The state in contentionhttps://indianexpress.com/article/opinion/columns/economy-development-2019-the-state-in-contention-5510964/

The state in contention

As global circumstances change, the role of the state will have to come again into contention. The nature of this debate will be very different from 1991, even though our intellectual habits are still framed by that episode.

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As exuberant hopes for the Indian economy fade, all political parties struggle to find a new economic paradigm (Representational)

India’s transformation since the 1991 reforms has been significant. The nature and scale of those reforms has been fiercely debated. The intellectual focus of that debate was largely on globalisation, deregulation and, as an afterthought, spending the gains of growth on health and education, something we did very poorly. Growth rates in the region of 8 per cent, declining poverty, give this story a political plausibility, even as it was unevenly implemented. But as exuberant hopes for the Indian economy fade, all political parties struggle to find a new economic paradigm.

As global circumstances change, the role of the state will have to come again into contention. The nature of this debate will be very different from 1991, even though our intellectual habits are still framed by that episode. Some of the trends outlined below are already underway. But their centrality in our intellectual lives will need to be recognised. As a provocation, here are some theses on where the debate over the Indian state will go.

One, the conditions of political legitimacy will require more, not less, taxation. India was hobbled by memories of extortionate taxation pre 1991; and the number of direct taxpayers has not expanded rapidly enough. This, combined with a rhetoric of competitiveness, and generalised distrust of the state, created a reflex move against taxation. Many will argue that India is not an outlier in terms of tax GDP ratio at its level of development. But there is no question that this ratio has to go up considerably if India has to meet the goals of macro stability, social investment, enhancing state capacity and political legitimacy. Indian elites have to understand that.

Two, the project of building an inclusive society will have to involve the creation of a much more ambitious income support architecture. Whether this takes the form of UBI (universal basic income) or not can be debated. The current agriculture crisis has brought home the fact that even on the most optimistic growth projections, India will not create enough jobs that provide wages for a life of even minimal dignity. It is a pipe dream to think that without ambitious income support a minimally inclusive or even politically legitimate society will be created.

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Three, the project of preventing further environmental degradation, and aligning India with climate change goals will require state intervention and mobilisation of political legitimacy on an unprecedented scale. To India’s credit, it has never denied climate change. Its national action plans have substance. But getting in place the kind of regulatory framework and infrastructure that can actually meet our pressing environmental needs will arguably be an even more complex challenge than anything we have experienced so far. So far there is no evidence that our existing political economy supports the renovation of our economic structures.

Four, the debate on state and industrial policy will open up again. Gary Becker’s claim that “the best industrial policy is none at all,” was a piece of ideological myth-making. The US was amongst the subtlest practitioners of industrial policy. But industrial policy had become a bad word. The sharpening of global tensions, more conditional free trade, the imperatives of environmental change, the indispensability of public research to development, and political control over new data orders, will make industrial policy inevitable. In India debates over globalisation have not factored in the debates over technological nationalism that are underway all over the world.

Five, the Indian state’s fraught relationship with crony finance will continue. The IBC process may hold out the promise of allowing more efficient allocation of capital. But the counter tendencies, the hue and cry over corruption notwithstanding, are still very powerful. Indian capital’s glee at the RBI governor leaving had less to do with a principled concern for the best interest rates; it was more a rear-guard action to prevent more dirty linen being washed in public. There will be symbolic prosecutions, but influential sections of Indian capital will continue to have both the Congress and the BJP by the scruff of their neck. With the domestic financial allocation system still quite broken, India will continue to approach globalisation with one hand tied behind its back by domestic cronyism.

Six, the Indian state will struggle with the health and education part of the social contract. In health, the focus, post Ayushman Bharat, will again shift to costs, primary care, and public health, areas where we are still least equipped. Education will be more of the same (perhaps without the explicit assault on public universities).

Seven, the heydays of the legitimacy of “independent” non-elected institutions are over. One post-1991 reconfiguration was the idea that significant policy decisions could be insulated from politics. The authority and prestige of non-elected “post democratic institutions” had increased relative to Parliament. This legitimacy has eroded, partly because of the performance of those institutions themselves. This does not mean that Parliament will recover its authority: It means continued institutional whimsy.

Eight, no political party will make serious investments in strengthening sovereign functions of the state, including police and judicial reform. Indian society will hope that informal modes of social regulation continue to provide a substitute for state institutions. Again, there is no political economy pressure for this reform. So on sovereign functions of law and justice, the Indian state will continue at its low level equilibrium.

Nine, the relative power of the state in relation to community groups will not increase. While a loss for the BJP will certainly provide relief against a vile majoritarian politics, “community” sentiments of various kinds will hold the cause of individual liberty and constitutional values hostage. In fact, if the repudiation of the BJP is not decisive enough, the state will be even more cautious in defending liberty. Peace may return but liberal values will still remain fragile.

Ten, Indian federalism will once again strengthen as a result of coalition politics, and the action will move to the states. But there will be no serious commitment to the subsidiarity principle and devolution of powers to panchayats and municipalities. Political regionalism will intensify, but as in the past, not in ways that threaten the Indian nation. Political regionalism is a form of deeper inclusion. But it will leave a trail of anxieties around nationalism in north India.

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A moment of transition is an opportunity to open up new questions. To borrow words from Langston Hughes “What happens to a dream deferred? Maybe it just sags/ Like a heavy load/ Or does it explode?” The Indian dream has again been deferred. It will take a radical rethinking of the state to ensure it does not explode, let alone sag.