Despite flattering images of high-tech Bangalore, India's economy continues to disappoint. On the eve of the general election Vijay Joshi says India can emulate the Asian tigers but not without transforming the stateby Vijay Joshi / February 20, 1998 / Leave a comment
Some of India’s achievements in the past 50 years have been remarkable. To the amazement of many, this vast and complex society has managed to protect national unity, introduce and preserve democracy and dilute traditional hierarchies. But economic progress has been disappointing. Despite the rhetoric of socialism and the pervasive state intervention in its name, poverty continues on a colossal scale. More than one third of India’s one billion people live in conditions of acute poverty; and more than one third of the world’s poor are concentrated in India. The goal of the next 50 years must be to achieve widely-shared prosperity without sacrificing democracy and civil liberties: the economic reforms initiated in 1991 constitute a beginning, but a long road lies ahead.
Redistribution alone cannot eliminate poverty. For the next two or three decades India needs a sustained increase in the growth rate of national income from the erstwhile ?Hindu rate? of 3.5 per cent per year?and even the rate of 6 per cent achieved since its recent reforms began?to 8 per cent or more. But fast growth is not enough either. If the poor are to benefit, growth should be labour-demanding, not labour-displacing. India?s population increase is finally slowing: from 2.2 per cent per year in the 1970s it has come down to 1.7 per cent and will probably fall further. Even so, for some time India?s labour force will continue to grow nearly as rapidly as before.
The brahmin fabian state
The problem of the post-independence era is that Indian policymakers acted with a mistaken conception of the role of the state. The state was extremely energetic in areas which were outside its competence. Detailed regulation of economic activity created massive inefficiencies and stifled entrepreneurial energies. At the same time, the state neglected to attend to areas where it should have been active. Most importantly, it failed to increase the labour power of the poor by providing them with primary health care and education. The cure for India?s ills follows from the diagnosis. The role of the state must be redefined.
It is now clear that India?s low growth rate was the result not of low saving and investment but of low productivity, and that the latter in turn was the product of excessive and inappropriate state intervention. The root of the problem lay in the philosophy of socialist planning which had a special resonance in…