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When we are not the change

Putting off reforms won’t get votes. But it can badly impact India’s economic destiny.

india Updated: Apr 20, 2012 21:15 IST
Hindustan Times

The rise of an emerging economy like India is not pre-determined. It requires diligent policy innovation to maintain an economic gro-wth trajectory and constant debate to keep the political class focused on the future. If anything, history is littered with examples of countries who have even surpassed the growth figures India has notched up this past decade — and then squandered it away. At the heart of ensuring India doesn’t lose its way is the need to maintain the pace of policy reforms. This means not only those in the purely economic arena but also in education, health and even security policy. Which is why it’s been alarming to hear key government technocrats wonder whether such reforms are on the political agenda any more. A recent example has been the chief economic adviser Kaushik Basu concluding that major reforms are being held up by India’s present political setup. This partially echoed commerce secretary Rahul Khullar, who said the India of today resembled that of 1989, a period when necessary policy decisions were stalled until the 1991 balance of payments crisis broke out. This broad negativism was contradicted by the Planning Commission deputy chairman, Montek Singh Ahluwalia, who insisted that big bang reforms were still on the table.

But going by the recent record of the UPA, even sentiments in favour of minor administrative reforms seem based more on hope than calculation. The Manmohan Singh government wheels out a set group of explanations for its inability to keep the reform ball rolling. Its favourite is the “dharma of coalition politics” in which paralysis is blamed on unwieldy political partners. Then there’s the fear-of-scandal argument. This argues that a rampant activist Anna Hazare and Comptroller and Auditor General Vinod Rai have rendered both bureaucrats and politicians too fearful to sign on any file. And then there’s the unstable global economy. The Reserve Bank of India’s hefty repo rate cut has at least taken away another hardy perennial: high interest rates. All these claims have a kernel of truth in them.

However, they are also circumstances that existed in the past and are likely to continue in future. The reason why prime ministers are given authority is to show the leadership to solve these problems. There was a lot of this evident in the first UPA government but a strange disappearance in the second one. Ulti-mately, a policy of avoiding policy is self-defeating. Mr Khullar compared it to an ostrich burying its head in the sand. Mr Basu has previously warned that without reforms today, all the reasons for not doing them — such as inflation and slow job growth — will return with a vengeance tomorrow. The supply problems and infrastructure bottlenecks that are to blame for much of the recent price rise will only get worse. Putting off reforms will be of no assistance at the ballot box. But it could prove to be fatal to the ability of India to emerge from a history of mass poverty and take charge of its own economic destiny.

First Published: Apr 20, 2012 21:13 IST