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Tuesday, September 22, 2020

Out of my mind: The right way for India

India has failed to industrialise the way its South East and East Asian neighbours have done.

Written by Meghnad Desai | Updated: February 14, 2016 12:03:35 am
india economic policy, narendra modi, india industrial policy, india economic reforms, Centre for Civil Society, CCS rankings, India think tank, india trade unions, public sector banks, indian economy, india news, indian express column, latest news Trade unions in India are anti-large factories and oppose industrialisation, be they the BJP’s Hind Mazdoor Sabha or the CPM trade union. (Source: Express file photo by Partha Paul)

Few people noticed that the Centre for Civil Society (CCS) was the only Indian think tank to make it in the top 100, coming 79th. In a country where to be of the befuddled Left or populist Right is de rigueur, the idea that a genuinely libertarian think tank can not only flourish but be known around the world is novel. The CCS has been championing free market economics, and the ideas of libertarians such as Friedrich Hayek.

India has no libertarian political party. Indeed all political parties from the CPM to the BJP and beyond subscribe to a sort of khichadi of economic ideas — lot of Statism, surreptitious support for private business (avoid wearing suit-boot), discomfort when attracting FDI, love for protectionism and subsidies for anyone who can take out a procession to stop traffic. There is no love of private business, no awareness where the governments get their money from nor any understanding of the market. Right and Left in India are defined along secular/Hindutva lines. In economics, the policies enunciated by the Congress in 1947 and updated in 1991 are still the only one going.

Narendra Modi is more decisive and more likely to implement policies but they are no different from UPA-II or NDA-I.

This has consequences. India has failed to industrialise the way its South East and East Asian neighbours have done. Trade unions are anti-large factories and oppose industrialisation, be they the BJP’s Hind Mazdoor Sabha or the CPM trade union. Forget labour market reform. Forget manufacturing growth. That has meant the persistence of poverty, especially in rural areas, where too many farmers are on the precarious subsistence margins. Indian political parties love the kisans to death, literally so. In a faster growing economy, farmers would have left their small farms and got industrial employment. But Socialism does not work that way. Industrial jobs have to be protected from others getting them.

Along the way India (or perhaps Indira) let the world’s leading textile industry crash out of existence. She nationalised the banks with the promise of financial inclusion, which 47 years later has still not been achieved. In the meantime, many banks are bankrupt but safely in public sector and continue to be small and marginal in international terms.

Despite all the dedicated efforts by governments to slow down growth, somehow it happens. How else would one explain the success of the IT industry except by the fact that it never featured in any Five Year Plan? Bollywood is another example. It was not until NDA-I that the government grudgingly gave it industry status (thanks to Sushma Swaraj). This confirmed its status as the only Indian economic activity with a global reach. Having industry status removed the gangsters from financing films and brought serious capital in.

Governments create entitlements without willing the resources to fulfil them. Food security, health care, RTE, were all created recently. But the food storage facilities, hospitals or schools lag behind.

The result is massive dissatisfaction among people, only exploited by opposition parties, which, as in the case of the Congress, created the entitlements in the first pace.

Some day someone will start a party with sensible economic policies. Even an existing party could reform its thinking. Is that too much to hope for?

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