Business, Finance & Economics

Have India's reforms been turned upside down?

Economist Bharat Jhunjhunwala makes a damning case against India's economic reforms in this week's Tehelka:

[The] purpose of the reforms was to reduce the role of the government, whittle the bureaucracy, put the economy on a high growth trajectory and create enough jobs to secure people’s welfare. The logic of reforms has been twisted, however, that role of the government is being increased and people are being taxed to support the bureaucracy. 

Here's Jhunjhunwala's three examples:


The prime minister has wholly reversed the process. He is propogating disinvesting of minority shareholdings of the PSUs instead of privatising them. This has lead to the deepening of the government role instead of reducing the same. Ownership of majority shareholding with the government means that control over key policy decisions such as appointment of a managing director would continue to rest with the ministers. The proceeds of disinvestments would provide larger money to the government for making expenditures. Privatisation has lead to reduction of government role also tax burden on the people. But the government has twisted privatisation to maintain its position and power so that they can continue to impose more taxes on the people.

Goods and service tax:

The other side is that goods consumed by the poor and the rich; and goods produced by labour and capital-intensive technologies will be taxed at the same rate. This will lead to the increase in rate of taxes on goods consumed by the poor and produced by labour-intensive methods.

Government-run schools:

 the government has a twisted sense of logic and provides for enhanced inducements to the poor who continue to send their children in non-performing government schools. Children attending such government schools are provided with ration, mid-day meals, free books and uniforms. By providing a string of such sops, the government ensures that children remain uneducated.

I'm not sure I agree with him on all these points, but it's a useful way to think about the agenda of economic reforms -- too often presented as an unassailable monolith.