EDITORIALS & ARTICLES
What explains India's modest improvements in social development outcomes even as the rate of growth has accelerated since the initiation of economic reforms?
- Economic reforms in India refer to the neo-liberal policies introduced by the Narsimha-Rao government in 1991 when India faced a severe economic crisis due to external debt. This crisis happened largely due to inefficiency in economic management in the 1980s. Economic reforms that began 30 years ago have transformed India. What used to be a poor, slow‐growing country now has the third‐largest gross domestic product (GDP) in the world with regard to purchasing power parity and is projected to be the fastest‐growing major economy in the world.
- The important consideration is not whether the economic reforms measures are anti-poor or not, but whether they are in fact “pro-poor”. In other words, is there an explicit “equity” dimension to the economic reforms or is the “humane face” merely an attempt to neutralise the negative impact that the reform measures would have on the extant structure of income and asset distribution? The very fact that the social sector spending policies, including the creation of the National Renewal Fund (NRF) for retrenched workers, is defined as a “safety net” such policies are meant to compensate for equity losses and would not necessarily improve the existing structure of incomes and asset inequality in the country.
- There are areas in which government intervention is specifically required to ensure that apart from efficiency gains, the economic reform measures would have a positive impact on equity as well. These areas are: (i) employment, (ii) food security, (iii) health, (iv) education, (v) technology, and (vi) environment. While “equity” is not an explicit goal of the economic reforms measures, it is necessary that this is so and a clear definition of what equity should imply in the Indian context should be developed.
- Another important consideration relates to the fact that while we are assessing the social impact of the reforms measures, a distinction be made between the direct “transitional costs” of reform measures in terms of equity losses, and the already pre-existing equity loss that occurs due to the inequitious nature of the extant economic regime. One should not confuse between the inegalitarian consequences of the existing social and economic order and what might be the specific product of the economic reform measures.
- The economic reform measures should not imply a retreat of government from all spheres of the economy and society. While in some areas there would have to be reduced governmental intervention/support, in others like health care, education and social welfare, they ought to be more purposive and better targeted in terms of equity intervention by the government.
- The broad thrust relating to the education, health and the public distribution system is that public provisioning of these services is still important and there is inadequate attention being paid to improving the quality of these services in the public sector. On the other hand, the increasing privatisation of these services has created a dualistic structure in which a high value, high quality private sector is growing while a low value low, quality public sector is stagnating. Unless the government invests more money and improves the quality of the services rendered the retrogression in these sectors would have adverse social externalities resulting in a national loss.
- If financial allocations are no measure of public support, there is no evidence either to suggest that the government be any more committed today than before to improving the efficiency of resource utilisation. The real challenge before the government today is, therefore, not so much to reduce the role of the government in the social sectors but in fact to make government more responsive to the needs of the people.
- Indeed, the popular base for economic reform can only be built when ordinary people perceive an improvement in the quality of life. Deregulation, debureaucratisation, decontrol, disinvestment and so on are only ways to wind down the involvement of the government in the economic life of the people. While much of this is popular with the business community, most consumers of public services are desperately seeking a more efficient and humane government rather than just less government. For, less government is no substitute for good government (Sanjay Baru, 1993).
- Prof. V.S. Vyas has cautioned the Central Government against resorting to “unmindful cut in government expenditures” on sectors like education and health, besides infrastructure and human resource development to reduce deficit. In our enthusiasm to reduce deficit we must not curtail the expenditure vital for development. Fiscal adjustment and economic reform is not simply a matter for the drawing room. In the period of transition, it imposes a burden of adjustment that is distributed in an asymmetric manner. Without correctives, the burden of adjustment is inevitably borne by the poor. Whatever we might say about social safety nets, we do not have the resources for this purpose. It cannot and will not suffice to assert that the burden of such adjustment would have to be borne by the affluent and the middle class, simply because the rich in our society have the incomes to immunise themselves from the burden of structural adjustment.
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