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The reforms we don't talk about

Last updated on: September 22, 2011 12:11 IST
The word "reform" in India has attained a level of sanctity that only words like "ma" and "satyagraha" have achieved.

Thus, to question reform is to challenge our belief in the saintliness of mother or the pure motive behind satyagraha.

And, to a man, we agree that it was the 1991 economic reforms that put India on track to become a great global power - a status we have always assumed to be our destiny.

Ironically, we set out to reform in one era those notions and ideas that we had held in great esteem in an earlier one.

For example, the 1991 reforms aimed at undoing all that we had done in the 1950s and 1960s as part of our efforts to catch up with the industrial era.

This meant embracing the fad of that era: "import-substituting industrialisation".

The key plank of this grand strategy was to raise import duties to a level at which foreign companies would be forced to relocate manufacturing in India, and in the process we hoped to protect domestic infant industries till they gained a foothold.

The underlying notion was that the state was to take on an activist role, taking charge of "the commanding heights" of the national economy - banking, insurance and so on.

India was not the only country that embraced the "import-substituting industrialisation" fad.

South Korea, Argentina, Brazil and many others adopted this strategy.

In fact, Argentinian economist Raul Prebisch was the fountainhead of this idea.

Much of the two decades after Independence were spent pushing the economy in this direction.

After 1991, however, India - and the other countries that had embraced the strong-state model - spent the years driving in the opposite direction. Import duties were slashed and private companies were invited back into sectors such as insurance and banking.

In this new era, the state was supposed to keep out so far as economic matters were concerned.

Ironically, even as we are  busy trying to eliminate the state, thinkers at the cutting edge in the West, where many of these fads have originated, are busy trying to bring the state back in the picture.

Thus, in the United States, a Consumer Financial Protection Bureau is seen as needed to function, according to its website, "like a neighbourhood cop on the beat … [to] supervise banks, credit unions, and other financial companies…".

The market is no longer considered good enough for this job.

On another front, the US government is spending $7.2 billion "to expand broadband access and adoption in communities across the US which will increase jobs, spur investments in technology and infrastructure, and provide long-term economic benefits".

In the UK, the other votary of free-market competition, the government is investing vast amounts to enhance broadband services.

In other words, in the West the state is being brought back in, particularly to equip those nations for the movement from the Industrial Era to the Information Age.

In the meantime, in India we are busy quarrelling among ourselves over how to best allocate public land to private parties to build car factories and highways when the true highway of the Information Age, broadband, is non-existent; even where it exists, it is priced at unaffordable levels.

Moreover, there are challenges in other critical sectors. Since the involvement of the state in public health is low, even sahibs and memsahibs in Lutyens' Delhi and posh South Mumbai are regularly struck by malaria and dengue.

And our vast private education system is churning out perfunctorily educated young people who are often considered unemployable.

We still believe that increased competition in telecom, public health and education will solve these problems.

We are like those Generals who attempt to fight the current war using the strategies and tactics that worked in a previous war.

By the time we finish reforms and India enters the Industrial Age, leading countries in the world would have already embraced and created unassailable positions in the Information Age.

Therefore, the reforms must be aimed at driving India into the Information Age.

But our society is still wedded to the old industrial paradigm and its institutional framework.

As Carlota Perez says in her book, Technological Revolutions and Financial Capital, the world of the Information Age "has a different logic and different requirements from those that facilitated the spread of the automobile, synthetic materials, mass production and the highway network.

"Suddenly, relation to the new technologies, the old habits and regulations become obstacles, the old services and infrastructure are found wanting, the old organisations and institutions are inadequate.

"A new context must be created; a new 'common sense' must emerge and propagate".

Ajit Balakrishnan
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