The government must do more

IN A speech on Thursday, the Prime Minister expressed the view that if India begins to grow at 10 per cent in the near future, it can eliminate poverty in 10 to 20 years, ensure education for all, and greatly enhance employment opportunities. A 10 per cent growth rate and the elimination of poverty are within reach today. Since the reforms process began in 1991, Indian enterprises have done well at both manufacturing and services – which have great potential for employment generation – and there is much scope for further growth in sectors like construction, food processing, IT and tourism. The increasing strength of regional parties can enable reform and growth to reach the remotest corners of the country and ensure that inequities are removed. Moreover, an active civil society and the success of concepts like micro-finance and self-help groups can assuage the ‘trickle-down’ deficit.

However, none of this will yield fruit unless the government plays its own part right. For this, clarity of vision regarding what we want the reforms to achieve is imperative – do we just want growth, or do we want growth and development? Double-digit growth figures mean nothing if the benefits remain limited to the already affluent – such growth is economically unsustainable, socio-politically dangerous, and morally unacceptable. For more inclusive growth and development, the government needs to do a lot more – and not less, as neoliberal economics would have us believe. As Prof Jagdish Bhagwati, one of the world’s most famous proponents of free trade and liberal reform, puts it, India cannot rely on hopes of a ‘trickle-down’, it needs a “radical and activist pull-up strategy”. The areas that most need attention are obvious – employment generation, agricultural reforms, PSU reforms, taxation reform (to tax the rich more than the poor), competition policy, labour market flexibility, and so on. So far, change has often been incremental, whereby the government has only done more of the same thing – for instance continuing to provide wasteful subsidies, like those that actually accrue to rich farmers and hopelessly inefficient PSUs.

Perhaps there are lessons that India can learn from China’s new ‘five balances’ approach. China’s Communist Party, having achieved growth rates of 10 per cent over several years, has consciously sought to balance its priorities and correct inequities by privileging domestic matters over external, interior regions over coastal, rural areas over urban, society over economy, and nature over man. The dragon has clearly realised that growth, to be sustainable, must be widespread. In India, much ink has been split to discuss – and mostly denounce – the Congress’ re-adoption of its ‘garibi hatao’ slogan. Thirty years after the slogan was first used, its re-adoption contains an implicit admission of failure. However, the UPA now has the chance to learn from the mistakes of the past. With the economy is superb shape, it has a chance to make history. Here’s hoping it will succeed.