All talk, little action on India's reform

By Nantoo Banerjee

NEW DELHI: A few months from now, India's much publicized economic reform program will enter the 10th year of implementation. The program is on. So is the attended publicity. Ten years are not certainly a short period in a nation's economy.

Hitler's Germany took less than 10 years to gear up its economy to militarily challenge the might of allied forces led by Britain, Russia and the United States and sustain a war on the soils of three continents -- Europe, Asia and Africa -- for almost six years until it was crushed.

Neighboring China achieved a tremendous economic progress during its first 10 years of reform between 1985 and 1995. In contrast, India is still debating on the trickle down effect of its reform.

Apart from making some popular multinational brands easily available to those who can afford them, the reform program has not generally impacted the life of industrial workers, farm hands, the unemployed, the undernourished and the poor.

The credit for initiating the current form of economic reform, designed more on the lines of the familiar IMF-World Bank formula, goes to the PV Narasimha Rao government.

But it was during the previous Congress regime under Rajiv Gandhi (1985-1989) that the government took the first major step to relax the rigors of the license-permit system, allowing monopoly houses like the Tatas and Birlas to expand their production capacities and businesses, private and multi-national entry in the power sector, rationalization of the import tariff structure and reduction in direct and indirect taxes.

So, in a way, India's economic reform process is as old as the one launched by the People's Republic of China. If the reform process has not yielded similar results in two of the world's most populous countries, that is because it did not follow the same pattern. The Chinese pattern is more focussed.

So far, India's has been, at best, a hotchpotch -- a confused mixture of ideas without any ideality.

Today, China has a lot to boast. It is the world's largest steel producer and consumer, the largest producer-consumer of cement, the largest producer of coal, the largest manufacturer- exporter of low-cost textile, the largest producer of foodgrain.

It has the largest reserves of US dollars outside the United States and the most effective state-sponsored family control (single child) regime aimed at drastic reduction of population.

And, its industrial infrastructure, comprising roads, power generation and distribution, telecommunication, and water supply, is fast catching up with the best in the rest of the world.

True, China still has a long way to go in terms of distribution of wealth and social justice among its vast population, an independent and reliable judicial system, legislations to protect the rights of workers in both the flourishing private enterprises in the industrially prosperous southern region and sick public enterprises all over the country, migration of farm workers to industry hubs, minimum wages, housing and health care.

In comparison, India's reform has achieved little. Detractors may have different views. Why, the country's television viewers have access to scores of TV channels (among the highest in the world)? What about such good things in life like branded scotch whiskey; designer clothes, watches, toiletries, global brands of refrigerators, dish washers, washing machines; Japanese, Korean, American cars (even German Mercedes) choking the country's narrow and poorly maintained arteries; mineral water, Coke, Pepsi, American fast food joints; cellphones, Internet access and more US dollars for pleasure trips abroad?

The list may impress a small population championing the present style of economic reform in India and wanting more (mange more) of such lifestyle stuff. But the general public is confused as the successive governments in the last 10 years have been trying to market their consumerist reform programs as the only hope to raise the living standards of the common man.

Even the Leftist-sponsored United Front governments headed first by HD Deve Gowda and then IK Gujral followed the pattern set by Rao and went full steam ahead to promote consumerism and cheap multinational brands in the name of economic liberalization. The National Democratic Alliance government, led by the so-called nationalist Bharatiya Janata Party, is no different.

The political masters do not seem to have time to sit together to think whether this if the right way to improve the living standards of the common man, which is the principal objective of any economic reform.

That India's reform program is moving rather directionless has been publicly stated by no less a person than Jack Welch, legendary super manager of the world's super corporation, General Electric of the United States, during his recent visit to India. He said: "Information technology is alright. But you need electricity to operate a computer."

He was shocked by the widespread power shortage and lack of physical infrastructure in the country.

Welch's observation would have made any welfare-oriented government sit up and think. While the Indian government did not react, obviously because a debate on the subject at this stage will only expose the administration's lack of vision and open a pandora's box for its critics.

A calamity budget may not quite help rebuild earthquake- devastated Gujarat, but it will be enough to put the entire economy into another calamity. It's time to go for hard options.

The writer, a former Jefferson Fellow, is a commentator on economic policy and business affairs.

-- The Statesman/Asia News Network