The authors say we should be proud what we have achieved over the past quarter century – consistent growth, and
reduction in poverty. But is the optimism justified?
The authors say that before 1984, in keeping with socialist norms, the private sector was kept out of large areas of economic activity. This was supposedly done to prevent the concentration of wealth among the few, but it had the opposite effect. Constrained by regulations and the lack of a competitive environment, private initiative suffered and Indian industry became inefficient as a result.
With the advent of Rajiv Gandhi in 1984, a generational change occurred and a new generation came to power. Attitudes towards the private sector began to change, pro-business reforms were initiated, and a gradual liberalization of the economy began. This process gathered pace after the forex crisis in 1991.
The economic liberalization was accompanied by another (unrelated) development. The rise of regional parties led to greater autonomy for the states. With greater decentralization, the better run states surged ahead of the others. These fast-growing states (India) have now acquired a momentum of their own. The problem is the badly governed states left behind in the liberalization process (Bharat) – as it is here that most of the unskilled labor and under-educated people reside.
These backward states are holding back economic growth as a whole, and need to be offered incentives to reform. Drawing a parallel with the European Union, the authors say that what the nation needs is a common market that permits the flow of people, goods and capital across states without any restrictions. This is especially true of education, and of training institutes – as the skills acquired in these institutions represent an investment for the future. Standardization of inter-state taxes is also required. It is only a common market that will enable yesterday’s Bharat to become tomorrow’s India; and allow the nation as a whole to move forward.