Our Constitution has served us well for over 75 years despite some challenges. It reinforced values of unity in diversity and harmony. It has largely fulfilled our socio-political aspirations. All the political parties swear by the Constitution, a product of socio-political consensus by the great minds of those times with opposing ideological dispositions.
Now, we need a similar consensus for an ‘Economic Constitution’ that will help fulfil the economic aspirations of our people (not just political parties) to be a developed nation by 2047, with a per capita income of about ₹15 lakh. Mere rhetoric and mathematical modelling won’t do. There’s need for a well-articulated long term development path, strategy and action. Economic aspirations are no less important than political and social aspirations.
The Indian Constitution drew insights from the constitutions of several other countries. For instance, concept of Republic from France, Directive Principles from Ireland, Fundamental Rights from the US, Fundamental Duties from USSR, Concurrent List from Australia, etc. These have been adapted to our historical and cultural perspectives.
In this context, let us examine some of the successful economic development experiences and models.
Washington Consensus: The main principles are primacy of markets, free trade with minimal tariff of around 10 per cent and foreign direct investment on a level playing field with local entrepreneurs, property rights, fiscal discipline, and deregulation. This model works best in an ecosystem of political democracy and free markets.
Jake Sullivan, US’ National Security Advisor, advocates a New Washington Consensus and active industrial policy, and some of these are aligned with their foreign policy. Joseph Stiglitz, American economist and Nobel Laureate, argues that while markets are at the centre of a successful economy, government has to create a climate for business to prosper and create jobs. It has to create physical and institutional infrastructure.
Beijing Consensus: State capitalism is central to this philosophy. Private entrepreneurship, markets and competition also thrive hand in hand. Innovation, experimentation, equity, self-determination, high savings and investment are among the important features. Flexibility and adaptation are the key. Most economic and investment decisions are decentralised and this coexists with centralised political authority. Shared prosperity is another objective.
Barcelona Development agenda: This advocates balanced role for the state and markets. It reminds of the need for micro-economic interventions to redress market failures and improve productivity. Government shall promote development and protect the poor as well. High quality institutions and experiments in policy making are other features.
Santiago Consensus: This is characterised by inclusivity, transparency and governance.
Berlin Consensus — forum for new economy: A group of economists have started working on a new paradigm to address new challenges. This questions the wisdom of overly relying on markets to resolve the problems of today like increasing inequalities, climate change, fragile global supply chains, recurring financial crisis and decreasing role of the State.
The dominant focus on efficiency, driven by technology, is creating social strife. Many liberal democracies are under threat or serious pressure. A new paradigm is being deliberated that, among other things, redefines the role of the state, markets and puts people’s interest at the forefront.
India’s development path
Over the last three decades, India has embarked on several economic reforms and cumulatively these helped us attain a GDP of $4 trillion. But China, which was on economic reform path just a decade earlier, has raced ahead to attain a GDP of $17 trillion.
While varied political systems partly explain this huge difference, there are other important factors like second generation reforms, massive investment in R&D, high savings and investment, investment in education and primary health and, not the least, accountability of bureaucracy for economic development.
Our reforms are halting and hindered by electoral cycles. There are quite a few solutions but no comprehensive development path.
While we may draw on the development experiences of other successful countries, we need to contextualise them to our opportunities and challenges.
India has a huge pool of brilliant economists with hands-on experience in macro, micro, trade, and development areas. Maybe we can create something similar to a constituent assembly with these economists and help lay out a long-term plan for development. To kick-start this process, the government may organise a series of hackathons to generate ideas. Group think does not help.
Political bipartisanship is fundamental to this process. The two main political formations, NDA and INDIA bloc, represent nearly the entire gamut of the political spectrum. There can no be no better time to strike economic development consensus, where both sides exhibit statesmanship. This is not a replacement but an add-on to our existing Constitution. The upcoming Budget could probably initiate this debate.
The writer is a former Director and CEO, IDRBT, and Chairman NPCI