India: Bees Saal Baad (translation, 20 years later): Complete the unfinished agenda of reform
Comment of the Day

July 27 2011

Commentary by David Fuller

India: Bees Saal Baad (translation, 20 years later): Complete the unfinished agenda of reform

My thanks to a reader for this excellent editorial today from The Times of India Hyderabad:
India has had 20 years of economic reforms. Its growth story sells well. Gone are the days it lived ship-to-mouth. Or choked industry with controls and red tape. Or served up gold reserves as borrower's collateral. In 1991 we embraced liberalisation. And India's never looked back since. Or has it? Nostalgia remains, on the political left and right. Some say reform has widened the rich-poor gap. Others decry corrupt "crony capitalism". These apologists for the licence-permit raj should turn the argument around. Where would we be if reforms hadn't happened?

For starters we would still be shackled to the "Hindu" rate of growth, instead of being the second-fastest growing major economy. Shielded from overseas competition, our industry wouldn't be world class. Our poverty rate wouldn't drop since the 1970s from 65% to 35%. Nor would millions have aspirational and entrepreneurial drive, from farmers buying tractors to corporate biggies acquiring overseas stakes. We always had welfare. What did the trick if not private sector-led high growth?

Look closer. The problems the anti-reform lobby highlights can be traced to inadequate reform, not excess of it. Every free society has its share of inequality because it allows for play of competitive forces. So, let's focus less on income disparity than creation of income-boosting opportunities. As for corruption, blame tardiness in systemic overhaul. And note the vicious cycle: the more common people are deprived of educational avenues or organised sector employment, the more scope for kickbacks-driven politics.

To change this reality, we need more reform not less. For farm output and incomes to rise, we need to modernise agriculture through retail and marketing reform. For workers' incomes and skills to increase, we need mass-scale factory jobs. Rapid industrialisation in turn demands labour and land reform. If rigid labour laws keep the bulk of the workforce shackled to low-paying, insecure jobs, drift on land acquisition revamp suits politically blessed land mafias, not industry or infrastructure developers. Clearly, access to land and other natural resources must be determined by market forces, not opaque systems of patronage that blight everything from housing to mining.

The more choice people have - whether to buy cellphones or access food outside PDS - the more transparent systems become. Choice isn't a hallmark of public sector monopoly but of private sector competition. Telecom, aviation or banking, sector after sector shows that to be true. So, India needs a second wave of reform: spurred disinvestment, tax revamp that creates a common market and investment-friendly policies for sectors ranging from insurance and energy to education. We've come a long way since 1991. We can go much further, much faster. Let's not be shackled by nostalgia now.

David Fuller's view India's vibrant free press is one of its great strengths. Increasingly, editorials of this nature speak for India's educated middleclass entrepreneurs and market oriented intellectuals, prodding - goading even - the government towards an agenda of private sector-led growth.

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