Opinion - Editorials

Restructuring India

THE CONTINUED RESISTANCE to economic reforms at the State level manifests itself in many forms. The protests by State Government staff, the reluctance of Governments to restructure State Electricity Boards, the ad hoc tariff shifts for some utilities and the pruned investments in crucial social sectors are the more obvious ones. If the economic reforms process that commenced over a decade ago is to make some meaningful change in the manner the country is governed, it is time the States pulled together in a similar direction, though each may choose the path and the pace according to their specific needs. The variations in the progress of reforms at the State level persist as there are some fundamental issues that still have to be grappled with. Given the long-term interplay between economic policy and general living conditions, the difficulties faced at the political level are understandable. For, casting aside a framework that existed for over five decades is bound to be painful. Moreover, as that setting had a greater role for Governments in economic affairs and consequently led to the creation of a protective state, the apprehensions about public reaction to a withdrawal are bound to dictate political decisions.

At the core of the decade-long economic reforms process is the need for Governments, both at the Centre and in the States, to prune fiscal deficits. This, according to the common prescription, meant that the Governments would have to spend within their means, thereby triggering a process of re-defining the areas that would be under the direct purview of the state. It meant doing away, at least to a considerable extent, with the massive public sector built up to serve the twin purposes of sparking economic development and providing direct employment. But with the system being unable to bear its own weight, far-reaching changes were called for in 1991 which would see a much-diminished public sector. The importance of the States in making the structural transformation required is becoming more evident, especially when it comes to crucial areas such as SEBs, Public Sector Undertakings and other components of public spending, such as subsidies. States that have taken the lead to emerge as the more visible reformers have found the path difficult. Those that are compelled to do so on account of better financial management, for instance, Kerala, are finding the process thwarted by the constituents that would be affected. Some others, Tamil Nadu, for instance, went ahead with some reform measures, only to find that the political party in power had subsequently lost the popular mandate.

The more difficult part in seeing the reforms process through is to achieve it within India's democratic and constitutional framework. The Union Government's role in some important areas of this nationwide exercise has been one of expressing intent, bound as it is by the federal features of the Constitution. There is not yet enough evidence to support the most acceptable argument for reforms — a re-allocation of scarce resources for social sector development — making it more difficult for a reform-inclined State to take the process further. Added is the present situation of a slackening of demand, raising expectations of a greater state involvement to trigger economic recovery. A decade's experience has made it clear that the process is indeed a painful one. Cuts in Government jobs and the shrinking role of the public sector are yet to be accompanied by an effective social security mechanism, making the States' case for carrying out the reforms more difficult. For the process to make a qualitative difference in India's living conditions, it is important that the measures are not seen as those coerced by the Union Government, but accepted and implemented by the States.

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