India After Liberalisation: An Overview

by Bimal Jalan

The 1991 liberalisation was India's biggest moment in its economic history after independence. As its effects began to percolate into how India lived and worked, the potential it had to lift the country and its millions out of the 'Hindu' rate of growth began to become apparent. Thirty years later, we seem to be on the cusp of a different story.

In India after Liberalisation, Bimal Jalan offers a wide-angle view of how liberalisation has shaped up over the intervening decades. What emerges is the story of a country best placed to catch the tide to high growth and a system that, time after time, fails to live up to the challenge of decision making.

For any student of economic history or policymaker or participant, who wants to understand why we are where we are, this is a timely, telling and essential guide.

Genres: Economics

240 pages, Paperback

First published January 28, 2021

Reviews

[Chandana Kuruganty · Rating 4 out of 5]

What I really liked about the book:
1. Chronological attempt to explain Indian Economy to a novice
2. Attempt to provide temporal and spatial connect between various issues that our economy has faced
3. Providing a pragmatic way forward in most of the scenarios
However, certain areas require more than an economist's perspective ( Poverty, Malnutrition) and that is where the book falls short of being holistic.

[Arun Pandiyan · Rating 3 out of 5]

Bimal Jalan, the ex-governor of the Reserve Bank of India (RBI) had authored a series of books on economic reforms and liberalization. In the book ‘Politics Trumps Economics’ which I had read earlier, he had discussed how politics without a shared agenda or focus on the common good can often act as an impediment to economic development. He also had suggested a few political reforms to correct the trajectory of the country’s political economy. In this book, Bimal Jalan had written twelve essays on the topics of reforming crucial sectors such as banking and finance along with covering important issues of corruption, separation of powers in the State, science, technology, innovation, and social sectors.

After the 1991 LPG reforms, India marked significant growth rates, especially in industrial output and service sectors. Yet, the Human Development Index (HDI) often reflects the poor status of the social services rendered to the majority of the population. Even after thirty of liberalization, abysmal social services ‘in the name of poor’ which are heavily subsidized fail to reach the consumer. The implementation of Aadhar had reduced certain bottlenecks and had controlled the corruption to an extent, but except for a few south Indian states, the social sector is dying in India. Underlying reasons are corruption, inefficient bureaucracy, and negligence in allocating necessary resources.

Bimal Jalan suggests that in a developing country like India, except for the deliverance of primary goods such as education, healthcare, and food security, the State should act as a monitor and regulator leaving the other instrumentalities of revenue generation to the private enterprises. He rightly points out in one of his essays on the impact of colonization which had persuaded some of us to imbibe a flawed idea that liberalization exacerbates poverty. He writes,

“….the haunted memories of the colonial past continue to shape the contours of the debate on economic policy. There is still a powerful and influential section in the political spectrum which considers pro-trade and pro-growth policies to be anti-poor.”

Oftentimes, the growth story of India is compared with China to propose an ideologically driven argument that democracy doesn’t eradicate poverty. Throughout the book, Bimal Jalan made relevant references to the ‘east-Asian-miracle’ where democratic countries like Japan, South Korea, Malaysia, Singapore, and Taiwan maintained an average GDP of 8 percent for over two decades. His analyses on how these ‘small countries’ had managed to eradicate poverty by becoming globally acclaimed exporters of goods warrants an immediate revamping of our strategies to increase our exports. To export, we need to produce and produce at a large scale. Unfortunately, with the climate of academically illiterate woke activists with their anti-west rhetoric advocating for self-sufficiency, closed economy, restrictive trade policies, and community level production, it will take another couple of decades for India to ace the world trade.

Democracy is ever-evolving and flexible. In this context, Bimal Jalan had proposed three crucial political reforms to keep the democratic spirit alive among the Indian voters:

i. In the case of joining a coalition government, small parties with less than 5% of the national vote bank has to drop their identity and join the government under the obligation of continuing it until the next election.

ii. Adjudication of the criminal cases on politicians within six months after the results in case the candidate wins.

iii. State funding of the elections to create a level playing field among individual candidates. The MPLAD funds can be utilized for this expenditure.

Corruption has become a public menace and present normality among civil society. To tackle corruption, he advocates for the necessary constitutional amendments in the Official Secrets Act where the definition of secret is arbitrary and Article 311 which shields the public servants from faster legal actions. Further, the system of providing certificates, licenses, registration, and other identity cards to the general public must be computerized, made online, and outsourced to non-governmental companies on contract.

India was left behind in science, technology, and innovation often due to capital needs, viz., physical, financial, and human capital. Often we are sold a lie that technology is ‘labor displacing’. When India liberalized its trade policies, the Communists complained that the washing machine will displace the poor maids and servants. In his essay, Bimal Jalan rightly noted:

“Though the innovation of a new technology may be labor displacing, the production of ancillaries or related products may give rise to newer opportunities.”

In summary, India has a comparative advantage with 65% of the younger population (aged 35 and below). These essays are crucial to understanding our priorities in this 21st century in terms of economic policies and politics.