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Reforms in perspective

Eight Lectures on India's Economic Reforms

By T.N. Srinivasan

Publishers: Oxford University Press, New Delhi

WPrice: Rs. 150.

THE 100-page monograph under review is a collection of lectures (revised for publication) the author delivered at the Institute of Social and Economic Change, Bangalore two years ago, the basic thrust of each being to lay bare the movements in sectors su ch as industry, agriculture, fiscal developments, education and health, infrastructure, finance, and international trade and investment against the historical perspective.

The author _ who teaches Economics at Yale _ writes that the `historical context' is important because without understanding the pre-Independence origins of our development strategy until the 1991 reforms and the early political consensus in its favour, it is difficult not only what motivated the then Prime Minister Narasimha Rao and Finance Minister Dr Manmohan Singh to initiate `systemic' reforms in July 1991 but also why they were delayed until that time, and why there still is some serious resistanc e to reviving, deepening, and extending the reforms.

Needless to say, the lectures are not only informative but illuminating as well as far as analysis and prognosis are concerned. Each provides in a nutshell the basics of the subject under study, pointers being also included regarding future developments in the specific spheres.

The author is also an optimist, which is preferable anytime to being a pessimist, although a healthy optimist is one who should always have his feet firmly planted in the ground. To take an example, in the lecture on Fiscal Issues, Professor Srinivasan o utlines his views on the separation of powers between the Centre on the one hand and the States on the other. He is one of those who believes in restricting the powers of the former to subjects such as Defence, Foreign Affairs, Communications, Transport, etc (including ``a relatively circumscribed role of redistribution across States''). He believes that such a system will fuel inter-State competition leading to `a race-to-the-top rather than a race-to-the-bottom'.

A point of general interest that needs to be underscored is the remark (in the lecture on Agriculture) that ``in India all industrialists, farmers and organised workers expect the State to fully absorb any downside risks (be they from natural calamities or from policy changes) and the State has fulfilled their expectation at high cost''. However, ``in a reformd environment in which (the) upside potential has been raised, it is essential that some of the downside risks are borne by the beneficiaries them selves rather than by the State''.

In the postscript, Professor Srinivasan tries to make amends for the omission of the political factor in the eight lectures. In course of this exercise, he writes that while Mr. Narasimha Rao and Dr. Singh ``had the courage to realise the utter failure o f the development strategy pursued until then and the need for systemic reforms ..., unfortunately they did not try to mobilise public support fo reforms. It is true that the crisis forced their hands with respect to the timing of announcement of reforms . But more could have been done to generate popular enthusiasm.''

The observation is entirely factual but the basic problem is: how could this be done? Certainly not singlehanded, in the sense that both the former Prime Minister and his Finance Minister could have taken it upon themselves to go directly to the people t hrough radio and television. Apart from everything else, such an approach was simply not feasible because the audience was just too huge to be dealt with by this puny instrument.

The author's prescription could have been effectively implemented only if the Congress(I) as a whole took it upon itself to spread the reforms message far and wide through political means. What Professor Srinivasan perhaps is actually suggesting is that the people should have been appropriately `educated' on the usefulness and imperative nature of the economic reforms being tried out which, among other things, would have (at least to some extent) elicited greater support from the populace for the `hars h' economic meaures which had to be taken which, in electoral terms, would have meant greater acceptance of the Congress(I) reforms policy.

The point is consequently made that, in the absence of a political push for the acceptability of reforms, ``like all the Five Year Plans, the reforms appear to be more like `top-down' impositions, than a consensus from a `bottom-up' movement of ideas''. This is correct, but the point also needs to be made that the generation of `a bottom-up movement' is far more diffcult in the Indian context, particularly as regards an economic-policy issue compared to a political idea.

As fas as the latter is concerned, one is reminded of the late Jayaprakash Narayan's movement in the mid-seventies against Indira Gandhi which culminated (initially) in the imposition of the Emergency and (subsequently) in her defeat at the hustings in 1 977.

The interesting question here is: could J.P. have motivated the masses (in Bihar and elsewhere) on, say, the need to open up the economy to foreign business and commercial influence, the entire argument focussing on the inevitability of a collapse of the Indian economy if the reform measures were not taken quickly?

There is a further complication here, namely, is the reforms issue a subject that is close enough to the heartbeat of the people as is, say, Sarvodaya or trampling on the political liberties enshrined in the Constitution? Secondly, the situation becomes even more difficult if the specific idea to be sold argues in favour of greater foreign competition to be pitted against domestic manufacturing interests (big and small) which could, in the short term, hurt the interests of the small entrepreneur.

A related point which the author makes is that ``a reform agenda not based on political realities but on wishful thinking, or worse still on myopic political calculations, is not a reform agenda but a recipe for frustration''.

What, in fact, are the political realities currently prevailing in India? The answer is to be found in the difficulties being faced by the Prime Minister, Mr A.B.Vajpayee, is ramming through some of his reform programmes entailing hard economic decisions , most of which are characterised by compromises he has had to make to keep his NDA allies happy and contented.

To a large extent, `political reality' is determined by the quality of the politicians a country has at a given point of time, and there is little doubt that that quality has hit rock bottom today in the short history of free India. The upshot of this, i n terms of the argument advanced by Professor Srinivasan, is that if the reforms agenda was to be tailored to the existing state of political reality (so as to avoid `frustration'), there would be nothing left in that policy as far as `reforms' are conce rned.

Ranabir Ray Choudhury