Debating reforms

major initiatives, such as disinvestment pushed by it predecessor, may have helped push this narrative.

But have things changed since then? How do political parties view reforms? Are they as antagonistic to reforms as is made out to be? Or is their position a matter of political expediency?

The ungrammatically titled The Future Of Indian Economy, edited by Yashwant Sinha (former finance minister and arguably one of India’s better incumbents in North Block) and Vinay K Srivastava, elaborates on these issues.

Mr Sinha lists four possible explanations why economic reforms have not been accepted in India. But these explanations, to put it charitably, fail to pass muster.

At the top of his list is the colonial hangover.

“The East India Company’s experience is deeply rooted in the Indian psyche. So all foreign enterprises and foreign investments are looked upon with suspicion. Anyone who pleads for them, collaborates with them is also looked upon with suspicion,” he says.

Equating reforms with foreign investment is precisely where some proponents of reforms go wrong.

The much-needed factor market reforms or, for that matter, improving the ease of doing business are not needed to line foreigners’ pockets but to improve the productivity of indigenous firms and make them more competitive.

Later, Mr Sinha says pro-reformers have damaged the cause of reforms by always identifying economic reforms with foreign investment. He is guilty of doing the same.

Another popular explanation is that reforms have failed to impact the lives of the poor.

“Twenty-five years of economic reforms have made very little difference to their lives. If it does not touch the lives of the vast majority of people, they will have little interest in economic reforms,” he writes.

As a former finance minister, Mr Sinha must know that reforms over the past decades have helped lift millions above the poverty line. In fact, the pace of poverty decline has accelerated in the past decade. Yet he chooses to ignore facts that are visible even to the ordinary Indian. The debate on reforms — or the lack of it — in India needs to be examined at many levels.

First, disregarding the convenient rhetorical positions that the two major political parties end up taking, is there an actual difference of opinion on what constitutes reform? Does opposition to certain reforms fade over time? And is incrementalism a better strategy to adopt in the face of opposition?

On the argument of political opposition, consider the case of fuel pricing.

All parties have at some point clung to the administered price mechanism regime fearing an electoral backlash if crude prices soared.

Yet step by step, successive governments have dismantled this regime.

Opposition may exist. But it has been relatively muted. There has been continuity in policy despite the rhetorical positioning by the two major political parties.

In the case of land acquisition, however, little seemed to have changed. The current NDA government’s attempt to change the UPA’s law failed to get crossparty support.

These examples would suggest that perhaps Mr Sinha’s claim of political opposition and a lack of consensus on reforms is not as straightforward as it seems. The reality is more nuanced.

Mr Sinha also argues, and perhaps rightfully so, that “the constituency for reforms is limited to the government of the day, economic commentators, the corporates and the English newspapers.”

Perhaps it should be seen more as a failure to communicate the benefits from reforms down the line. Or of how the sharp growth in tax revenues post reforms has given the Indian state the capacity to launch massive welfare programmes such as the rural employment guarantee scheme.

On how to make reforms more palatable, Mr Sinha’s four-pronged approach is even less convincing.

“The content of the reforms programme must touch and seen to be touching the lives of the people. Provision of basic amenities especially for the poor in both rural and urban areas must be the starting point,” he writes. This is a motherhood statement that scarcely addresses the institutional infirmities in governance structures that act as hindrances to efficient public service delivery.

And although he advocates greater patience with the political process, he writes that “politicians and political parties are risk averse and would never like to put the existence of their government or their political future at stake for the sake of economic reforms.” Really? Even when reforms delivers jobs? Past reforms and challenges ahead Edited by Yashwant Sinha and Vinay K Srivastava Rupa Publications ~795, 361 pages