One of the most honest statements from a government official in recent times came from chief economic adviser Arvind Subramanian who said big-bang reforms are not applicable to a country like India. At a recent event, he said, “If you look around the world, big-bang dramatic reforms happen around crisis.” He also added, “Big-bang reforms are not easy to happen in democracy. In democracies, you have multiple veto centres, multiple decision-making centres and it is very difficult to push through decisive change and if you look at India at this juncture, we are not in crisis.”
There you go. All you big-bang change seekers, the party is over even before it started. The government has, in effect, said they don’t want to rock the boat. Things won’t change much and things won’t change fast. Doesn’t matter if the election campaign promised a bold new government. We saw TV ads that had farmers saying “achhe din aane waale hain (good times are about to come).” Investors and businesses were promised things will be dramatically better in a Congress-mukt Bharat. Voters were asked to deliver a decisive mandate if they wanted real change. They came out in droves and gave a mandate no single party has received in 30 years.
What could stop India now? Nothing really.
And yet, the big changes didn’t hap pen. A soft interim budget, a calibrated full-year budget, a few positive statements on taxation (only to be contradicted by an overzealous tax department) and a stuck, horribly named though important “Land Acquisition Bill” means even the new government is tying itself up in knots. Investors are turning impatient, stocks and the rupee have started to slip, and while no India Inc CEO will publicly criticize the government, the profuse praise has certainly stopped. The only thing going for the government right now is Rahul Gandhi, who at least at present is struck more by wanderlust than power lust. Any reasonably organized opposition would be able to take on this government, and this just within a year of a historic mandate. Look how easily the anti-farmer labelling has stuck. Or how the Delhi elections were lost. Or how there is little certainty about the Bihar assembly election.
Sometimes the government asks, ‘What big-bang reforms do you want us to do anyway?’ Well, that is pretty clear. They revolve around opening up the economy , building infrastructure and making it easier to do business, which in turn creates jobs, growth and raises revenues for welfare projects. I think the intention is there. Many in government are extraordinarily capable people, fully aware of what it will take to restore high growth – full rupee convertibility, simple taxation, the GST law, no hounding of businesses to score political points, broadening the income-tax base, selling non productive government assets and the like.
So why don’t they do it? The issue is what the chief economic adviser stated. In a democracy, change isn’t easy. Though a billion-plus people feel things need to change, everyone has a different idea of what that change is. I might think a more capitalist approach is better.
Another citizen may want all big companies to be banned. Some believe every time the government does something business-friendly, it only helps rich people.
Others may think without thriving businesses, where would we have the growth, jobs and tax collections? And since Indians are closet socialists, trusting a more capitalist setup is proving difficult for our citizens. Abuse can occur both in socialist and capitalist systems, but a capitalist society does tend to get richer.However, Indians would rather have lesser opportunities and be in a familiar, oppressive system than trust a new system. Until that mentality changes, which means until all of us change, there cannot be a big-bang reform. The political risk of shoving in change people are not ready for is simply too high. The only time it happened was in 1991, when we had a crisis, and that is somehow the only time Indians become one and listen to reason.
If we do want big-bang reform, many tiny-bang changes are re quired in the mindset of Indians. The rich vs poor, farmers vs corporates, foreign vs desi conflicts that we have created in our heads deny us the belief that win-win situations are possible.
All this doesn’t mean the government doesn’t have to do anything. They promised an agenda of growth, and they have to somehow deliver on it. Some political risks for India’s good will have to be borne – what else is a bold government anyway? Yes, Indians want change but are scared of it at the same time. The trick is to come up with creative political and economic solutions that lead to reform and minimize political damage. Rupee convertibility, for example, is a less political issue than the land bill, and perhaps that could be taken up first. A few big-bang items, along with proper communication to change mindsets, would do us all good. Giving up, or going too slow won’t. Sometimes, in life or politics, not taking a risk is the biggest risk.