The reforms that have been initiated are many; and they continue to arrive in many little moves, almost continually. But much of importance remains to be done. Should we condemn the reformers for hastening only slowly?

Remember that, to some extent, changing India’s uniquely damaging policy framework, nourished over three decades, is a task akin to cleaning up after a typhoon: the task is enormous and cannot be done all at once. It is also hard to double guess politicians beyond a point when, while they move in the right direction, they claim that they must be allowed to traverse the political minefields in a democracy as they, and not we technocrats, see fit as far as speed and strategy are concerned. The last time when technocratic full-speed-ahead advice to a reforming government backfired badly was when shock therapy was prescribed for Russia, with a backlash that gave Russia much political turmoil and little economic progress while returning Jeffrey Sachs unceremoniously to begin a life again at Harvard. I am reminded of his famous line: ‘you cannot cross a chasm in two leaps’, to which Padma Desai (I should confess my bias since she is my wife) replied: ‘you cannot cross it in one leap either unless you are Indiana Jones; so you drop a bridge instead’.

Yet governments can indeed be too slow for their own, and their societies’, good. My judgment is that the initial speed and scope of reforms in India were just about right. India took very definite and substantial steps towards freeing the economy: the industrial licensing system has been virtually dismantled, current account convertibility is virtually in place, and the astringent attitude to direct foreign investment (DFI) which had led to an incredibly low annual inflow of equity capital of just about US $100 million annually by 1990, has been reversed both in rhetoric and in policy actions.

This early harvest is not yet sumptuous, for these reforms are still to be deepened further. The current account convertibility still goes hand in hand with wholly muddled thinking that permits nearly all consumer goods to be still subjected to strict import controls on the silly ground that we ‘do not need such imports’! The DFI policy, while better, is still far from what is necessary to attract substantial inflows: the Enron affair, and now the withdrawal on grounds of inordinate delays in clearance by Amoco from a $ 1 billion coal based methane gas project again in energy-starved India, just reported in the Asian Wall Street Journal (September 20–21, 1996), suggest that much needs to be done, and fairly quickly, if India is to move effectively into its outward orientation mode nearly a quarter century after the East Asian NIE countries did and about a decade after the other Asean NECs have done. I am an optimist on this front since I believe that these dramatic instances will, given India’s open democratic system, lead to enough pressure from below to weed out the remaining inefficiencies.

The greater difficulties lie, however, in the speed at which important residual reforms can be carried out, now that the Rao government has been replaced by a weak coalition government. The two areas where reforms are necessary and critical, if the outward orientation is to produce growth rates of 9–10 per cent rather than of 6 per cent, are the public sector which cries out to be privatised now and the ability of firms to extract greater efficiency from its labour force, including through changed laws that permit the laying off of workers as necessary, though with appropriate safeguards. In neither area can one expect this coalition government, which has two Communist cabinet members with trade union backgrounds, to bite the bullet. True, the communists in Bengal have shown flexibility in going out to get DFI and talked the talk of ‘capitalist roaders’. But what you do when the rules are set by the center which you have no part of, and you must compete for resources in the market place at the state level, is entirely different from what you would do if you are at the center making the rules.

On the other hand, the new Prime Minister is pragmatic and his personal experience of the Global Age is from the Silicon Valley in Bangalore in his own state of Karnataka: and that gives him an optimistic view of the benefits to India from integrating rapidly into the world economy. And the new Finance Minister is as committed to reforms as the old one; in fact, the two had joined hands in the Rao government as the leading reformers of their time.

So, you can be an optimist or a pessimist as to whether we in India will change from second to third gear in our reforms or whether we will coast along in second gear. Only time will tell.