Economics Reforms

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India's Economic Reforms: Dismantling the Machine for Going
Backwards
Jagdish Bhagwati

This paper by Jagdish Bhagwati presents a
critical appraisal of India's economic strategy
over the last five decades. According to
Bhagwati, while India's democratic success has
been outstanding, her economics has been a big
disappointment leaving the economy in a state of
economic backwardness. By 80s/ India's
economic failure became a classic case study to
lean what not to do. Recent reforms, which
signal the final discrediting of the failed ideas/
have started dismantling the past policies that
crippled India's performance. However/
Bhagwati feels that the prospects for a complete
transition still remain problematic partly on
account of the politics of coalitions at the centre
and partly because the dissent from the
supporters of India's earlier policies may create
confusion and delays.
Jagdish Bhagwati is Arthur Lehman Professor of
Economics at Columbia University, USA.
Reproduced with permission from the Times Literary Supplement, August 8, 1997.

India at fifty remains an enigma. Its huge incoherences
invite the witticism that, in India, anything and its opposite are true, m consonance with the ancient metaphysics of
India: what is, is not. V S Naipaul's conversion from an
exasperated critic in An Area of Darkness (1964) to an
admiring celebrant in India: A Million Mutinies Now (1990)
is thus to be seen, not merely as a personal journey from the shock of first recognition to the fuller understanding that
time brings, but also as his confrontation with the diversity that India maddeningly presents.
India's politics and economics underline these
contrasts, showing India to be both a success and a failure. The politics, for all its shortcomings, has been an
extraordinary success. Now that democracy has spread so
widely, it is all too easy to forget that, almost uniquely
among the newly liberated nations that entered the second
half of this century, India managed to remain democratic,
despite its multitude of religions and languages and the
tragic and inflammatory legacy of the turbulent Partition.
The misguided descent into Emergency Rule by Prime
Minister Indira Gandhi and its resounding rejection soon
thereafter at the polls left Indians even more wedded to the institutions that define the democratic process. The politics of democracy is rarely as neat as that of authoritarian
regimes. But the noise of democracy that bothers the rulers
further east is wrongly mistaken for chaos. Instead, it has
been the safety valve of articulated dissent that has held the country together.
But if India's democratic success has made her the
unique example for the theorists of democracy today to
understand, her economics has been a dis appointment. To
put it plainly, it has been a dis aster. More than a generation has been lost to policies that produced low growth rates,
leaving the economy in a state of technological
backwardness, low per-capita income, high, illiteracy, and
massive poverty.
India had been marked out in the 1950s as the
developing country most likely to succeed economically,
with its uncommon assets in entrepreneurship (that, at its
apex, boasted the Tatas, who gave India its first steel plant at
Jamshedpur
a
commercial
success

Vol. 23, No. 1, January - March 1998

without the subventions that would corrupt the economy
after independence), political leadership (whose pride was
Jawarharlal Nehru) and bureaucracy (with its legendary
Indian Civil Service). By the 1980s, however, India's
failure had made it the classic case to study to lean what
n ot to do. The success stories turned out to be small nations in the Far East, characterized by sustained two-digit growth rates (compared with India's average around 3.5 per cent
over three decades), high levels of literacy that grew in turn with the economy, rising wages, and pheno-menally low
levels of poverty....
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