Saving India's economy

[Louis Proyect <lnp3@xxxxxxxxx>]

NY Times, May 20, 2004
Sikh Who Saved India's Economy Is Named Premier
By AMY WALDMAN

NEW DELHI, May 19 - Manmohan Singh, the gentlemanly Oxford-educated
economist who saved India from economic collapse in 1991 and began the
liberalization of its economy, has been appointed the country's next
prime minister, ending a week of high political drama.

Mr. Singh said Wednesday night that the country's president had asked
him to form the next government. At his side stood Sonia Gandhi, who a
day earlier had stunned the country by announcing she would not become
prime minister as expected.

Mrs. Gandhi, the Italian-born widow of former Prime Minister Rajiv
Gandhi, reiterated that decision on Wednesday, despite pleas and
protests from party members. Parliament members from her Indian National
Congress then selected Mr. Singh, who was finance minister from 1991 to
1996. He will be sworn in within a few days.

In many ways, Mr. Singh, the architect of the restructuring of the
Indian economy after four decades of quasi-socialism, is an apt choice
to lead India now, when it is fast rising as a global economic power.

It faces the challenge of reforming further in order to ensure higher
growth rates, but also delivering the benefits of reform beyond the
growing middle class. That is the message being taken from the election
results, when the largely pro-reform government led by the Bharatiya
Janata Party was rejected by voters.

"We will give to the world and to our people a model of economic
reforms," Mr. Singh said Wednesday night, but with a "human element."
The new government, he said, would "create new opportunities for the
poor and the downtrodden to participate in development."

full: http://www.nytimes.com/2004/05/20/international/asia/20indi.html

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Times of India
Thursday 20 April 2000

Editorial

Poverty of Ideas

One of the paradoxes of the reform era is that even though economic
liberalisation has led to a broad upswing in growth rates, no
significant dent has been made in country's poverty profile. In
1991, the year Manmohan Singh -- who was finance minister at the
time -- launched the first set of reform policies, 36.3 per cent
of the population was considered poor. By 1997, the latest year
for which complete National Sample Survey data is available, the
rate had fallen only by two per cent to 34.4 per cent. This despite
the economy having grown by more than five per cent per annum during
the period. Even more curious is the fact that the poverty rate
fell steadily during the 1970s and 1980s -- when the socialistic
era of controls, permits and licenses was in full swing and the
country's economy grew only at what was derisively known as the
`Hindu' rate of growth. If the results of the `thin' survey conducted
by the NSS in 1998 are taken into account, the contrast between
the reform and pre-reform periods becomes starker still. The 1998
survey -- drawn from a smaller sample than earlier surveys --
reveals that the number of those below the poverty line might
actually have increased in the past few years and could be close
to 40 per cent. The pessimistic picture emerging from the NSS does
have a certain resonance with anecdotal evidence of immiseration
in some regions and among certain sections of the population.
Landless labourers appear to be a particularly vulnerable cohort,
especially given the extreme sensitivity of real wages to even
small changes in inflation and food prices.

While it is not certain that the incidence of poverty has increased
since the reforms process began -- more studies and surveys are
needed before such a determination can be made -- it is certainly
evident that higher growth rates alone will not help India's poor.
Policy makers need to bear three points in mind when they discuss
the future trajectory of the reforms process. First, since many
liberalising countries in Asia, Africa and Latin America experienced
an increase in poverty at the initial stages of reform, India cannot
afford to be complacent. Second, the exclusion of a large number
of people from the fruits of reform will, in a democracy, undermine
the political viability of liberalisation. To a certain extent,
this is already happening in India as diverse constituencies have
begun to demand a roll-back of deficit-cutting measures and a halt
to privatisation.

Third, the interests of vulnerable sections of the population can
only be safeguarded by focused policies which provide immediate
relief and also enhance the capacities and entitlements of the
poor. The government's present system of subsidies is too diffused
to make much of a positive impact on the poverty rate. Nevertheless,
a precipitate withdrawal of the kind the finance minister has
envisaged in this year's Budget cannot but have a negative impact.
The poor will continue to remain poor unless we invest in them more
than political rhetoric and economic models that are known to be
ineffective. Reforms will be a political and economic failure if
the government fails to invest in health and education and physical
infrastructure like housing, transportation and sanitation.


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