Q.42 “The gradual approach to economic reforms has given its own dividends to India”. Comment with suitable illustrations.

Ans. The economic reforms which commenced in the world by mid-1980s reached several other countries in the next decade, more so after the arrival of the WTO. Over the time, experts together with the World Bank and the International Monetary Fund has classified such countries into two categories

—one which went for the ‘gradualist’ approach and the other which followed the ‘stop-and-go’ approach.

India’s reform process has been termed as gradualist (also known as ‘incremental’). We see the traits of occasional reversals in the reform policies of India. There has been a lack of consensus among the different coalitions as well as the Centre and the states. It reflects the compulsions of India’s highly pluralist and participative democratic policy-making process.

Though such approach helped India avoid socio-political upheavals, it either delayed or did not allow it to realise the desired objectives of reforms.

The first generation of reforms could not bring the expected results out of the reforms due to absence of some other kind of reforms which India goes for after almost one decade. This has created a mood of disillusionment among the general public towards the benefits of the reforms—failing governments to muster enough political support in favour of it. But the gradualist nature of reform has given India certain other benefits which are considered bigger than gaining only the economic fruits out of it—

• India being a welfare state, it does not seem nice to follow reforms for only wealth creation which is the essence of reforms.

• With a huge population of poor and marginalised people subsidised or free delivery of essential goods and services becomes necessity on the part of the government.

• In India kind of economy, market forces can not be believed to have remedy for every economic issue. This makes a strong case for the intervention from the government.

• India has been able to avoid several economic crises too by following such an approach—first the impact of South East Financial Crisis (1996–97) and second, the western recession (2007–08) led by the US sub-prime crisis.

• In a sense, the incremental approach to reform made India delay adopting highly ‘neo-liberal’ policies and turned out to be a blessing in disguise.

Excessive inclination towards gradualist reforms may hamper the growth prospects of the economy. This is why the new government at the centre looks committed to the cause of essential reforms in a speedy manner—at times, even taking high political risks, too.