Expert Speak India Matters
Published on Mar 09, 2016
Re-reforming the reforms regimen?

Budget time has traditionally been the time for the nation to take a closer look at the economic policy and philosophy – going beyond the nuts and bolts of the government-spending and taxation proposals. This time, as in recent years, the national discourse stopped with the latter, without reference to the former. So did the Budget. Yet, such a discourse has become increasingly relevant now than at the time the nation took to economic reforms without a second thought or a serious discourse.

This is the 25th year of economic reforms. Very few policy-makers, political leaders or public analysts seem to have remembered it, recalled it. Earlier, the nation was tied down to what is now dubbed – at times derisively – the ‘Nehruvian model’. Since adoption by the Avadi Congress in 1955, ‘democratic socialism’ was around only for 35 years. It was a crucial 35-year period, yes, for post-Independent India. But the nation is made to think and feel as if the ‘Nehruvian model’ had been around for centuries, and had been exclusively responsible for damaging the core of the nation’s economy, society and polity.

Whatever the pluses and minuses – or, only minuses – of ‘democratic socialism’, it came after years of discourse and debate. There was no consensus, what with the centre-right Jana Sangh and Swatantra Party, among others, finding faults even when none existed. Under a Five-Year Plan (1951-55) that totalled Rs 2000 crores for the whole nation, the private sector did not have the fiscal muscle to invest or the confidence of the investor to trust the stock market.

Nehru’s ‘Temples of Modern India’ came alongside the constitutionally-mandated ‘affirmative action’ of every kind. It is sad to recall that all those that now deprecate the ‘affirmative action’ of socio-economic kind were among those who unanimously passed the post-Independence constitutional scheme in the first place. Maybe, it had outlived its utility and relevance as India grew – or, refused to grow – for a variety of reasons, global trends and domestic corruption being only two of them.

Demographic opportunities

The problem with the ‘socialist model’ pertained mostly to management and implementation. Today, after 25 years of economic reforms, the same is being said – though reluctantly so – about the management or mismanagement under the market-driven model. Congress Finance Minister Manmohan Singh’s ‘systems failure’ and a BJP successor Yashwant Sinha’s ‘systemic failure’ in the stock and/or fiscal markets were a case in point even in the first decade of the reforms. With that the nation also forgot and forgave the Harshad Mehtas of the world – or, so would it seem.

The irony of the anti-subsidies reforms era is striking. Where a Finance Minister failed to present a popular/populist Budget, he had to go. P Chidambaram (Congress) thus had to follow Yashwant Sinha (BJP), out of the Finance Ministry. Where the Prime Minister of the day failed to rectify it all, he too had to go – and with that his Government. As PM, Manmohan Singh followed Vajpayee, possibly into sunset! It was clear. Political parties while in power, talk of reforms and subsidy-cuts but introduce precisely more of it, and rightly so for and in Indian conditions.

The prime ministerial compulsions for winning elections for the party and its allies weighed down on PM Singh than the freedom that he had enjoyed as FM under another Prime Minister. That is the socio-economic reality of Indian politics and polls. Going beyond the ‘demographic opportunities’ that the West suddenly started talking about in Indian terms, it’s the reality of Indian population and their poverty that holds the key to politico-economic philosophy and policy-making. The nation is yet to devise a way to counter/corner the same, not that it should at all try one – and fail and fail the nation miserably at that.

Into the 25th year, the nation is already faced with the third tranche of banking NPAs running into lakhs of crores of rupees. Because they are mostly nationalised banks, the Government is constantly being called upon to undertake re-capitalisation of some kind or the other. But for such government initiatives/compulsions, those banks might have gone bust very long ago – some of them, more than once. Poorly, India’s poor farmers and farm labour, or the urban middle class, is the defaulter.

