September 29, 2007

Sell Reforms Well to the Poor

This article originally appeared in Tehelka on September 29, 2007.

At the importance of any issue in Washington can be measured by the number of seats it fills. A discussion about Indian politics attracts only the most die-hard Indophiles. A discussion related to the Indian economy, on the other hand, can pack a large auditorium. Despite its military firepower, nuclear aspirations and unrivaled multiculturalism, it is India’s economic potential that has secured the unprecedented attention of the world’s sole superpower. Among other things, Americans are in awe of India’s technocratic leadership, impressed and intrigued that a vibrant and frequently populist-oriented democracy such as India’s can elevate the likes of Manmohan Singh, P. Chidambaram and Montek Singh Ahluwalia to leadership positions. Yet there is also frustration that these reformers have been unable to secure a clear political mandate for their attempts at further economic liberalisation.

There has long been intellectual awareness in New Delhi of India’s need to engage the rest of the world. But the fact remains that Manmohan Singh’s government has done a poor job in selling reforms to the people. With many such reforms including opening up Indian agriculture to large-scale farming and distribution systems, the government has made itself vulnerable to broadsides from anti-globalisation, isolationist elements who claim that such reforms override the interests of the poor. Quotas, subsidies and the distribution of colour televisions are portrayed as schemes to benefit the poor, when in fact they divert attention from policies. Even unprecedented economic growth has been turned upon its head amid accusations that such growth has not been inclusive. As a result, even India’s growth itself is occasionally portrayed in a negative light. The bottomline gets overlooked: that the risks of uneven growth outweigh the certainty of decelerated growth. Perversity in small doses may be less harmful than epidemic complacency.

The combination of complacency and resentment in a high-growth environment makes the Indian economy deliciously enigmatic to speculators. With a slumping housing market, stock market and volatility, the likelihood that America will soon experience a recession is all but certain. When exactly and for how long this will happen, are less clear, but chances are, the rest of the world will not be unaffected. India may soon find itself desperately trying to adapt to a recessed global economy. Its expected shortfall in energy, infrastructure, and human resources, stemming partially from its reluctance to liberalise, will not be of any help, certainly not.