Vijay Joshi, an emeritus fellow of Merton College at the University of Oxford, is known to observe India with a critical eye. Joshi has co-authored several books on India and served in official positions here, including as special adviser to the Reserve Bank of India governor, and in the Union finance ministry. Recently in India to launch his book, India’s Long Road: The Search For Prosperity, Joshi took some time out to speak to Mint Lounge on the country’s record with reforms, his critical assessment of the National Democratic Alliance, and India’s economic potential. Edited excerpts from an interview:

Your book coincides with the 25th anniversary of the big burst of reforms in 1991. Your thoughts on this.

Actually, the reforms began well before 1991. (Therefore) 1991, in a sense, is the formal inauguration of a big reform, but a lot of quiet reform had begun even in the late 1970s and, to some extent, even in the 1980s. The ground had been prepared, the intellectual climate had shifted quite considerably during those years and then there was a dramatic moment with the collapse of the Soviet Union, dealing another blow to the respectability of the earlier strategy. There was a crisis. Though there had been some reforms in the 1980s, the fiscal management left a lot to be desired. Consequently, there was a macroeconomic blowout in the 1980s and this crisis provided the occasion for the (big burst of) reforms. It is hard to reform when there is no crisis; a big reform often comes after a crisis.

There are two things that jump out of your book. One, you talk about reforms by stealth and two, what you just said, that reforms are linked to crisis. Is India still caught in this mindset?

This still seems to be the case; reforms in India seem to be always of an incremental variety. In a sense, that is always going to be true, but the question is, what is the pace? I think we are still stuck (with this mindset), and I would include the present government. I would say that they are incrementalist with a vengeance. It is difficult to make bold moves (on reforms) in India, (though) they are needed—because India doesn’t have the luxury of time.

But if popular thought in this country doesn’t favour big-ticket reforms, it makes political and logical sense to pursue incremental reforms.

Well, that is a question of political leadership. The need for radical reform is so large. The question is, what is our objective? I mean—I set it out in my book—we have come a long way in these 25 years since 1991; but in the next 25 years we have an ambitious objective of, say, reaching a per capita income of the lowest in the high-income countries today, like Chile, Hungary, Greece or Portugal. That is not an overambitious target. To do that, it requires a faster pace of reforms than they have shown so far. If all that we can manage is the pace of reforms that we have now and if that is all Indian democracy can tolerate, then we won’t achieve the objective.

The one question that is being asked by this government constantly is that for seven decades India has tolerated various deficits—fiscal, skill, health, education, and so on. So what really went wrong? And why was this never addressed?

Governments generally are short-termist. They tend to drift because democracy has certain strengths and one of them is that they can take all the knocks and blows. They don’t have implosions, at least settled democracies (don’t)—I think India is now a settled democracy. They don’t have huge endogenous implosions. It is the flip side of not collapsing, in that they have the confidence that whatever is thrown at them, they will survive. So that creates a kind of lackadaisical drift and I think India is a classic example of that.

Your book is very critical of the Narendra Modi government. Can you elaborate?

I may update it slightly because there has been some movement since the book came out. I get the sense that recently, the government is showing more of a desire to do things. They have made a big push on FDI (foreign direct investment) though they are still very wary about doing anything about multi-brand retail. They made some moves on textiles, which I think are not revolutionary but are still significant.

There seems to be some desire for getting things done and perhaps they realize that their window for getting things done is not that large. They realize that actually reform and development are a better way to win votes than the BJP-RSS kind of strategy, so maybe there may be more action. On textiles, for example, I think it is a big issue since they are going to capture the space that China is vacating.

Is it a smart strategy to pursue when global trade is shrinking, and countries are becoming more insular?

There are a number of things one could say about that. The climate and the commentariat is always very focused on what is happening right now. These things can change. The atmosphere may not look so bad in five years. A lot of people talk of revolutionary changes in artificial intelligence, robotics and all kind of things coming; people have talked about this many times in the past. People have talked about this even when motor cars were produced, that there will be no jobs left. This has been a worry right through the ages.

Secondly, I don’t think even if robotics is going to come, there is a window of, say, 15 years before this kind of thing really hits; the question is, are we really going to make use of this window? There is no way that India can skip the whole stage of labour-intensive industrialization and go straight to becoming a high-skilled economy. We simply don’t have the wherewithal to do that.

But we also need the extra bit of doing what the East Asian countries did. Though world trade is growing more slowly, it is the question of capturing the share that China has. I mean, China has a huge share of world exports and they are going to vacate it because labour costs in China are rising extremely fast. Both Chinese investment and foreign investment in China is going to relocate to other countries. The question is, are they going to go to Vietnam and Bangladesh and such other countries or are they going to come to India? We should have filled that space a long time ago. We should have created the conditions a long time ago, but now the faster we can do it, the better it will be.

Pretika Khanna contributed to this interview.

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