| |
THE
NEW ECONOMY: GUEST COLUMN
This
is, of course, a fantasy. Not because it cannot happen but because it
will not happen. On the one hand, there are reforms whose roadmap has
been well known for years but successive governments have lacked the courage
to move boldly. On the other, there are reforms on which thinking is either
muddled or entirely lacking.
Reform of
labour laws prohibiting exit of large companies had been seriously discussed
at the time of the July 1991 reforms. Yet no action has been taken in
this area till today. Likewise, there is broad intellectual agreement
on privatisation. But the Government faces opposition from within-the
ministries that stand to lose their PSUs, workers who receive their salaries
without having to work, and bureaucrats who fear losing the perks that
come with serving on PSU boards.
On an issue
such as fertiliser subsidies, our thinking defies economic logic. Few
would object to selling fertiliser to poor farmers at subsidised prices.
But what economic theory justifies subsidies to fertiliser manufacturers
at rates that rise with the degree of inefficiency? Yet, that is precisely
what the Expenditure Reforms Committee has recommended recently.
As for higher
education, systematic thinking seems to be entirely missing. The Central
and state governments lack resources to either expand the availability
or arrest the declining quality of university education. At the same time,
the inexhaustible pool of talent and the information technology revolution
offer unprecedented opportunities for investment in high-quality universities.
Nevertheless, we refuse to consider ending the state monopoly on university
education and allow private investment in it.
So where
are we likely to be in 2010? Forecasting is a risky business. Fifteen
years ago, no one could have predicted the rise of the Net and the impact
it is having on the world economy. Similar inventions could happen in
the future. For instance, if new discoveries make the handling of soft
material by robots possible, the garments industry will migrate back to
developed countries. Similarly, if a charismatic leader comes along and
succeeds in pushing far-reaching reforms through Parliament, what I have
called fantasy may turn into reality.
Also critical
to the validity of any economic forecast is the course the aids epidemic
could take. According to some estimates, almost 5 per cent of our population
may become HIV-infected by 2005. If inexpensive cures do not become available,
fighting the epidemic may eat up a sizeable chunk of our resources. Yet
another factor that will be important is our ability to preserve access
to markets in developed countries under the rising threat of the link
between trade and labour standards.
Leaving
aside these considerations, our growth rate during the next 10 years is
likely to average 6 to 7 per cent. This is the same rate I had predicted
in 1994 for the decade of the 1990s. With growth rate in 1993-94 at a
measly 3.8 percent, the prediction was viewed as hugely optimistic at
the time; today, with the economy already growing at 6 per cent it is
likely to be viewed as pessimistic. Assuming my growth forecast proves
right, however, our per capita income in 2010 will only be one and a half
times its current level. The decline in poverty and infant mortality rates,
rise in the literacy rate, and the expansion of telephone services and
personal computers will be correspondingly smaller.
|
|
At
6% GDP Growth 
At
10% GDP Growth
METRO TODAY
Web
Exclusives
