Indian economy’s fine. Thank you

After 400 years of blindly following free enterprise, many American citizens are storming the barricades and upbraiding the system.
‘It’s not fair!’ they are shouting. ‘It’s benefiting only 1% of the population!” they accuse. “It’s loaded in favour of the fat cats!” they abuse.

The overall unemployment in America persists stubbornly at over 9% but this hides the fact that youth unemployment is at around 20% (and in some locations, and among some socio-demographic groups, at twice that). One out of seven Americans is on food stamps (and about the same number suffer from ‘food insecurity’.)

All this ‘Hai! Hai!’ is creating utter confusion in the rest of the world, especially the Third World, and particularly India. Having jettisoned socialism in favour of capitalism, Indians are now wondering whether they took the right step, even though the country benefited by a quantum jump in GDP growth.

Up north, the Russians are afraid they might have jumped from the frying pan into the fire by giving communism the heave-ho and adopting American-style capitalism. And out there in the sands of the Middle East, the newly liberated Arab masses don’t know where to jump — left, right or back to feudalism.

The trouble with any ‘ism’ is that it is defenceless against a fundamental urge in humans — greed. To satisfy this, the natural tendency is to subvert the system for personal gain. Even in a so-called equitable system like communism, the commissars, with the advantage of power, got away with the gravy, leaving the bones to the masses.

The socialism we practiced was leveraged by a select few bureaucrats and politicians to milk the economy. The rest got rules and regulations thrown at them. In capitalism, of course, big fish eating little fish is the rule, so trickle down is only a theoretical construct. What reaches the bulk of the population is the pieces thrown off the high table.

In India, we have chosen a bhel puri of ideas from different systems. In some ways, it is a mirror of our people. There is  free enterprise in the form of the private sector, a streak  of communism in the guise of the public sector, a smidgeon of socialism in subsidies and distributive measures, red carpet for foreign investment, bureaucratic rigidities, price controls, regulators, stratified taxation, freedom of movement of labour, foreign trade controls and so on.

Does it work? Well, yes and no. The success is that in the last 60 years, it has created a sizeable middle class where virtually none existed. It has also substantially reduced the percentage of the population that was mired in poverty when we started as an independent country.

Of course, sceptics point to the large number of people who are still stuck below official poverty levels. They do not take into account the trebling of an already large population in the interim period. No other country, and that includes the erstwhile Soviet Union, has managed to lift so many out of the morass of poverty in so short a time without sacrificing democratic politics. Those who talk glibly about elevating everyone into the middle class should realise that the size of the cake we have at present is limited and distributing it evenly among the 1.2 billion will only result in a few crumbs for everyone.

Of course, we need to increase the size of the cake and distribute it more evenly. But jettisoning the present system, as some short-sighted extremist organisations and their purblind apologists suggest, is hardly the solution, unless they believe that chaos is better than the current set up.

There are those who are enamoured by the approach of the high-taxing socialism of the Scandinavian countries. Those nations do not face the humongous and extremely varied   population India has to manage. There is absolutely no similarity in the circumstances.

We have no option but to continue tweaking and fine tuning the middle-of-the-road system we have developed over the last six decades. This could include casting the revenue net wider, increasing efficiency of expenditure, plugging leaks in subsidies, more effective regulation, getting government out of activities where it is not needed, reducing bureaucratic  delays in project implementation, smoothening the pathways of investment, etc. 
And above all, let us not forget Anna’s call: “Down with corruption!”

The writer is a commentator on public affairs