When the Chief Economic Advisor to the Finance Ministry finished his talk at the Carnegie Endowment for International Peace in Washington DC, little could Dr Kaushik Basu have imagined how it would be reported in the print media not just in India, but in the US itself.

According to an Associated Press report carried by The Washington Post and other reports in the Indian print media, Dr Basu was credited with the view that India would see no big reforms till after the elections in 2014.

Predictably, a denial followed; but Mr Basu admitted he had referred to critical reforms being stalled on account of coalition politics. Just to make sure he was understood correctly, he added that major reforms were coming in the next six months, such as diesel decontrol, though he had doubts about GST reforms seeing the light of day soon.

Dr Basu's clarification did set the record right, for he never said what the press attributed to him. An audio link on the Carnegie Endowment Web site allows you to listen to his speech, and nowhere does he say that reforms will have to wait for the general elections of 2014.

Underlying themes

For an Indian the more significant aspects of his exposition lie beneath the obvious. His argument on the reforms so far — the bureaucracy and politics, the relationship between them as mediating agencies, policy transmission belts — taps into abiding beliefs prevalent in the West on India's capacity for change.

The iconography of such beliefs is best summed up by the image of a trundling elephant, to which, rather unfairly, qualities of sloth and ponderousness have been attributed. Other images populate this landscape of sloth: inefficiency, corruption (of course), bad roads and an array of market-unfriendly characters (Ms Mamata Banerjee, the irrational farmer, the Left) blocking the road to progress that Dr Manmohan Singh would like to drive us down.

Dr Basu reiterates all the stereotypes, a sluggish economy till 1991, a civil service aware of the debilitating effects of licensing but unwilling to change, keeping India backward. Then 1991 happens, Dr Manmohan Singh, Finance Minister, scripts the new scenario of a historic transformation that has been the outcome of reforms till 2003.

Present tense

The reform-engine, he admits, has sputtered almost to a halt at present. Coalition politics and a bureaucracy beset with the “psychology of finger pointing,” which for him means passing the buck or the file so as to delay decisions, stymie initiative. Lethargic decision making (the slug has returned!), anxieties of coalition politics and a cussed Opposition that would rather scuttle the GST reform they know is good for the economy than let the ruling party get credit have taken their toll.

But this explanation raises a question: what has changed since that magical period of reforms in the nineties? Has the setting, the enabling environment deteriorated?

This is where the skein of his argument begins to unravel. Reforms since 1991 have been pioneered by minority governments dependent on friendly parties. Dr Manmohan Singh's stellar reforms were inaugurated by a government under severe pressure, its victory and subsequent term haunted by the ‘Mandal-Mandir' controversy.

Every government since then ushered in reforms, even if sporadically shaken and stirred by the whims and caprices of partners and allies. Second, it is inconceivable, almost ridiculous, in fact, to believe that one policymaker, Dr Singh, could have ushered in a mindset change in a bureaucracy used to years of routine decision-making; it is even more ludicrous to suggest this transformed bureaucracy has gone back to its earlier ways in recent times.

The same setting

Reforms in India have incubated in and sprung from the same murky environment of coalition politics, a slow-moving bureaucracy and vested interests in and out of government and politics.

In fact, it is the same all over the democratic world, even in the US, where every change from above is slow and protracted because it is subject to competing claims and levels of awareness and articulation of various stakeholders.

In Ireland, the austerity plans went through effortlessly, thanks to a confused populace; in Greece, they did not because of an angry population. In the US a resoundingly victorious Democrat President cannot get through reforms everyone wants but the Opposition and the super-rich.

In India it is no different, except for the scale and manner of articulation. The tapestry of contesting claims is far more complex and heterogeneous than anywhere else in the world.

And, yet minority governments hobbled by coalition politics and indecisive bureaucrats who, in turn are often mauled by whimsical ministers, have managed reforms that barely three decades ago would have been unthinkable.

So what's the difference?

The only difference between that “golden” period and the present, between protracted success and helpless failure, lies in the nature of reforms then and now.

In the first three years that Dr Basu mentions as crucial, the “reforms” were, in hindsight easy; they required just an erasure. Abolishing licensing hurt a part of the bureaucracy no doubt (but just in New Delhi), and of course hide-bound industrialists grown bloated on licensing and the patronage of financial institutions.

Slow tariff cuts met protests from the so-called Bombay Club, but industrialists were quickly tuning into the possibilities that globalisation offered them. Financial reforms, too, were beneficial to a narrow sliver of the investing community and with a careless rapture almost, policymakers in Delhi could shave off income tax rates and create an environment for freer capital flows, aware that the RBI would play the “bad cop” when required.

Now, reforms matter

With the Special Economic Zones Act of 2005, the prospect of change leeched into that wider and roiling world of contesting claims, unlike all the other reforms since 1991. Now the opportunity for gain was to be accompanied by the threat of loss engulfing newer stakeholders roped into the ring.

Not just coalition partners in New Delhi, but States ruled by opposition parties had to now play some role in the execution of the proposed change. Policies were now no longer a win-win for all but a welter of wins and losses, some overlapping. Since 2005, every non-financial policy initiative has had to deal not just with resentful coalition partners, but State governments and localised stakeholders with alternative world views on what constitutes the best of a bargain.

The days of “air-conditioned-hall reforms” that turned the fortunes of a privileged few ready recipients of change are over. It is on the dusty plains of contesting claims and pluralist pressures that reforms such as the FDI in retail or the GST or refurbished proposals for SEZs will have to seek legitimacy. In the meantime, policy advisors could continue to refine the capital markets.

>blfeedback@thehindu.co.in

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