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It was mounted on the scale of another tryst with destiny, the 1991 shift of our ‘mixed economy’ in favour of the free market. “As Victor Hugo once said, ‘No power on earth can stop an idea whose time has come’," said Manmohan Singh, to bookend his budget speech of 24 July 1991 as India’s finance minister, “I suggest to this august House that the emergence of India as a major economic power in the world happens to be one such idea." It echoed a Nehruvian call to shape our future in a way that would make success inevitable. Scarcity amid poverty all around should have flagged failure, if not clunky overpriced cars sold as a privilege, but it took a couple of shocks to shift our economic strategy. The prospect of vehicles going without fuel, after a Gulf-war oil flare-up exhausted our dollar stash for imports, had exposed self-sufficiency as a flawed policy, even as the Soviet cave-in bared the weak-incentive jinx and low-efficiency trap of an over-centralized economy. It was clear we needed our resources allocated less by the state and more by market devices, with free prices acting as signals for a dynamic interplay of demand and supply to do that job. The idea of market freedom as a better—or less fallible—way ahead for India seemed unstoppable. Like an open mind, an economy once opened could never be shut, could it?

The reforms of 1991 were ‘big bang’ alright. If the rupee had to sweat and productivity to rise, the state had to cede space for the profit motive of private enterprise to play a lead role in our economy. Over-centralization of economic processes had proven counter-productive, said Singh. “We need to expand the scope and area for the operation of market forces. A reformed price system can be a superior instrument of resource allocation than quantitative controls." The ‘centrepiece’ of his 1991-92 budget was a deflation of our bloated state. So, a tighter rein on the Centre’s fiscal gap, backed by a plan to curb profligacy (effected in 1997) and offload public-sector units (by and by), was to go with a dramatic dropping of entry barriers. Abolished industrial licences threw open all but 18 industries to new businesses, with private players allowed to explore novel areas and the cost of capital given some flexibility. On the external front, trade restrictions were eased, with our currency reset for a partial float, even as we laid East India Company’s ghost to rest by allowing joint ventures with up to 51% foreign equity in 34 markets, drawing an influx of money. Exposure to global rivalry was its actual rationale, a policy-spur aimed at gaining a competitive edge. As Singh said, “It is essential to increase the degree of competition among firms in the domestic market so that there are adequate incentives for raising productivity, improving efficiency and reducing costs."

Thirty years on, that edge over competitors has not proven too sharp, though various other clamps have since been eased, Indian allocative efficiency has risen, and opening up has left us better off, overall. While our market reforms worked, they did not do well enough, alas, to perpetuate themselves. Capital is freer, but jobs are scarce and labour markets remain rigid. Wealth got created, but gross inequities persist. Startups bustle, but the economy had lost verve even before covid. Today, our market needs to be robustly rivalrous for it to emerge as once envisioned. Yet, visible-hand guidance of investment is back, even as import barricades creep up, regulation tightens in some spheres, and oligarchic anxieties arise. All said, we mustn’t let the spirit of competition get stifled again, lest our second tryst ends in a whimper.

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