Reforms: beyond economics | The financial express

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One of the boldest statements in all of India’s budget speeches was inspired by a prime minister who, months before he took office, was retired, and delivered by a finance minister who was nowhere on anyone’s mind even a few months earlier. So when Manmohan Singh had his Victor Hugo moment on July 24, 1991 and said in his budget speech: “No power on earth can stop an idea whose time has come… Let the whole world hear it loud and clear, India is now wide awake”, it took time to soak in.

It was, however, a magical moment, no doubt, and India changed forever. Where does he have it?

Gautam Chikermane’s Reform Nation seeks to answer that question in a very readable book. Much of the background to “Historical Budget” is well known, but the book’s style of storytelling, expected of a renowned journalist, brings the pages to life. The detail and perspective would be particularly useful for those who reached adulthood after the 1990s. Reform Nation delivers on the author’s promise in the preface that the book is a reference on India’s economic history since independence.

Chikermane writes in detail about the series of announcements in the 1991 budget, from the virtual abolition of industrial licensing, openness to foreign direct investment and the reduction of the maximum customs duty rate to 150% at the establishment of a statutory independent regulator for capital markets, etc. Faced with a huge currency crisis, India, instead of keeping its reserves and courageously closing its doors, did the opposite: it opened its doors to foreign companies and capital and changed the grammar of its economy.

But the usefulness of the book lies in the details, the circumstances that ultimately led to the triggering of the reforms, which were carried out with varying degrees of success by successive governments. Students of the economic history of India will find the chapters on the plan of Bombay, successive industrial policies, etc. very useful. As the author says, in the period before and since independence, there have been eight major attempts to change the direction of the Indian economy. While most scholars have looked at the Big 5 until the Industrial Policy Statement of 1980, few have explored the Industrial Policy Statement of 1990. Besides government policies, there was a bold statement, and perhaps the only since, of private visionaries, commonly referred to as the Bombay Plan of 1944 and 1945, parts of which have injected intellectual vigor into India’s economic discourse.

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Although Reform Nation seeks to give the impression that all is well with the reforms under Narendra Modi, the fact is that despite the success of key insolvency and bankruptcy resolution reforms, the goods and services tax, etc., there were also many spectacular failures. the law, agrarian reforms, for example, reinforcing the conviction that a strong government at the Center does not necessarily and always ensure easy acceptance of hard reforms.

The author faults the opposition, particularly Congress, for opposing farm laws that were part of his own manifesto in the 2019 election. In an otherwise excellent book, the author should have avoided statements such as “India will have to look beyond Congress to pursue reforms. Politically too, India will have to seek opposition beyond the party”. The fact is simple: this kind of politicking is nothing new in India. The Bharatiya Janata Party’s strong opposition to insurance reforms while in opposition is also well known.

A better explanation for the lack of stronger reforms after the first was given by former Finance Secretary Montek Singh Ahluwalia: the first wave of reforms was much easier to conceptualize because the Indian economy was so constrained that it had become obvious. that the country had to change. The later stages of reforms are more difficult and require the establishment of institutions, which takes time. The 1991 crisis was undoubtedly not an isolated event. It was the culmination of many emerging crises and challenges, given the hesitant responses of the government of the time to bouts of unbroken fiscal profligacy.

Many readers will agree with the author that despite their many remarkable contributions, the poverty framework created and perfected by Prime Ministers Jawaharlal Nehru and Indira Gandhi stifled India’s economic policies until 1991. Politically, this framework adopted the redistribution of wealth while avoiding the creation of wealth. ; economically, it ended up redistributing little more than poverty, rent-seeking and corruption. Janata Dal’s government did no better.

India is currently at a crossroads. Thirty years after its reintegration into the global economy, it is a lower-middle-income country that has maintained its economic momentum for three decades, one of the few countries to do so. But the greatest economic challenge now is to respond to the aspirations of a young population by creating jobs with decent wages. All the necessary conditions for the next reforms are in place: scale, technology, politics and aspirations. However, the sufficient condition of an even greater conviction must be articulated politically and materialized economically.

The final part of the book will engage students of India’s economic policymaking due to insights into what economic reformers would have to deal with in the future – the triple trinity as the author calls it. While the former is the trinity of disruptions – technology, geopolitics and narratives, the latter is the trinity of major players – producers, consumers and regulators – and enables them to become catalysts for growth, prosperity and wealth. The third is the ability to negotiate the threats and opportunities of the first two trinities to deliver the final trinity – dismantling the colonial legal infrastructure holding India back, re-establishing India as one of the main linchpins of the global economy and become an influential decision maker. , security provider and be counted among those redefining the emerging new world order. In short, economic reforms in the future will have to go beyond economics.

Reform Nation: from the constraints of PV Narasimha Rao to the convictions of Narendra Modi
Gautam Chikermane
HarperCollins
Pp 374, Rs 799

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