The Poverty Of Economy

In his appraisal Montek Singh Ahluwalia describes India's economic achievements since 1991 as "clearly impressive". He says: "The recovery from the 1991 crisis was exceptionally swift and the post-stabilisation period saw a significant acceleration in growth compared with the growth rate before the reforms". 'He would praise the reforms', you might well say considering that he played a key role in implementing them and managing the economy in the first two stages. But Montek's appraisal is not merely self-congratulation or government spin. His case is persuasive and he admits that all is still far from well, particularly on the poverty alleviation front where the expenditure of state governments on social services is declining. But Montek, like many economists, is better at posing the problem rather than providing the answer. How, for instance, can politicians be persuaded that they will never balance the books unless they reduce the numbers and increase the efficiency of their bureaucrats?

In his paper the American scholar Myron Weiner also stresses the importance of state governments putting their houses in order and suggests that central government largesse might have exactly the opposite effect. He says, "New resource transfers from the centre to the states - filling the deficit gap as it were - would have the perverse effect of reducing the pressure for fiscal reforms in the states."

The contributors all agree that the reforms need to be accelerated but the political scientists point out that this will not be possible unless they are accepted by the people of India, and that too by all of them, not just the middle-class. Ashustosh Varshney demonstrates that it is the very reforms which have implications for what he calls "elite politics" that have progressed, while those which are issues of "mass politics" have stalled. But governments, central and state, can't for ever postpone reforms like the labour market, and balancing the books which means cutting, among other things, subsidies. These are issues of "mass politics".

Varshney suggests that it is easier to reform the economy when India's attention is distracted by other issues. It is certainly true to say that in the early nineties the reforms slipped by under the cover of the Mandal and Mandir issues, but it would be nice to think that the next stage won't need quite such devastating distractions. For my money, the politicians will have to think of ways of selling reforms to the masses, which very few have even attempted so far. But that's no reason for despair. This book does warn of the problems which remain to be solved, but it also celebrates the successes achieved so far. That surely should provide the encouragement needed to solve those problems.