A new tag2 min read . Updated: 09 Nov 2007, 12:24 AM IST
A new tag
A new tag
It is good that the Indian government has decided to come out of the closet, though perhaps only momentarily.
During a series of presentations to unveil the Pravasi Bharatiya Divas 2008 this week, the annual jamboree attended by overseas Indians, the government has reportedly tried to promote the country as “the world’s fastest growing free market democracy". India, please remember, is officially a socialist country. The political class never tires of reminding us of this.
Perhaps too much should not be read into the punchline of a marketing campaign. India is not a free market country by any stretch of imagination. The highly regarded annual report on economic freedom in the world prepared by The Fraser Institute, a think tank in Canada, brings this reality out in stark terms. Its latest rankings (for 2005) place India at 69th place, among a total of 141 countries. It is on a par with countries such as the Philippines, Bolivia and Kenya. Hong Kong tops the charts, while Zimbabwe brings up the rear. India is somewhere at halfway house.
And why not? India does not recognize the right to property as a fundamental right. Our import tariffs are still among the highest in the region. The web of regulations restricting business, trade and employment has only partially been removed. The controversies surrounding special economic zones and the events at Singur and Nandigram show how the state can dispossess people of their private property with impunity. These are not indications of an economy that has unfettered markets. Despite the undoubted progress made in freeing the economy since 1991, we still have a long, long way to go.
However, the free-market tag does remind us how far India has moved away from its original constitutional framework. India was not defined as a socialist country in 1950; Indira Gandhi added that word during the Emergency. The right to property was recognized as a fundamental right in the original Constitution; it was deleted from the list of fundamental rights by the Janata Party government.
India’s rapid economic growth since 1991 is largely because of the economic reforms launched that year, reforms that pushed back the state and created space for the market. India’s future growth, too, will depend on how fast the rest of the economy is unfettered. This is thus a good time to look beyond a one-off marketing campaign and ask why India should not emerge as a free-market economy in a more substantive manner.
It would be erroneous to compare India with China in this context. China has a system of state capitalism, though it continues to describe itself as a socialist country. But since the state plays such a large role in the Chinese economy and the Communist Party provides the authoritarian political system with its legitimacy, it is very difficult to openly embrace capitalism.
India, on the other hand, has an economy that is driven by private sector activity and gets its political legitimacy from a Constitution that is based on liberal values. We should end this hypocrisy of calling ourselves a socialist country.
Prime Minister Manmohan Singh has often said that India should move to becoming an open society and an open economy, which to us is a euphemism for liberal capitalism. The news reports that ministers in his government are ready to defend the description of India as a free-market economy are alsoreassuring.
Let the debate begin.
Is India enough of a free market economy? Write to us at email@example.com