What India Needs? …A Perspective

By Jiban Mukhopadhyay

Summary

Jiban K. Mukhopadhyay’s booklet reproduces a talk delivered on 27 September 2003 at a Freedom First seminar in Mumbai, in which the former Chief Economic Adviser to the Tata Group sketches a ‘feasible’ rather than ‘ideal’ perspective for the Indian economy a dozen years into the post-1991 reforms. He concedes that a Chinese-style 9–10 percent rate of growth is beyond reach in the short run but argues that a sustained 7–7.5 percent over the next five years would double per capita income in fifteen years and lay the ground for higher growth thereafter. The diagnosis is bleak about the inherited apparatus — colonial-era bureaucratic procedures, a ‘medieval mindset’, political fragmentation across 24 parties — but optimistic about the ‘countervailing forces’ of market reforms, the IT and telecom revolution, judicial activism and small entrepreneurial initiatives that the dysfunctional state apparatus has been unable to suppress.

The substantive recommendations cluster around four areas. First, industry must be restructured for global competitiveness, with productivity gains protected by sector-specific ‘policy compacts’ for labour-intensive industries (textiles, auto components, tourism) and a social-security fallback for the displaced. Second, agriculture — still feeding 67 percent of the population while contributing only 25 percent of GDP — is identified as the binding constraint on sustained growth; Mukhopadhyay invokes Deng’s 1978 reset of Chinese agriculture as the template, and argues that every incremental percentage point in agricultural growth translates into Rs. 10,000 crore of disposable rural income that pulls industrial demand along behind it. Third, the public sector — which he calls a ‘bovine animal’ worshipped alongside India’s mythological deities — must be privatised: the government’s job is to be a rule-of-law facilitator, not an operator of businesses. Fourth, India must stay inside the WTO and negotiate hard within it rather than withdraw, since 148 members account for 98 percent of world exports and the alternative is the absurdity of 5,624 bilateral agreements.

Throughout, Mukhopadhyay frames the present as Dickens’s ‘best of times and the worst of times’ and closes with the image that ‘it requires rains to create a rainbow’ — the perspective he offers is operational only with sincere, dedicated effort by everyone, but it is not an ‘absurd and hyper-imaginative scenario’. The booklet ends with the standard Forum of Free Enterprise back matter inviting readers to join.

Key points

• Argues that a 9 percent China-style growth rate is unrealistic for India in the near term, but a sustained 7–7.5 percent over the next five years is feasible and would double per capita income within fifteen years.

• Reads the post-1991 economy through ‘the best of times and the worst of times’: market reforms, IT/telecom and judicial activism are the ‘countervailing forces’ offsetting colonial-era bureaucracy and a ‘medieval mindset’.

• Identifies agriculture as the binding constraint on sustained growth — 67 percent of the population still depends on it, but the sector wildly oscillates with the monsoon; one extra percentage point of agricultural growth pumps Rs. 10,000 crore of disposable income into rural India and pulls industry along.

• Treats privatisation as ‘a done thing all over the world’ and mocks India’s 15-year inconclusive debate, comparing public-sector reverence to the worship of bovine animals and mythological deities.

• Defines the state’s job as facilitator and rule-of-law provider, not direct operator of businesses, citing the United States and Western Europe as the model.

• Estimates 50 million unemployed Indians and warns that the 1990s combination of 6.1 percent GDP growth with sub-1 percent employment growth makes ‘jobless high growth’ the central labour-market problem; calls for sectoral policy compacts in textiles, auto components and tourism.

• Defends staying inside the WTO and negotiating hard: 148 members account for 98 percent of world exports, and withdrawal would require approximately 5,624 bilateral agreements to replace it.

• Reports that the post-reform structural gains are real — total factor, labour and capital productivity rose, with the top 50 private firms (six Tata companies among the best) outperforming the industry average.

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