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Two decades of a misplaced idea

Two decades of a misplaced idea
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First Published: Thu, Sep 15 2011. 09 11 PM IST

Jayachandran/Mint
Jayachandran/Mint
Updated: Thu, Sep 15 2011. 09 11 PM IST
July 2011 marked the completion of two decades of economic reforms. The anniversary calls for an honest stock-taking of the gains and losses of the economic trajectory the country has followed in these years. An evaluation of reforms cannot be delayed anymore.
There are two ways of carrying out such an exercise. The first is the standard academic way of looking at the performance of key economic indicators. On this count, there is definitely some cause of celebration. The growth rate of the economy is now close to an average of 7-8%, higher than the 5-6% in the previous two decades before reforms. But more importantly, India is now the second fastest growing economy even as the developed world battles recession in various forms. In addition, there is an increase in our export performance, investment rates and—not to forget—the rise of the Indian firm as a global entity.
Jayachandran/Mint
Even if one joins this festival-like celebration, some level of realism and sobriety is called for. One basic argument in favour of economic reforms was that it would dismantle the licence-permit raj, permit fair play of market forces, and introduce a competitive spirit, leading to the unshackling of the economy’s growth potential. This, in turn, would also allow higher revenues to be generated for the government, which would then trickle down to benefit those left behind. While allowing for some increase in inequality, eventually there would be equitable growth for all sections of society.
If performance is based on these indicators, then the results are, at best, mixed. The Gini coefficient— a measure of inequality across households—in rural areas has gone up from 25.8 in 1993-94 to 28.8 in 2009-10. It has gone up from 31.9 in 1993-94 to 38.3 in 2009-10. The higher the Gini coefficient, the more unequal a society. The number of absolute poor in the country, which was 404.9 million in 1993-94 and 406.6 million in 2004-05 has come down marginally to 397 million by 2009-10. The average rate of employment generation over the period has remained at 1.3% per annum, much less than the rate of growth of population or the rate of growth of working age population. The last five years have seen this rate of growth of employment fall to the lowest level of 0.2% per annum.
Consider the “unshackling” argument. While the withdrawal of the licence-permit raj allowed growth of new economy sectors such as information technology, new forms of licence-permit raj has raised the fear of crony capitalism. This is much more obvious in the sectors relying on natural resources such as land, mines and spectrum than other sectors of the economy. These developments raise the issue whether growth has been due to the unleashing of the entrepreneurial spirit of Indian companies or has been facilitated by a renewed and refurbished version of the licence-permit raj, which the reforms sought to dismantle.
The other, non-academic, way to look at the reforms is to find out what citizens think about these far-reaching economic changes.
Recent months have seen public anger spill over and protests on various issues from inflation, land acquisition to corruption are now commonplace. In this context, the recent popular agitation on the issue of corruption reveals much more than what is commonly perceived. Reading it as popular resentment against traffic policemen and corrupt clerks in government offices ignores the real reason of discontent. Corruption is not only about getting your ration card issued or driving licence made, it is also about access to opportunities. The class of people now on the streets is largely young (probably with no memories of pre-reform India), urban and educated. This is the class that, in theory, should have benefited the most from the reforms. But it is the one that feels left out because of lack of opportunities in education, employment and good, paying jobs. They have not had their share of these benefits. This anger manifests itself in the manner in which these participants in the protests against corruption have conducted the debate on the Lokpal issue. They’re not interested, beyond a point, about the details of the Lokpal Bill. The debate is not about whether a Lokpal can eliminate corruption. It will certainly not because it is only treating the symptoms and not the disease. But the middle class does want a government which is fair, equitable and sensitive. But then, isn’t it what the reforms were supposed to do?
If the biggest beneficiary of the reforms feels left out and is crying for better governance then who has gained from these changes? It is interesting to note that one of the leaders of Indian industry, Ratan Tata, is on record about the nature of crony capitalism in the country today. Some of the biggest names in the private sector are under a cloud; allegations of corruption against big companies have made headlines.
The question posed at the start of the article can now be rephrased: If private companies did not gain, the young urban middle class is restive and the rural poor did not enjoy the fruits of growth, then who did? This issue cannot be evaded anymore.
Himanshu is assistant professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humanities, New Delhi
Comments are welcome at theirview@livemint.com
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First Published: Thu, Sep 15 2011. 09 11 PM IST