[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]N[/dropcap]o government can doll up the reality beyond a point. Prime Minister Narendra Modi’s inaction on the reforms front, along with embrace of socialist rhetoric, is having its impact on country’s image. After the World Bank’s Ease of Doing Business survey revealed poor performance—India moved up only by a notch in 2017—the IMF downgraded India’s growth outlook, and the global media lambasted the demonetization move, India has been ranked 143 in an annual index of economic freedom by a top American think-tank. Our rank, which dropped 20 notches in a year, is behind Pakistan.
The foundation has blamed the lack of reforms for the low ranking.
The Heritage Foundation in its Index of Economic Freedom report said that corruption, underdeveloped infrastructure, and poor management of public finance continue to undermine overall development. This, it noted, is despite the fact that the economy has sustained an average annual growth rate of about 7 per cent over the past five years.
The foundation has blamed the lack of reforms for the low ranking. “Growth is not deeply rooted in policies that preserve economic freedom. Progress on market-oriented reforms has been uneven. The state maintains an extensive presence in many areas through public-sector enterprises. A restrictive and burdensome regulatory environment discourages the entrepreneurship that could provide broader private-sector growth.”
Many, including this author, have underlined these problems several times—to no avail. Not only Modi doesn’t heed to any counsel regarding liberalization, he seems to be going down the path of socialism; he is increasingly Indira Gandhi-like phraseology of the 1970s; he is also promoting the Marxian class war theory by incessantly screaming how concerned his government is for the poor. There is little effort to cut the red tape and minimize procedural rigors; the government is keener on launching new schemes, coining new slogans, and organizing jamborees than on reducing control. Price controls are being introduced; more regulations are on the way, like the FSSAI, seeking restaurants to disclose nutritive and calorific value of the food they serve.
[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]“T[/dropcap]he regulatory framework is burdensome, and the legal framework is weak” the Heritage survey says. “Labor regulations continue to evolve, and the informal economy is an important source of employment. Although the IMF reported in 2016 that India’s ‘major subsidies’ (e.g., on fuels and fertilizer) dropped below 2 per cent of GDP, the government is introducing a new basic foods subsidy for around two-thirds of the population.”
…the foundation has credited Modi for “reinvigorating India’s foreign policy. Modi, who in June 2016 made his fourth visit to the United States in two years, has bolstered ties with the US, particularly in defense cooperation.”
It needs to be mentioned here that the food security law was introduced by the previous regime; at that time, Modi’s party supported the legislation and now his government wants to implement the fiscally and economically ruinous Act. In fact, the Modi regime even took on the WTO over the issue.
However, the foundation has credited Modi for “reinvigorating India’s foreign policy. Modi, who in June 2016 made his fourth visit to the United States in two years, has bolstered ties with the US, particularly in defense cooperation.”
That is indeed a plus of the present regime, but neither foreign policy nor military prowess can be reinvigorated beyond a point without economic might; and economy cannot be galvanized without reforms, which are lacking.
It is time the Modi government acknowledged the fact that liberalization is essential for growth and development. Spirited speeches are no substitute for economic freedom.
1. Text in Blue points to additional data on the topic.
2. The views expressed here are those of the author and do not necessarily represent or reflect the views of PGurus.
3. Economic freedom is the fundamental right of every human to control his or her own labor and property.