Sixty-seven years is not a long time in the life of a nation. Yet, even in this short span, India’s economy has seen it all… from famine to the Green Revolution, from xenophobia over multinationals to rolling out a red carpet for them, from hovering on the brink of defaulting in 1991 to becoming the fastest growing economy next only to China — it has been a roller-coaster ride since Independence.
The contrasts are striking too. With 56 billionaires, India ranks sixth in the world and is ahead of the U.K. and Hong Kong, according to Forbes . Yet, it also is home to a quarter of the world’s hungry with 270 million people living in poverty. The country boasts of swanky airports and flashy hotels, yet more than half its homes have no toilets. The contrast hits you when you fly into Mumbai, India’s commercial capital. As the plane approaches the airport, the ground below is a sea of blue, not from the waters of the Arabian Sea but due to the tarpaulin that covers scores of tin structures that people call home.
To be sure, there are many such contrasts and interestingly, these are not the result of experiments in capitalism. India went the socialist way after Independence but even after more than six decades, the gap between the haves and the have-nots has failed to narrow; some may say it has actually widened. Now, whether this is due to a flawed application of the principles of socialism or due to the inherent flaws in the philosophy itself is a matter for economists to argue about.
When the country opened its doors in 1991 to foreign capital and the economy was liberalised, many assumed — mistakenly — that it marked a decisive turn from socialism to a market-based approach. The markets were opened to foreign capital as was industry, multinationals were again welcomed and steps were taken to unleash the latent entrepreneurial spirit of Indians. The services industry, notably information technology, took off and became an example of what our countrymen could achieve if given freedom and support. It helped, of course, that this sunrise industry was left to its devices for a long time — the IT revolution had taken off when we got the first minister for information technology. The lesson: the lesser the government’s role the better.
Yet more than two decades after liberalisation, the country is still confused over whether it should be guided by socialist principles or turn to capitalism. The clash of philosophies between the “growth lifts all boats” camp of Prof. Jagdish Bhagwati and the “address inequalities first with affirmative action” approach of Prof. Amartya Sen highlights this.
With a market-friendly, right-of-centre party leading a majority government for the first time since Independence, the expectations from the BJP-led NDA government were of a shift in economic philosophy. Slogans such as “Minimum government, maximum governance” that Prime Minister Modi threw at voters in the campaign trail only served to heighten such expectations. The markets began to smack their lips in anticipation even as die-hard socialists and the Left mourned the impending swing of the pendulum from the Left to the Right. But has that happened?
The signals from this government in the last two months have been all about continuity with the left-of-centre UPA’s policies. At least till now. Proof can be had in the continuation of handsome allocations to existing social schemes and the addition of newer ones in the Modi government’s first budget. The only change has been in the schemes’ names — from that of the Nehru parivar to the Sangh Parivar doyens. Nothing wrong with continuity, except that it shows that we are still confused about which road to take.
So, are we setting ourselves for the ultimate irony — a socialist government from a Right party? Some would say this is only a reflection of ground realities. You can never really have an outright capitalist dispensation in a country with such striking contrasts in income and wealth. After all, doesn’t capitalism engender inequality? If that were so, how then did the current state of inequality come about despite the practice of socialism over the last several decades?
Cracking this conundrum and moulding an economic philosophy suitable for this country of contrasts is the biggest challenge for India’s first business-friendly government, or at least, one supposedly so.
