In the final part of their eight-part series on the contemporary history of the Indian economy, the authors make recommendations for the Indian economy. The earlier partscompared the policies of various Indian governments between the 1940s and the 1990s with those under the British rule.
India has been a victim of various economic systems imported from the West. It has pursued various aspects of communism, socialism, Keynesian economics and the monetarist theories despite their failure elsewhere. India must learn from its — and other countries’ — mistakes and make appropriate changes to strengthen its economy.
Among the first steps, India must dismantle the Nehruvian establishments and get rid of the planning commission along with the five-year plans. It must also aggressively pursue the deregulation of industries and completely eliminate the license raj that creates unfair monopolies while excluding smaller businesses from participating in the economy. India’s experience shows that sectors with fewer regulations thrive while those with many regulations stagnate and become mired in corruption. Jawaharlal Nehru’s so-called land reforms that retarded the growth of the agricultural and housing sectors too must be reversed and the government must respect everyone’s property rights.
India must also avoid the mistakes of the West and must not set up welfare systems like government-controlled social security schemes, education subsidies and free healthcare. America’s government-run social security scheme is on the road to failure and has rightly been likened to a Ponzi scheme. A scheme run by the private sector without the government forcing individuals to participate in it will be a fairer and more efficient method as all losses will be limited to voluntary participants in the plan.
The policies related to education in the western countries too have led to wasteful spending as bloated universities use massive grants from the government to generate research papers with trivial ideas and dole out degrees in frivolous subjects like gender studies, women’s studies, journalism and economics. To prevent this scenario and in the interest of fairness, the Indian government must abrogate all laws that make college degrees a requirement for any job and instead allow the market to make this determination.
The socialised healthcare systems too have failed in the West. In a reversal of roles after India liberalised its economy, patients from Canada and UK seeking to escape their systems that keep them on waiting lists for several years now flock to Indian private sector hospitals for surgeries.
The Western fiscal policies too are flawed and emphasise consumption and treat debts and deficits as necessary components of a strong economy. These ideas have predictably led to the Western economies becoming unstable and their currencies rapidly losing purchasing power. The Indian government must change its ways and align itself with the Indian ethos which stresses prudent savings.
Indians have historically converted their savings to gold as they distrust the currency issued by the government. The government has retaliated by regulating the possession and exchange of gold.
The government must respect the rights of the people by getting off the fiat currency regime and allowing the unregulated use of any commodity including gold as the currency. In addition, it must shutter the Reserve Bank and stop interfering in the interest rate market. Such steps together with curbs on the fractional reserve banking system will lead to a stable economy with a stable currency.
India’s politicians and bureaucrats have pursued the cynical goal of maximising their revenues even at the cost of imposing tyrannical measures on the people. Their goal implies that the people exist for the government and this has led to many unfair taxes and tariffs which need to be abolished.
Many of India’s policies result from imitating the West and following the suggestions of international organisations. Those who run these international organisations have created rules that favour a small set of people while causing instability in the economies around the world. They have used every crisis as an opportunity to set up yet another international organisation that takes the wealth of the developing countries in the guise of helping them. The current crisis in Europe too has led to calls for the creation of a global tax on trading along with a new organisation to regulate banks around the world. It is important that India eschews the suggestions of these organisations.
Following these steps will create a robust and vibrant economy while simultaneously addressing the problems of corruption, inflation and poverty. At the same time, India can provide leadership for the world to move towards a completely unfettered free enterprise system. To avoid the existing tyrannical systems, people too must remain vigilant and refresh the tree of liberty from time to time.