Friday, August 25, 2017

Indian Independence: 70 years

Q1. What does the report card of the last 70 years read like – have we done enough to make India an economic power?
 A1: The first 30yrs of independence were wasted in socialist economic experimentation as Indian economy fell further behind the world (average). With gradual reversal of anti market policies since 1980 & then in 1990s we have started catching up with the Rest of the world. 
Q2. Where are we headed in the next 30 years, going by the present indicators?
A2: In the next 30yrs India will grow faster than the slowing Chinese economy, and therefore close most of the economic gap(%) which has opened with China in the last 30yrs.
 Q3. What specifics do we need to undertake if we are to become the world leader in the next 30 years – in economy, technology, strong institutions?
A3: Sustaining fast growth for next two decades requires both policy and institutional reform: The former includes Public Sector units(PSU), Public sector Banks(PSBs), land & labor markets to increase the flexibility & mobility of factors among different uses. Institutional reform includes legal, judicial, police, political & bureaucratic reform.
 Q4. Have the political leadership and the economic decision making and leadership served the country well in the last 70 years?
A4: Economic decision making by political leaders has been affected more by ideology than by data based economic analysis, showing what policies & programs solve problems & which create more problems than they solve. This started changing in phases: The first phase was in the 1980s, the second in the 1990s and the third has started in the 2014-15.
 Q5. Has economic democracy been concomitant with political democracy in the country?
A5: Constitutional democracy is the only system consistent with modern concepts of equal rights for all humans, and we must all work together to constantly improve its functioning. In my view it is a convenient evasion to blame all problems on bureaucrats & politicians. The failure is of Intellectuals, & all varieties of experts who propound on economic development policy. Their lazy use of ideology as a substitute for facts, data and analysis of problems, solutions & outcomes, shares much of the blame for bad policies and failed programs.
 Q6. How do you look at agriculture, manufacturing, services in the last 70 years? How do you look at their evolution in the next 30 years?
A6: The socialist control model of development of Agriculture and manufacturing through controls, public sector as drivers & domestic protection was a failure and is primarily responsible for Indian growth lagging behind World average till 1989. Import liberalization, particularly of capital goods(earlier restricted to USSR) in the 1980s and in the 1990s along with FDI was a major driver of productivity & growth acceleration in manufacturing. Agriculture sector remains shacked by controls and regulations, and consequently remains a repository of low productivity jobs. Two good monsoons provide a golden opportunity for abolition of import, export, trade & GM seed controls along with R&D, extension & spilling to spur productivity growth
 Q7. What have been the three biggest decisions of the last 70 years in the space of economic decision making?
A7: One, the removal after 1980 of production, investment, trade & Export-import (Exim) controls imposed during 1950-80, Two, the liberalization of the foreign exchange regime (which I recommended in a PC note in late 1980s & subsequently wrote the paper on "Dual exchange Rate" in November-December 1991), Three the constitutional amendment replacing many indirect taxes by GST
 Q8. What has been the role of the private enterprise in the overall growth of the country? What more can the state do to encourage private enterprises?
A8: It's a misunderstanding to think the License-Permit-Quota Raj has been dismantled. Controls & control mentality is deeply embedded in our political-bureaucratic-intellectual systems of governance. The "Ease of Doing business" (EoDB)  & "Tax Terrorism" elimination initiatives are another effort to identify & remove these oppressive controls. Agriculture & Education are two areas where controls remain oppressive & dis-functional? Both education & health sectors could benefit from modern, rational regulations

Q9. Can the right to food, right to health, right to education, and right to work become fundamental rights in the next 30 years, as India turns 100, in 2047?
A9: In my view the Indian adoption of "Rights approach" represents a gross failure to recognize and reform failed governance institutions corrupted by the ideologically driven LPQ Raj. The democratic constitution and our democratic polity defined development policy objectives have always focused on public welfare since independence. The reason they haven't been accomplished so far is bad policy, corruption & bad governance. Without reforming these there cannot be a sustained improvement in child malnutrition, health, education & employment creation. Passing of rights laws just serves to salve the conscience of Intellectuals.
 Q10. Where will be role of the private enterprise in the country, in the next 30 years?
A10: In a 2002 EPW paper I proposed a "New Development Paradigm." That Government, Private & Non-profit sectors must focus on areas they must and can do most effectively. Thus govt. must focus on Macro-economic policy, "Public Goods" & public goods infrastructure & social security nets, private sector on production & distribution of all goods & services, and NGOs/NPOs on social reform & social needs. I am hopeful we can reach this ideal in the next 20-25 years.
 Q11. Any concluding thoughts on when India turns 100 (in 2047) and where we are in 2017, when India turns 70?
A11: According to my definition of "Great Power" & "Super Power" India will likely become a Great power around 2035 (joining China in this category) and a Super power around 2050. Thus on India's 100th anniversary we will be celebrating the arrival of India into a Tri-polar World with two other super powers USA and China.

An edited version of this interview appeared in Business World on 24 August 2017, at

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