Reforms weren’t allowed to reform enough -

Reforms weren’t allowed to reform enough


Thirty years ago, India broke free from the desi version of socialism. The rest is history. But it’s a history that could have been even more glittering, and India’s future now could have been far brighter. True, thanks to reforms, poverty, the insurmountable barrier of successive generations, began to recede faster than ever before. Poverty ratio went down in two decades from 45.3% of the population to 21.9%. It declined even in absolute numbers. We are today discernibly better off. But, did we do well enough? Not by a long shot.

China is the inevitable benchmark. In the first 30 years of its economic opening up, its inflation-adjusted GDP grew 17-fold. India, in contrast, saw a five-fold growth. This is not because India was burdened by democracy. Voters have repeatedly rewarded governments that brought about a material change in their lives. Indeed, there’s some evidence that incumbents retain power when they seek re-election at times of relatively high growth. But the political class never took these lessons to heart. Also, and across parties, leaders forgot the lesson that while in an unequal country, economic safety nets are crucial, it is high growth that gets you resources for effective welfarism. A stark demonstration of this folly is apparent today – GoI is scared to spend money for direct cash transfers in a Covid-hit economy because years of moderate to slow growth mean we don’t have resources.

One of politicians’ cardinal failures is that many reforms where the payoffs show up over time but costs are upfront have been postponed or attempted in a slipshod manner. Electricity and agriculture are two areas. Thirty years after reforms began, the power sector is a horrible mess. And rich farmers are holding the government to ransom to continue an expensive and inefficient price support system. That’s a sobering anniversary thought.



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This piece appeared as an editorial opinion in the print edition of The Times of India.



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