Dialogue for growth

Govt should welcome diverse opinions in policymaking

Prime Minister Narendra Modi is reportedly meeting industrialists and entrepreneurs to discuss economic policy measures. This is a welcome move because it will not only help make necessary policy changes but will also allay fears that the government is unwilling to listen. That was evident at a recent media function when industrialist Rahul Bajaj said — with the government’s power elite, including Home Minister Amit Shah, on stage — that there was no confidence that the government would appreciate criticism. Mr Shah was sporting enough and assured Mr Bajaj that nobody needed to be afraid. Such meetings have great value because they open up space for discussion and debate. After all, objective criticism and timely course correction are important elements of a vibrant democracy.

 
Maruti Suzuki India Chairman R C Bhargava recently noted that India needed a political consensus on how to grow the economy. Mr Bhargava was spot on. India lacks a political consensus on the way the economy, including the role of the private sector, should be managed. This makes decision-making more difficult for the government of the day. Even in the present context, a fair and free-flowing discussion among all stakeholders will help generate ideas to revive the flagging economy. Growth in the Indian economy slipped to a six-year low of 4.5 per cent in the second quarter of the current fiscal year. A perception of fear and a lack of clarity on economic policy will certainly affect India’s potential. Even though individual observations can be debated, the fact that industry leaders are voicing their concerns and the government is willing to listen are welcome signs.

 
At a broader level, call it the long shadow of the licence-quota raj, governments in India are generally sensitive to being seen doing things for the private sector. It is puzzling that, despite benefiting significantly from economic reforms over the decades, both the government and public, in general, are not prepared to give the private sector a bigger role. This distrust is reflected in the maze of prevalent rule and regulations, which stifles entrepreneurship and gives the state enormous power that is often used to create fear. The Economic Survey (2016-17) fittingly captured India’s ambivalence about the private sector and highlighted: “… India has distinctly anti-market beliefs relative to others, even compared to peers with similarly low initial GDP [gross domestic product] per capita levels.” This needs to change if India has to grow at higher rates and create gainful employment for its rising workforce.

 

While the Central government has taken several steps to improve the ease of doing business, which is also reflected in India’s World Bank’s rankings, it should now open up the debate and build a larger consensus on deeper reforms. Firms should be able to operate freely and the administration, including state governments, must intervene only in the case of a market failure. On the other hand, the private sector needs to improve governance standards. On balance, however, the private sector has done well over the years, and its role needs to be expanded with an enabling regulatory environment which allows entrepreneurs to take risks. For better policy formation, stakeholders should be able to express their views freely and the government must take decisions after considering different viewpoints. Benefits of such a process are not limited to economic policy alone.