India last month completed 25 years of economic liberalisation with its Parliament passing a law on the Goods and Services Tax, one of the biggest reform measures. That it took nine years in making, and will take at least another year to operationalise, shows the pace of the Indian elephant. The delay was mainly because political parties reversed their stand when they moved from opposition to government and vice versa.
The ruling Bharatiya Janata Party opposed it for seven years and the Congress, now in the opposition, scuttled it for two. Both engaged in semantics and fiddled with details, using them as bargaining points. Finance Minister Arun Jaitley would be the first finance minister anywhere who opposed a measure and then piloted it to success.
Reforms began with the telecom sector and ideas on unhinging the economy from state control had sprouted during Rajiv Gandhi’s premiership in the late 1980s. But, reforms formally began in 1991. They were necessitated by serious economic breakdown when gold had to be mortgaged to the Bank of England, the implosion of the Soviet Union, who had been the main strategic ally, and skyrocketing oil prices following the 1990 Gulf War.
Rajiv’s assassination brought in P. V. Narasimha Rao, an astute but low-profile politician on the verge of retirement. He picked as his finance minister another unassuming person, but a sound economist, Manmohan Singh. Amid alarm over the unknown, distrust and opposition — even from his own party — Rao provided Manmohan with crucial political support, without which the reforms would have remained non-starters. The New York Times called Rao India’s Deng Xiaoping, comparing how the two socialists had turned pragmatic.
But Rao, unlike Deng, was working a fractious democracy. He was from India’s south and lacked the pull of Nehru-Gandhis Indians were used to. But the modern-day Chanakya unleashed a process that successive governments have continued. India does not fear reforms.
Later, to become the prime minister, Manmohan presented his first budget on July 24, 1991, quoting Victor Hugo: “No power on earth can stop an idea whose time has come. The emergence of India as a major economic power in the world happens to be one such idea. Let the whole world hear it loud and clear. India is now wide awake. We shall prevail. We shall overcome.”
A quarter-century on, it is possible to debate over those memorable words, the goals they set and the way and the extent to which they have been achieved. But reforms, good and bad, have changed India as never before.
Reforms opened the economy to global competition. It stressed on fiscal consolidation and discipline for macroeconomic stability. It liberalised trade and capital markets and dismantled the notorious licence-permit raj that hitherto stymied local enterprise.
India is indeed a major economic power altered in fundamental ways from the country that the Rao-Manmohan duo helped steer in new directions. With a gross domestic product (GDP) of US$2 trillion (RM8 trillion), it has edged itself among the 10 largest economies of the world. From two resident billionaires with an income of US$3.2 billion in the mid-1990s, the number grew to 46, with a combined wealth of US$176 billion in 2012. Their share of GDP rose from one per cent to 10.
Twenty-five years on, as the world’s fastest growing economy, India has also created unprecedented levels of wealth (however, unequally distributed), so that today, India is home to the third-largest population of dollar billionaires in the world. The ranks of middle-class Indians have grown tremendously, making India an attractive investment destination for producing and selling just about everything.
Reforms have surely helped cut poverty significantly, even as inequality has become sharper and worse. This is starkly evident in the social sector. Though literacy and enrolment rates in schools have gone up, the quality has suffered. India’s private health system has become world-class, but the public health system has suffered.
Droughts no longer cause starvation and death. There is more food and it is better distributed. But, millions still live below the poverty levels. People don’t have to wait for weeks to get a phone or gas connection or book a railway ticket.
But, India has also turned from a thrifty, self-reliant society to a consumerist one. Gated housing complexes and swank shopping malls have created numerous islands of prosperity amid poverty.
Levels of absolute poverty have no doubt declined, as have malnourishment and hunger. But, the question to ask is whether these have declined fast enough. Even neighbouring Bangladesh, with half of India’s per capita income, has been able to eliminate want and malnourishment far more successfully than India.
The joint family that glued the Indian society for centuries is cracking up. The farm sector is suffering as millions are being uprooted from the land they have inhabited and tilled for centuries. Factories and roads are replacing farms as India urbanises at a fast but haphazard pace.
Old values are vanishing. Not just the rapid pace of growing inequality, the more worrying part is the indifference and the absence of outrage among people of privilege about the monumental levels of preventable suffering that surrounds them.
Working and living abroad is seen as an achievement. Big is ‘in’ and small farms and factories are losing out to globalisation. Being loyal to an organisation is passé. Collective bargaining in farms, factories and offices is vanishing. Work culture is weighed totally in the employer’s favour. Its consequence is sporadic industrial violence.
It is no longer a sin to be rich, whatever the means adopted. Reforms have ended the ideology of the political left. Right is might — and might is right. An inevitable outcome is the current discourse on religion and nationalism that excludes some.
Individually and collectively, ideals are giving way to aspirations of material wellbeing, and little else. Piety and spiritual pursuit, part of an individual Indian’s samskara (imprint or upbringing) are now commercial commodities on the media. Morals are giving way to “pragmatic” pursuits.
This is the paradox of India’s reforms. It resembles the title of a Bollywood saga, Kabhi Khushi, Kabhie Gham (Sometimes Joy, Sometimes Sorrow).
Mahendra Ved is NST's New Delhi correspondent. He is president of the Commonwealth Journalists Association (2016-2018) and a consultant with Power Politics monthly magazine