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36 Years On From The Step Inn
In his second term, if Mr Modi wins next year, he will need to be more confidently radical in economic policy
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I arrived in India for the first time late at night on 15th August 1982. I woke up the next morning, my 20th birthday, in the salubrious surroundings of the Step Inn, New Delhi.
I don’t know if the Step Inn is still trading, 36 years on. If so, I hope it has changed as much as has the rest of India. Back then, the Step Inn was not an establishment of international quality. Its shabbiness and eccentricity seemed to reflect much about India of that time.
The India I first saw on its 35th Independence Day was, to my eyes, a rather strange place. It was very largely isolated by act of policy choice from the global mainstream. Visiting India for a foreigner was somewhat akin to Alice falling down the fabled rabbit-hole. Socialist thinking had turned India in on itself and fractured the historical openness of the economy in the interests of self-sufficiency. By 1982, the outcome of this planned autonomy was clearly negative compared to the more open economies elsewhere in Asia.
India’s change in the ensuing 36 years since 1982 has been dramatic and, very largely, positive. Following Rajiv Gandhi’s initial tentative reforms, then the much more profound action forced upon Narasimha Rao by the crisis of 1991, and finally the continued reforms of the Vajpayee years, India has transformed itself from a global laggard to the fastest growing major economy. Average growth rates have lifted from the so-called “Hindu rate” of 3-4 per cent to the 7% that has been the norm of the past twenty-five years.
As a result, India today is a very different, and better, country. Poverty has been dramatically reduced, health is better, prosperity more wide-spread and the opportunities for young people to live full lives has been massively enhanced.
Today, at modern India’s 71st birthday, the country seems posed to assume a true leadership role internationally on many dimensions: strategic, economic and cultural. Economically, the prospects for sustained growth over the next twenty-five years appear better than at any time I have known. One key reason for this is because we have, for the first time in many years, a government in a majority, advocating broadly sensible economic policies and having demonstrated the political courage to take tough decisions.
Yet, as the IMF recently pointed out, to achieve India’s true growth potential will require much deeper and radical reform than we have seen in the first four years of Mr Modi’s administration. To lift the current 7% growth to the 10% achieved by China over 30 years will require both more and less from the government.
It will need more competition across the economy and the shattering of a range of entrenched vested interests. State quasi-monopolies in a number of sectors need to be broken up and fully privatized. Government resources will have to be focused on critical common goods like health, education and infrastructure, not running a substantial part of the economy. We will also need less of government, true deregulation and much more efficient, light-touch regulation.
In his second term, if he wins next year, Mr Modi will need to be more confidently radical in economic policy. If he is truly bold, he has the opportunity to lead India at a time that it begins, in fuller measure, to fulfil its true potential.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.