Eminent economist, Pranab Bardhan, yesterday said that economic reforms in India had led to a social churning, as a result of which the backward classes came to the forefront, while the elite moved away from the state.
Delivering a lecture on the impact of liberalisation here at the National Council of Applied Economic Research (NCAER), Bardhan said that such social churning also led to a redistribution of power in favour of the lower classes, which in turn raised questions of governance.
Bardhan, who is a professor at the University of Berkeley, California, said reforms in India had been traditionally defined in extreme terms. It has either been described in glowing terms or else it has been looked down upon, he said. Bardhan was speaking at a seminar, organised by NCAER to commemorate Indias golden jubilee year of independence.
Bardhan coined a new term to describe the liberalisation process. He describes it as a creeping reforms process in India which had not faced any politically pitched battles.
Creeping reforms or reforms by stealth essentially referred to slow chipping away at restrictions without any fanfare, he pointed out. Such reforms constituted deregulation of policies which were unacceptable to most in the first place, but it is unable to bring about major changes in important areas like the financial sector or create a nexus between hierarchy in public sectors, suppliers, criminals and their political patrons which is the essence of market economics.
However, the main obstacle to liberalisation in India was the Indian mindset which lay emphasis on group equities rather than individualism which is the basis of market-oriented economies. Hence, the view that liberalisation of the economy will naturally translate into market dominated economy was not possible in India given our political and social culture which was predominantly led by ideas of group equities rather than individual rights, Bardhan cautioned.
Substantial reforms has taken place during the last couple of years which has avoided major political confrontation. There has been piecemeal reforms which did not face any group confrontation because there has been a diffusion of the interests of vested groups, Bardhan said.
And contrary to popular beliefs, the starting point of creeping reforms was not 1991 when the then finance minister, Manmohan Singh launched the programme of deregulation and dereservation, but it has been a continuous process for the past two decades.
Bardhan drew upon aggregate statistics of various economic indicators as given by the Central Statistical Organisation to emphasise that there had been no major changes in macro outcomes since 1991-the year held as the starting point of trade liberalisation.
If we fit a trend line in the data for gross domestic product (GDP) growth rates from 1980-81 to 1994-95, we will find that there has been no break since 1991. If the data is broken down to show sectoral composition of growth, it shows that there has been no significant change in the primary and tertiary sectors post liberalisation. There has been some change in the secondary sector, though the change is negative, he reiterated.
The reforms process in India has been quite painless with the diffusion of interests of vested groups. For example, during the process of opening up of sectors, if the business houses have lost out in one sector, they have made profits in another. Some amount of diffusion of resistance to reforms have taken place due to the shifting of powers to the regional centres, he said.
Policy decisions like giving greater autonomy to public sectors or going in for disinvestment of public sector enterprises have not faced any political confrontation because the vested interests were pacified in some way or the other.
