In 1990 I got posted to Patna from Kolkata where I was living with my relatives. On arrival there, I found that I lacked the two most essential things for living anywhere ~ a gas connection and a vehicle. There was no way I could get those ordinarily within a short time, but it turned out that one of the officials working with me knew an MP. From his quota, he very kindly gave me a gas connection and a scooter. The gas connection I got within a month, and the scooter after seven months. Friends congratulated me for getting those things at “lightning speed” ~ usually they took years under the License Permit Raj.
I was attending training abroad when Manmohan Singh presented his “Epochal Budget” on 24 July 1991. I had no idea then about its monumental significance. But when I had returned after a few days and went to the bank to encash my unused dollars ~ the daily subsistence allowance that the government had given me before I left, I got Rs 12000 more than what I had calculated. I told the bank clerk that it was a mistake, but she told me that the rupee had devalued substantially during my absence. It was a fortune in those days, and I decided to gift my mom a new refrigerator. To my utter amazement, I found that its price too was slashed by more than 25 per cent, as the import duty was cut. In those days of scarcity, it was unthinkable that price of an item considered as luxury could also fall.
I thought, well, something was perhaps changing. And what a change it has really been ~ from an economy of scarcity, to almost an economy of abundance, within a span of just 30 years, during which, as Mr Swaminathan Aiyar has noted, India transformed from being the “world’s biggest beggar for aid” to a “net aid donor”, from a country ravaged by hunger and famine to a major exporter of foodgrains, from one of the poorest countries on earth to the third largest economy in the world in purchasing power terms. The days when one had to wait in queue for everything from milk powder to car, when it would take years to get a telephone connection, when a visit to the bank to deposit money or to the electricity office to pay the bill required the time and patience of a chess grandmaster now seem almost unreal ~ never ever lived by us.
Our children would laugh to know that a company had to seek the government’s prior permission for buying a computer or importing a chip. From the days when it would take hours to get a trunk-call to materialise, that too if you were lucky, to this digital age when we can exchange messages in an instant all over the world with a small hand-held device ~ it is indeed a transformation no data can ever capture fully. We were lucky to have witnessed it within our lifetime, made possible only when the government loosened its control only by a little, from some sectors.
Imagine what miracle could have happened if it let go of its controls in totality and empowered the people to decide their course! Controls still exist over crucial areas that have colossal transformational potential – most important of which is education. The new education policy promised a whole gamut of necessary reforms and deregulation of education, but the promises are yet to be translated into action. We are very good at framing policies and consider framing synonymous with implementing, with the result that promises mostly remain platitudes.
Economy also remains mostly unfree, as indicated by The Heritage Foundation’s 2021 rankings of economic freedom, with India being placed at 121 out of 184 countries under the “Mostly Unfree” category, just one rank below Bangladesh. The parameters used to measure freedom were property rights, judicial effectiveness, government integrity, tax burden, government spending, fiscal health, business freedom, labour freedom, monetary freedom, trade freedom, investment freedom and financial freedom.
It is obvious that most of these require radical reforms, and even though the government has attempted to address some of these, those reforms are either stalled by vested interests as in agriculture marketing, or could not gather enough steam as in labour and land acquisition, where archaic laws and slow judicial processes continue to impede the prospect for growth. The second wave of the pandemic had exposed the pathetic state of our health infrastructure, which was systematically neglected and underfunded for decades. Without a robust health infrastructure, we won’t be able to protect citizens from a virus like Covid-19 and insulate the economy from its devastation.
With 65 per cent rural population, India still lives in villages; this has to be reversed along with improving the rural infrastructure for health, sanitation and education. Agriculture employs 55 per cent of our population but generates only 17 per cent of GDP, and about 660 million people are thus living on an average per capita income of about Rs 30,000 ~ a meagre Rs 2,500 per month. Our Human Development Index is among the lowest in the world, as are our educational standards and health indicators. Delivery of public services remains abysmal in quality and outreach. Electricity distribution and also the high cost of electricity remain major hurdles to attract investments and industries for accelerating growth.
To improve the efficiency and effectiveness of implementation, the antiquated structure of our civil services which encourages status quo and discourages reform and innovation need to be dismantled immediately. The generalised knowledge it rests upon is thoroughly inadequate for navigating the complexity of reforms in an era where digitisation and cutting edge technology have the potential to transform lives. The much touted grass-root experiences of our administrators at the village, district and state level do not equip one to deal with the demands of transformation in the 21st century where specialisation and expertise are the sine qua non of progress. Grassroots experience at the micro level can even be a disadvantage ~ it can blind one to the macro possibilities and conditions and their interlinkages, without which one can only move in a blind alley or go down a slippery slope.
All these remain the unfinished agenda of reforms. The zeal with which reforms were launched in 1991 became a great deal subdued soon afterwards. As politics took over economics, reform momentum slowed down considerably. The ruling dispensation considered welfarism a better option for catching votes. Since insufficient growth could not generate the necessary resources demanded by welfarism, weird measures like retrospective taxation had to be resorted to. The economy suffered while reforms continued at a snail’s pace.
That was when we lost the race with China, which had embarked on the path of reforms 15 years earlier than us, but even during the first decade of the millennium, people still talked about Chindia, in the expectation that we could catch up with our giant neighbour to dominate the global economic landscape together. We would have perhaps, had we not sacrificed the opportunity in our romance with the dole culture of pseudo-socialism promoted by leaders and their advisors whose visions were constrained by the narrowness of politics and short-term gains.
The crucial reforms were left unfinished. The new government had started the reform process in earnest, enacting many landmark legislations like GST and IBC, but could not revive a sagging economy and failed to create enough jobs. It also dissipated a lot of its precious energy and time in issues that are not even remotely connected with development and economic growth, the bottom line. Now the pandemic has intervened and wrought havoc on life and economy. Yet not everything is lost and phoenixes do and can rise up even from the ashes of catastrophes.
Last week Zomato, a food delivery start-up by Indian entrepreneurs incorporated in 2010 was listed in the bourses; upon listing its market capitalisation exceeded those of old giants like Coal India, Tata Motors and M&M. It is not the only one. In the pandemic-hit 2020, when established businesses were gasping for breath, 11 new start-ups, conceptualised by young Indian entrepreneurs educated in Indian institutions, entered the one-billion dollar club; in the first six months of 2021, 16 more joined the club. These are the new-age technology companies which have the potential to disrupt the market and trigger a virtuous cycle of creative destruction to generate abundant wealth for the economy, by making use of the digital ecosystem that has enabled their business models to be astounding successes.
While the license-Permit Raj and the Planning Commission era stifled and smothered all their talent and energy, reform and liberalisation have unleashed their potential. They are the children of liberalisation, not children of prosperity by virtue of inherited wealth. They have neither money nor political connections, in fact nothing except their creativity and dreams ~ something the LicensePermit Raj revelled in killing. In 1947, as a newborn nation we had made our first tryst with destiny, but our real tryst with it came in 1991. Our impatient aspirational youth are keen on having another tryst with destiny. We can no longer afford gradualism and incrementalism.
(The writer is a commentator, author and academic)