'Liberalisation Isn't Enough'

Almost a decade after economic reforms, the Indian economy is in a recession. Is it now time for a 'third way' in economic policy, away from the excesses of central planning, yet towards a controlled market?

My complaint against economic liberalisation is that in itself it is inadequate. Economic reforms must be accompanied by creation of social opportunities including elementary education, health care and land reform. But I argued for decades that there was a need to remove the licence raj of the pre-reform period. Economic reforms would have been much more successful if there was creation of social opportunities. This, however, is not to say that the present difficulties are because of the lack of social opportunities. The present difficulties are because of more short-term causes.

But increasingly all economic ways are now 'third ways'. No country can go in for a full-fledged market economy. Nor can they opt only for government planning. The US and European economies are based on the market but contain strong elements of government policy. The US has an efficient system of regulation of monopolies. European countries have well-developed national health care and social security. In China, market-based policies are combined with government controls on different areas of economic policies. All these are third ways. The real issue is the nature of the balance. It's important not to become an ideologue, either of the market or of state intervention. India needs a rigorously functioning internal and international market. The main thing to avoid is dogmatism.

How is the balance to be achieved?

There's the market, there's the government and the nature of society. The market is important for wealth creation, use of contemporary technology, for modern methods of production. There's no way India can prosper without the market. But there's need to see that the opportunities of the market are not confined only to the privileged section. Those who aren't literate, who don't have access to health care or economic resources may get relatively little out of market opportunities. Of course, education and health care are not just complements to economic growth but crucial on their own. But in the context of economic expansion there is need that all sections of the community are free to take part in the market. When the economy is opened up, those who have education and access to higher technology can benefit immediately. The bulk of the people could be left outside. Some of those who praise the achievements of East Asia don't seem to take into consideration the long years of preparation they had in the creation of social opportunities. They had high levels of literacy, good basic health care and nutrition, completed land reforms and so on. Japan, South Korea, Singapore and China made use of well-developed social opportunities along with market-friendly economic expansion.

What role does society play?

I've been a supporter of Indian democracy for a very long time. I place myself on the Left but used to be shocked at the way in which the Left has often viewed Indian democracy as a 'sham' democracy. Democracy is a great asset both on its own and as a supplement to the market and to the government. The market is guided by the profit motive which sometimes works well but at other times needs to be supplemented by democratic demands, for example, in fulfilling needs of health care or basic education. The government can do these things but it needs a political incentive. Elections, opposition parties and public debate are not only important for political processes but can also contribute to the making of economic policy. Public discussions can also challenge conservative value systems. For example, gender inequality in India is quite extraordinary. It is part of a historical tradition. Even though legislation is important the change must come, to a great extent, from rethinking traditional values. The experiences of other countries as well as diverse experiences within India can help.

Do you think the problem of Indian liberalisation has been that there's been no social and public dimension?

In a sense, yes. However, it's not a problem of liberalisation but of governance. I disagree with the conventional Left position that Manmohan Singh was wrong to go for economic reforms. He was being visionary. But more radicalism was needed, not just economic reform but also much greater creation of social opportunities.

But a lot of Left attitudes in India are a hangover from the past. Left politics has suffered from not being adequately critical in the past of the failings of the Soviet Union or China and also for not paying adequate attention to the market transformation in China. I admire the commitment of the Left to social justice and equity, but the Left has to pay greater attention to the contributions of democracy and the market.

Yes, I encountered this when I first began to work on issues of gender equality in the late '70s. When I tried to draw attention to the extraordinary lack of interest in women's welfare and to the major inequalities in economic, social and health dimensions, one counter-argument I faced was that I was voicing 'foreign' concerns. That Indian women don't think like that about equality. Well, I would argue that if they don't think like that they should have the real opportunity to decide whether they would like to think like that. There must be freedom to think differently and to go against traditions. Sometimes the anti-western attitude serves as a cloak for an unreasoning defence of traditional attitudes which are in need of critical scrutiny.

You don't agree with the BJP version of India; do you think it should govern?

I'm a democrat. I would never vote for the BJP but I defend its right to participate in Indian democratic politics and if successful, to form the government. But my vision of India is not that of a Hindu India. India has never been just a Hindu country. This was true even before Islam arrived in India. Much before AD 1000 there were large settled communities of Christians, Buddhists, Jains. The greatest Indian monarch in ancient times was a Buddhist—Ashoka. Bengal, in fact, went from Buddhist to Muslim rule with a very brief Hindu rule in between—the hapless Sena dynasty. Also many people who belonged to a Hindu society were not particularly religious in their works. Many works in mathematics, astronomy, linguistics and epistemology are not 'Hindu' in any particular sense nor is Kalidasa's poetry or drama. Kautilya's Arthashastra is not a specifically Hindu document.

How do you react to the nuclear tests?

As a loyal Indian citizen I think this was a serious mistake which was both ethically and politically wrong. This isn't to deny that the established nuclear powers have been biased. One could even argue that the one-sided nature of the policies of the great powers gave India a right to do silly things in retaliation. But a right to do silly things doesn't give India a reason to do silly things. Aside from increasing nuclear proliferation and adding to nuclear uncertainties in the world, India has achieved very little and lost a lot even in terms of the narrow objectives with which the government is associated.

First, India had a massive advantage in conventional weapons over Pakistan. Now that both have bombs, the situation of advantage has been converted into a stalemate. Second, the government has an interest in keeping Kashmir out of international discussions. The nuclear developments make this much harder to do. This may not necessarily be a bad thing, but this is not what the government wanted. Third, India was much more secure about its nuclear capability, having carried out a test in 1974 and having a sophisticated community of nuclear physicists. Pakistan, on the other hand, had much greater uncertainty and could benefit greatly from carrying out an actual detonation. Pakistan had more to benefit from detonations and India created that opportunity for Pakistan without it being blamed as the initiator.

Fourth, the government seems keen to join the Security Council as a permanent member and to be taken as an official member of the nuclear club. The blasting of the bombs makes these occurrences much less likely since the international community is set against giving people an incentive to blast nuclear bombs in order to be accommodated in the Security Council or the nuclear club.

Fifth, the government often gets annoyed at being equated with Pakistan which is a much smaller country and it wants to be put in the same league as China. But the blasting of Indian bombs inevitably followed by blasts from Pakistan ensured that the "India-Pakistan balance" way of thinking survives.

Sixth, India has a very strong interest in seeing a civilian government in Pakistan. Nawaz Sharif was working hard to achieve that, but the nuclear blast has greatly enhanced the military's position in that country. The continued domination of the military in Pakistan is not to India's advantage.

Seventh, there are real risks of nuclear use in the subcontinent. The analogy with the balance of terror between the US and Soviet Union is deceptive, partly because even there things could have gone otherwise with a massive disaster. Also, the nature of control over the nuclear arsenal as well as the relations between the US and the Soviet Union were quite different. India may be more vulnerable since the Indian military is at least under civilian control whereas the Pakistan military has much greater independence.

Finally, the massive misdirection of resources away from economic needs and social priorities in the direction of the military, costs India a lot even in the absence of nuclear programmes. The escalation of the nuclear confrontation may make eradication of deprivation and poverty that much more difficult. This is a major loss.