Narasimha Rao-Manmohan Singh reforms still strong

People still talk about the economic reforms introduced by former prime minister PV Narasimha Rao and his finance minister Manmohan Singh almost 20 years ago.

Market advocates do not dare to critically assess the liberalisation process for fear of reliving the socialist and licence-permit raj nightmare. But this is also intellectual timidity at its worst.

Yes, the critics have been unfair in more ways than one — not all that they had said have turned out to be true. Naysayers had said India would become a vassal state of the East India Company, but it did not happen. But the pressures of global market powers — the government of rich countries — and global market forces more than once impacted Indian choices. And it was not always for the good.

The Enron experience was disastrous. The American multi-national energy major went bankrupt at home, but did everything wrong that it could in India.
 
It lobbied with politicians all hues to get what it wanted, imposed conditions such as power purchase guarantee agreement that openly violated the terms of fair competition. In the process, it exposed how crony capitalism works.

Even after Enron sank in the US and in Europe, India was left paying Enron’s creditors in the country. The matter was sorted out, furtively, during the first term of the UPA.

The reforms had a more severe fallout: scams running into thousands of crores. Having said that it does not necessarily mean that the reforms have been a disaster, but it certainly means there’s something wrong with it.

It would be fair to say that market-friendly economists and prime minister Manmohan Singh — it becomes necessary to include him in the group — are being intellectually dishonest when they do not accept that the reforms brought with it a tale of woes along with the good tidings.

It is necessary to include Singh in the group and help him recollect his remark when the reforms had barely started. When the Harshad Mehta scam hit the stock market, Singh had said he did not lose sleep over markets crashing because of it.

The expanding billionaires’ club is testimony to a political cliché: the rich became infinitely richer. But there were new entrants as well: the millionaires who made it big. This group, the old and the new, became productive by spending more than they earlier had. Also, they started spending at home instead of spending money stealthily outside the country. The middle-class numbers too increased as people from the lower middle-class moved up on the social and economic scale.

Reforms did not ruin the poor as they were already living in socialist ruins. The number of the poor as a percentage of the population may have declined or increased depending on the economist talking about it after the reforms got underway. But the poor still constitute an uncomfortably large number of the country’s population. The national economic prosperity will remain fragile as long as this number does not go below the level of critical mass.

The poor are not among the critics of the reforms. They are coping with the situation to the best of their abilities. It is the Left ideologues and the bleeding hearts of the so-called civil society who have been railing and wailing against economic reforms. And these pro-poor activists have been able to arm-twist the government to usher in welfare measures because the government now has the money — one of the unintended outcomes of the reforms — to spend on the poor. But these welfare measures do not really help the poor. They still have to help themselves.