Relevance: GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Key Phrases : Ease of doing business, Governance, Costs versus benefits, Principal beneficiaries, Crony capitalists, ‘Factor market’ reforms, Top-down approach, Participative governance, Economic institutions, Charter.

Background:

Why should there be Reforms?

Reforms bring improvement or amendment in what is wrong, corrupt, unsatisfactory, etc.

For instance,

• Incomes for most Indians are insecure and low.
• Inequalities are growing; economic growth has become sluggish.
• Labour unions have been saying for many years that labour laws must be reformed
• The government is struggling to make “doing business” easier for small enterprises and self-employed earners.
• Farmers want reforms to make their livelihoods more secure and remunerative; the government has promised reforms to double their incomes.

Everyone wants reforms. Reforms are required, everyone agrees.

So what is the issue, why we are lacking in reforms and what can be done to have a successful reform? Let's start with looking at what must be reformed?

What must be reformed in present time?

It includes economic matters as well as governance matters.

• Federal governance: Federal governance is being distorted by a centre in haste to make bold reforms to attract large investments. In its apparent anxiety to prove it is ‘strong’, the government is rushing to make big announcements.
• Consultation process: Democratic processes for consultation with stakeholders are being paid lip-service to, even short-circuited, in a haste to implement change. It is unable to identify the right reforms the country needs because it is not consulting states and stakeholders sufficiently.

So, any reforms which are unilateral, taken in a top-down approach will not be successful on the ground level as these fail to capture the aspirations of people and complex socio-economic realities of the community.

A case in point:

The methods used for bold reforms in 1991 were appropriate for the type of reforms made then. They will not work for the reforms needed now. The 1991 reforms unleashed industry from licensing and made imports much easier. The reforms’ principal beneficiaries were consumers who could buy imported goods they could not before, and also traders and assemblers of products with imported components. Consumer aspirations were fulfilled. Reform resistance came from some large industries exposed to new international competition. Costs versus benefits were clear. The masses of India benefited, while crony capitalists lost.

Since then, economists and policymakers have been struggling to implement ‘factor market’ reforms for land, labour and natural resources. These affect the livelihoods of the masses. They need to shift from the age-old method of making bold reform and need to consult all the stakeholders in bringing reforms.

List of some stalled or opposed reforms:

• The government had to withdraw its proposed reforms in land acquisition.
• Bold reforms of labour laws formulated by the Centre are stalled at the level of states and continue to be opposed by unions.
• Reforms of environmental regulations to enable large industrial projects are resisted by organizations representing concerns of local communities.
• Reforms of agricultural institutions to double farmers’ incomes have been stalled by a stalwart movement of protest by millions of farmers who are the intended beneficiaries of these reforms.
• The proposed farm-sector reforms are seen to have reversed the equation of the 1991 reforms. This time the beneficiaries will be crony capitalists, farmers say, and they, the masses, will be the sufferers.

So let's look at what kind of process needs to adopted in bringing the right reforms

It is time for India’s bold reformers to go back to the drawing board. They must first get the process of systems reform right. India must reform its processes of democratic governance. It must reform economic institutions at the same time to enable incomes and wealth to increase much faster and more widely within its economic pyramid, and not only for the 1% at the top.

What changes India need in bringing reforms?

• Participative governance: Economic reforms that affect the masses directly must be developed with the people for the people. They cannot be developed by experts above for people below. Not only is that undemocratic, experts in academic and policy silos can’t comprehend social and political forces within a complex system.
• Being clear about the ultimate purpose of reforms: Are agriculture reforms, for example, aimed at increasing incomes of farmers around the country, or for attracting more corporate investments to build supply chains? Therefore, clarity is needed over who must be consulted the most and whose views on the best way to go about these reforms must prevail.
• Wider consultation: List the diverse stakeholders who will be most affected by the reforms under consideration—both favourably as well as unfavourably. All of them must be listened to very well, and they must listen to each other too for a consensus on the best and most fair solution.
• The process of consultation must be designed and conducted well. When badly designed and poorly conducted, it will not produce good insights and well-rounded solutions, nor any consensus.

Conclusion:

• Reform is an ongoing process of learning, and acting, and learning further together. India needs to build institutional abilities for democratic deliberations and democratic development. This was also expressed in the charter of the NITI Aayog which replaced the Planning Commission. Sadly, NITI Aayog has also been sucked into a top-down process of development and reform which cannot work.

Sources: Live Mint

Mains Question:

Q. Reform is an ongoing process of learning, and acting, and learning further together. If it is not done deliberately and diligently it will get opposed and stalled. Considering the Indian context, discuss how India needs to change its ways in bringing reforms. [250 words]