In his new book India Grows at Night: A Liberal Case for a Strong State, Gurcharan Das writes that “generally, leftists desire a large state and rightists a small one, but what India needs is an effective state with a more robust rule of law and greater accountability”. In a free-wheeling conversation with Patrale-kha Chatterjee at his book-lined study at New Delhi’s Jor Bagh, the Harvard-educated former CEO of Procter & Gamble (India), now a well-known author and commentator, talks about how he changed his mind on the role of the state and how India can offer an unique model of modernisation. Excerpts:

Q: What were you thinking when you called your book India Grows at Night?
A: The basic idea was “India grows at night while the government sleeps”. I don’t complete the sentence in the title because I thought it would be a little insulting. The Indian state also has a lot of achievements. I had begun to celebrate the idea that India was rising despite the state and then I came to a realisation that that was wrong. That India had to grow during the day and we had to fix the state. We had to reform our institutions — the bureaucracy, the judiciary, the police and Parliament. And only then will we become a truly successful nation. What imagery does the idea underlying the book evoke? For me, I could have used imagery — India has been rising with one hand tied. One hand is the people, the market. The state is the tied hand. At one point, I say that the nightmare of the Chinese leadership is: “What if the second hand got untied”. If India became the second fastest growing nation with one hand tied, or growing at night, what would happen if that hand got untied and it started growing during the day? That is the nightmare of the Chinese.

Q: At the start of the book, you describe yourself as a libertarian. But the book suggests your thinking has become a lot more nuanced. This is an interesting development in the backdrop of the hugely polarising debate about the role of the state and the market in this country. At what stage did you start feeling that it may not be worthwhile to junk the state?
A: First, a little bit about my roots. My father was an engineer in the government. He was also a mystic. When we were children, our friends went to Kashmir; we were taken to the ashram. I did not have the business gene, but I celebrated entrepreneurship. I may be the first member of my family to join the corporate world. I believed that a nation’s wealth, as Adam Smith said, could only be created by entrepreneurs. Like everybody else in the 1960s, I was a socialist. But then I suffered those humiliations of the “licence raj” and these are what I have recounted in my book, India Unbound. In the 1980s, I became a libertarian. For me, Diwali was 1991. But 20 years after reforms, when I was writing the book, it made me realise that what I had believed — that the state was a “second order phenomenon” — may have been wrong. I moved away from that laissez-faire position to that of a classical liberal. Now I am against a limitless state, the mai-baap sarkar of Indira Gandhi. I am in favour of a limited state but a state which ensures equality of opportunity. The state should ensure good schools, good healthcare. But I don’t think the state has to run hospitals or schools. It has to provide for them. I believe in strong regulators because strong regulators ensure that the corrupt are caught and that there is no crony capitalism. There is a distinction I make between being pro-market and pro-business. Pro-market means basically in favour of rules-based capitalism and not crony capitalism. This means if a business gets into trouble, I would let it die. I would not bail out such a business. If I was in America, I would not have bailed out.

Q: Goldman Sachs?
A: I would have let them all die. I am trying to say that reforms promote the market, they support the market but they don’t support all businesses. This distinction is so important now when I think of where I am.

Q: When did this shift in your thinking take place?
A: It started when I began writing this book. The book was born in Tahrir Square in 2011. I was invited by the Egyptians. I saw what bad governance can lead to. The Anna Hazare movement also resonated with me. Corrupt ministers had led to crony capitalism. Even libertarians do not accept that. Bad governance gave capitalism a bad name in our country.

Q: What is the one “big idea” in this book? And what do you say to young people in this country at a time when the mood is gloomy?
A: The one big message in this book is India needs to reform its institutions. If you reform your institutions like the bureaucracy, the judiciary, the police, Parliament, corruption will automatically go down. You also need administrative reforms. If a person is promoted after seven years, 15 years, 21 years, based on seniority, why should he perform? But I also make the point that economic reforms reduce corruption. When we had licence raj, every decision was made by a bureaucrat. Now all that is gone, but even today in a sector like mining, it is there. My basic point for young people is that they can make a difference and it is there in the chapter called “Middle Class Dignity”. A third of India is now this young middle-class. They have tasted some success. Even some political success. I say to this class: take the inspiration from Alexis de Tocqueville who wrote a book on Democracy in America. In the book, Tocqueville says democracy begins in the neighbourhood. Even one hour in a week of community engagement, volunteering will make you think of 2014. The big question — who will I vote for?
I say I have no party I can vote for because every party is a party of grievance; none is of aspiration; and this one-third of India are aspirers No party tells me your country is the second fastest-growing economy; no party is telling me a positive story. Mine is a cri de coeur (heartfelt cry) for a liberal party — either revive the old Swatantra Party — but the Swatantra Party had the baggage of landlords and maharajas. So maybe not. But the kernel of that party was Rajaji and Minoo Masani. I would like a party which is right of the US Democrats and left of the US Republicans. A party that is dedicated to reforms, both economic and institutional.

Q: Do you have political ambitions? Would you consider contesting elections?
A: No. No. I think it needs a younger person. If I was 40 today, I would do it. I am 69. I would raise money for that party. I would support that party. I would give speeches for that party but when it comes to running India, younger people are needed.