation – had been steadily rising. India’s legal system was once among the slowest in the world, with cases taking as many as 10-15 years to move to resolution. Now, justice is delivered speedily – making contract enforcement a breeze.
Indian entrepreneurship had flourished. Indian startups were much sought after by global venture capitalists. While still not matching Silicon Valley, India’s multiple innovation ‘valleys’ had powered breakthroughs which had improved life not just for Indians but across Asia and Africa.
India’s predominantly rural economy of the past has been replaced with urban centres. Village life was now a tourism experience rather than a forced necessity. Infrastructure buildout had proceeded at a very rapid pace in the past decade. High-speed trains moved people rapidly between cities. High-speed networks connected Indians to each other and the Internet making physical location less relevant. India led the world in eCommerce adoption. Everything tech – fintech, edutech, agritech, and so on – had an India angle. The large domestic market and rapidly growing incomes had powered Indian companies to new heights.
Taxes in India were among the lowest globally. No tax exceeded 10%. India’s continuing public asset monetisation programme continued to attract global investors. The $2 trillion loan had long been repaid. The combination of a fast growing economy, young and aspirational population, limited government, rule of law, safeguards for property rights had all combined to make India the fulcrum for global commerce and supply chains.
Corruption and cronyism had all but vanished in India. The scope and size of government had reduced and so had its discretionary powers. India today reminds one of the US in the 1800s – where private corporations and philanthropy were the cornerstone of the growth acceleration rather than government spending. Economic growth, not political patronage, was what was top of the mind for Indians. There had also been a sea change in India’s politicians; because it no longer paid to be in politics, there was a new class of people entering politics – with an objective to safeguard the freedoms enjoyed by the people.
India 2024 – 3
What gave him the greatest joy was that it was all done by the people themselves; all he had done as Prime Minister was to lend a helping hand by initiating the transformation. The bottled up aspirations of Indians over multiple generations had unleashed the genie of extraordinary growth to make up for 75 years of stagnation and mis-steps. For those who still remembered the old India, this transformation had been one that few had imagined they would see in their lifetime. India had been an even bigger economic miracle than China.
India still had a long way to go. The average Indian’s income was still only a fraction of that of the average American or Singaporean. But, the foundation of forever growth had been firmly set in place. The baton of powering global growth had firmly shifted to India. The shackles of the past broken, the world was seeing a new India – open for business. As a headline put it recently, “India is the new America.” That could never have been said about China with its lack of political freedom. India’s economic rise has also served as a counterbalance to China’s expansion policies in Asia.
The story of how India became great was still being told. There was never a single factor. Just like when building a business, a huge number of things had to go right for ultimate success. Against the odds and against the tide after the pandemic of 2020 which hurt many economies after they enforced harsh lockdowns, India had done it. With its 1.5 billion population, India had the potential to set the world on a new course of technological innovation and sustain prosperity. That was because Indians were free. It was a word that was so misused and misunderstood. For long, Indians thought they were free because the British had exited the nation in 1947. Little did they realise that the new rulers who took over had kept the same rules that prevented them their freedom to choose.
If there was one takeaway from India’s remarkable story, it was that freedom is worth fighting for. There were many parts of the world where the human spirit and desire to be ‘free to choose’ was still suppressed by politicians and governments. The fight for freedom needed to go on. The tussle between what the few in power and the masses they govern was a constant one. All it required was one error and a nation could slide back into serfdom. Freedom was not the natural state of nations – control by the few was.
His ideas and actions freed a billion Indians from decades of central planning, state socialism and crony capitalism and lifted hundreds of millions out of poverty and unleashed a mass flourishing of entrepreneurship and wealth creation in India. But his work was not done.
The Road Ahead
Freedom was a treasure and it needed to be cherished. Indians had got their freedom and seen what it could do. But the spectre of collectivism and control was never far away. Keeping freedom intact was an ongoing project.
The freedom Indians gained had to be made irreversible. India needed new rules so no future government could undo what had been done in the past decade. No future government should be ever able to mess with the lives of people. India needs a constitution that was consistent with a nation of free people, not a constitution that continued the British colonial rule of subordinating Indians to the government. The 1950 constitution of India placed the government as the ruler and the people its subjects. This relationship had to be inverted.
As it stood, the constitution of India is never read by anybody. At over 170,000 words, it was too long to be read, and even if attempted, it was incomprehensible because it was written in legalese. India needed a constitution that was written in plain language that every literate person could read and understand, and was short enough to be comprehended by an average adult.
For this, he had drafted a Constitution for Free India. This is what he needed to present to the nation and get their support so it could create the Second Indian Republic. He had borrowed ideas from the best, especially the Founding Fathers of America. This modern Constitution itself was just a few pages of simple text that anyone could read and understand. It put the constraints on those in power, and ensured the people would never again be enslaved by one of their own. Only then would Indians be free to achieve their full potential. He would go out on the road again to persuade people and win their approval over the next few months.
Once the Constitution was approved, it would create a new governance architecture of India, with power finely balanced between the three branches of government. His job was then done. He would leave it to a new set of leaders to take the nation forward. August 15, 2025 would see a new leader and he would retire from active politics. He did not want to cast a shadow over the next government. The test of his work of the past decade was how well the nation handled the transition and the future.
And so it came to his life beyond. He would be turning 75 next year – and while he had some years of active life still left, he wanted to ensure the ideas of freedom and prosperity spread globally. More than a hundred nations still had their people suffering in poverty because of their governments and leaders. He was hoping to take the Indian success story and persuade some of them to change course and free their people. This would be his legacy: 1.5 billion free Indians and, hopefully, hundreds of millions more.
He was ready for the national telecast. “My fellow Indians…”