October 27, 2015

Careful with the realism

IDFC Institute Advisory Board member Manish Sabharwal  wrote in Indian Express:


"Indian economic policymaking today faces two criticisms: First, that storytelling is far ahead of reality and second, that incremental reforms represent a lack of courage. But how does this square with India’s nine-rank rise in Transparency International’s corruption index, 16-rank rise in the WEF’s competitiveness index, and its topping global foreign direct investment rankings? One explanation is that the world has been fooled by marketing that “puts lipstick on a pig”. I disagree; these rankings echo historian Samuel Huntington’s quip that the gap between India’s ideals and reality is not a lie but a disappointment...

India doesn’t need a “realistic” plan, but a multi-year vision far ahead of our reality... it’s unfair to ignore the potentially self-fulfilling impact of unrealistic visions, marketing and incremental reform on job creation... any great first-generation entrepreneur knows that ambitions and goals must be larger than your pockets, or current capabilities...

Similarly, political entrepreneurship is the art of getting re-elected before your long-term interventions work, but that is not easy...

Political entrepreneurs have three reasons to choose incremental over big bang reforms. First, India is a genuine democracy; it’s clear that, say, Chinese President Xi Jinping would never need to withdraw a GST or land bill. A benevolent dictatorship might seem to be the best form of government but you are more likely to end up with Robert Mugabe rather than Lee Kuan Yew... Second, big bang reforms imply one solution for all of India, but exports labour markets like Bihar need different interventions than import labour markets like Kerala, whose population is now 9 per cent Bihari. Finally, big bang reforms create an antibiotic reaction. If you propose 100 or zero, you usually get zero..."

Topic : State Capacity / In : OP-EDS
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