Under the socialist model, ‘subsidies’ was a bad word to mouth. In the absence of modern-day terminologies like ‘affirmative action’, the Government was seen as doing what it was expected to do in a ‘welfare State’ model. Today, ‘subsidies’ is bad word, particularly when it comes to those that impact on the common man. Yet, the reforms era experience has shown, India cannot do without ‘subsidies’ of the same kind. If anything, every government that has cried wolf at ‘subsidies’ have offered more than it had taken back.

After the ‘reformist’ Congress had lost the 1996 general elections, Manmohan Singh, the ‘Father of Economic Reforms’ was the first one to call for ‘reforms with a human face’. His victorious coinage for his Sonia-led Congress Party in 2004 referred constantly to the ‘aam adhmi’. In between, Vajpayee’s BJP-NDA was talking about ‘India shining’.

‘Indian model’

The question is thus to accept the ground reality that is India and evolve an ‘Indian model’ of economic and fiscal regimen that takes into consideration, key and favourable elements of all existing forms of economic policies and philosophies. ‘Real India’ should be the touchstone for any such regimen to pass the test that the nation needs to give itself. It could still be reforms as they exist now, and is progressing or something different and/or hybrid. However, such a ‘mid-term review’, if it could be called so, needs to take place.

‘Economic reforms’ was a knee-jerk reaction to the fiscal crisis of the late Eighties. Whether the fiscal crisis owed to bad economic philosophy and policies or poor, indifferent and corrupt implementation is a question that the nation should have asked – but did not ask. Nor has it asked itself since, from the comfort levels of higher GDP, growth-rates, etc, but with limited growth in jobs and opportunities. Per capita income has gone up, so has prices. Money in the hands of the common man has gone down in real terms.

It’s anybody’s guess why the Rao-Singh duo had to confuse ‘privatisation’ with ‘globalisation’, even while ushering in the ‘reforms regimen’. This is more so, considering that the nation’s ‘domestic savings’ are still very high, and no reforms government has found ways to tap the same for development/investment purposes. At a time when Railways Minister says he would be borrowing over a lakh of crore rupees from LIC, it is anybody’s guess why the nation needs FDI in that very sector.

The less said about the defence sector FDI, the better, that too when there is palpable disinterest for technology-transfer after the demise of the Soviet Union. The ‘Vodofone case’ is a pointer where the foreign investor could thumb his nose at the nation, and there are defenders still of this ‘faith’, nearer home! That is to say, the more we get globalised, more complex the investors’ scheme of ‘cheating’ on the Revenue becomes, making Harshad Mehta a child’s play. All of it has shown the inherent weaknesses in the Indian system that the FDI scheme has exposed and exploited – but with no real way for the nation to be able to plug them. Rather, when the nation plugs one, another and yet another leak appears – and all in the name and protection of the law of the land.

Whether all these have any linkage with the increasingly visible social unrest remains to be studied and addressed. By conventional wisdom, any rise in prices above the 20-percent mark would trigger ‘social revolutions’. In the ‘social media’ era, it might have taken a different tune and turn. The vocal and demonstrably visible electoral path may be a welcome substitute. It does not close the door on traditional forms of revolution, youth unrest and militancy. Contemporary India continues to witness all this and more.


A welcome feature of the reforms era is a near-consensus, at least between the nation’s ‘Big Two’ parties, on the political philosophy and polices that the nation should follow. As in ‘capitalist’ West, where bipartisan cooperation on economic issues far outweigh programme-oriented distinctions and differences, in India too, the BJP-Congress divide is all about details – be it in the Land Bill, or over the GST Bill, where regional parties too want their views accommodated from a practitioners’ stand-point.

The initiative for a national discourse with economic and social infrastructure as its centre-piece still lies with the Government, a government that for the first time in 25 long years of economic reforms is in relative comfort zone in the more meaningful Lower House of Parliament. The nation can shy away from the challenge, and let the available opportunity slip by only at its future peril – as much over the short and medium terms as the long term.

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N. Sathiya Moorthy

N. Sathiya Moorthy

N. Sathiya Moorthy is a policy analyst and commentator based in Chennai.

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