India’s growth rate has gone below six for the first time in two years. In the process the nation has lost the tag as the fastest growing economy in the world. Unemployment rate is the highest in the last 47 years. Along with these two blows, India will cease to be the most favoured nation to US in trade. So the task is cut out for the new government. It will have to bring back the economy on track very soon. Otherwise, the country’s economic future is bleak.
Notwithstanding all its promises and potentials if the Indian economy today has reached such a point, it is only because our country’s politics has always got preference over economics. Virtually, very little space was given to the economy to grow. After Independence, it was mixed economy. Adoption of such a model did not allow Indian economy to grow on a competitive spirit. Can anyone imagine that India’s Gross Domestic Product (GDP), an important indicator to judge economic growth, was on average at just four percent for nearly four decades between late 40’s to early 80’s? The biggest curse of mixed economy was that while profitable sectors attracted private investments, the government had to invest in not so profitable sectors which in turn put a lot of burden on our exchequer. It may be mentioned here that those countries which did not adopt such a model of economy had progressed at a much faster rate than India during the period mentioned.
While lack of competiveness pushed economy back to the wall during the mixed era, things started looking bright in the early nineties. In 1991, the then PV Narsimha Rao government decided to open up the economy. With the advent of new economic policy the country pinned its hope to turn around in economy. But the dream was shattered soon. Fearing backlash from the electorate, the late Narsimha Rao slowed down the process of economic liberalisation. The move served no purpose. Firstly, the Narsimha Rao government did not survive and more importantly it left the process of liberal economy halfway.
Since the departure of Rao government in 1996, every government has promised to take the liberalisation process to its logical conclusion. But no one has kept the promise. There were even instances that the Prime Minister was all for new economic policy, but his finance minister decided otherwise. While the Prime Minister thought that high GDP growth rate would enable the government to fund its welfare project, on the other hand the finance minister was for giving all stimuli to the rural market to utilise fully the vast potential of Indian market.
At the darkest hour of Indian economy, the question which remains unanswered till now is whether we want our economy to be competitive or we want an economy which will continue to offer sops? To bring the economy back on rail, we need to fasten our seat belts and get ready to face challenges. But the manner in which sops are offered and doles are distributed, it raises question mark on our determination to fight the economic battle. In a welfare state, a government is duty-bound to ensure welfare measures. But that should be done not at the cost of economy, only by strengthening it.
