What the government should be doing in 2021-22 is to get the Indian economy back on track through incentives and financial stimulus, and not romance with economic reforms, says PARSA VENKATESHWAR RAO Jr.
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In 2021, we would be in the year that has seen three decades of India chasing economic reforms. The talk about getting the government out of business should have happened by now because that was what it was all about. The public sector was to be dismantled, and the domestic private sector was to be opened to international competition.
In the 1990s, the focus was on disinvestment and on letting the global players into the country. But it seems that the issues have not been sorted out. Disinvestment remains to be done and there are complicated reasons as to why it did not happen.
The attempt to sell off Air India show what the problems are. There are not too many takers for the ailing national carrier.
The problems are all not certainly the so-called socialist stranglehold of the economy and the country. But India’s top economists and policymakers talk about reforms in enthusiastic tones and pretend that market economies have no problems to speak of. This has been the case with the economists who have served different governments all these years.
They genuflected before the idols of the market economy and saw reforms as the pathway to economic salvation.
Soon after 1991, we saw the dizzying, in the context of those early days – of the Sensex beyond 4000 points which impelled the then finance minister Manmohan Singh to say that he does not lose sleep over stock markets.
Then the fall of Harshad Mehta happened. It was a case of rogue stockbrokers operating in the system.
ENRON FIASCO
Then Enron happened. The American power giant, Enron, came into India, and demanded power purchase guarantees. It also learned to play the political game as well, wooing the political masters of the day, the late Bal Thackeray of the Shiv Sena and the 13-day BJP government of Vajpayee in 1996. But four years later, Enron collapsed in the United States as it was found playing hooky.
The Enron top brass, who had once hobnobbed the powerful in the land, ended behind prison bars. It gave rise to a Broadway musical as a morality lesson in the free markets. Enron filed for bankruptcy. India was left holding Enron’s baby, the Ratnagiri power plant. And Indian government paid through the nose the liabilities left behind by Enron to the American consortium in India.
India’s top economists and policymakers talk about reforms in enthusiastic tones and pretend that market economies have no problems to speak of. This has been the case with economists who have served different governments all these years.
The 1997 south-east Asian financial crisis with its massive flight of capital, which then spread to Russia and Brazil, the 1999 dotcom bust and the 2008 subprime mortgage crisis that led to the pillars of the American financial world falling like nine pins are signposts of the wildly fluctuating global economy of free markets.
The Indian experts missed the crucial point that on the high seas of a free market economy, the winds could be fair, and they could be foul too. Instead of preparing the country, the people, and the governments, about wild market fluctuations, they were happy to sing the paeans of an open economy.
As far back as 2011, in his address to the UN General Assembly, then Prime Minister Manmohan Singh admitted in his own subdued way that the dark side of globalisation has not been recognised and sensed that the trade barriers would be going up.
EMPTY PHRASES
It is only after the full blast of Covid-19 hit the world and India, that Prime Minister Narendra Modi had on May 12 this year beat the drum of ‘Atma Nirbhar’ or Self-Reliant India and try to give a perverse metaphysical twist saying that the soul of self-reliant India is ‘vasudhaiva kutumbakam’ one of those empty phrases which sound magnificent but mean nothing in practical terms.
Neither Modi nor his advisers in the government have understood that the global economy had not recovered from the Great Recession that began in 2008 as the Great Depression began in 1929, and that in 2019 the world economy was struggling with low rates of growth. They have not grasped the challenges of a free market economy.
The fact of the matter is there is no alternative to a free market with all its attendant hazards. We cannot go back to a closed, autochthonous economy.
DROP DELUSIONS
The idea and slogan of self-reliant India point to a way back, not to a way forward. The ‘maya vada’ of Modi that India will be the hub of manufacturing for the world, and that all global investments must come to India and that India exporting to the whole world is the way to sustain the global economy, is the great Indian rope trick.
To believe that free trade in food grains will revive the economy is foolhardy. Indian exports are not going to grow any time soon.
Unless we desist from this delusionary thinking, we will not be able to come to grips with the grim reality of a post-Covid-19 world economy.
It is in this context that the reform rhetoric strikes a false note. Throwing open the food grains trade to the vicissitudes of the market is a good idea at the wrong time. This is time to lend a helping hand to all sectors of the economy including agriculture through stimuli.
To believe that free trade in food grains will revive the economy is foolhardy. Indian exports are not going to grow any time soon.
The exports in vaccines might jump but it is a temporary boom. It is not sustainable.
India should be able to increase agricultural exports, and it needs a calibrated strategy to do so.
The exports in manufactured goods cannot be accomplished by allowing foreign companies to use India as a base. Indian manufacturers should find their niche and capture the world markets on their own.
What the government should be doing in 2021-22 is to get the Indian economy back on track through incentives and fiscal stimulus, and not romance with economic reforms.
There is time for reforms, and there is time for holding back on reforms. Now is the time to hold back on market reforms of the three farm laws kind.
(Parsa Venkateshwar Rao Jr is an author, senior journalist, and commentator. The views are personal.)
