Geography Reference
In-Depth Information
myriad points in the 1900s, has the government begun to see limited success in
this effort in 2001 and 2002?
In September 2001, the McKinsey Global Institute outlined a 13-pronged
strategy to achieve 10 per cent growth of India's gross domestic product (GDP).
On their list of recommendations are provisions for eliminating subsidies that
distort the product markets in goods and services; reducing barriers that disturb
factor markets; minimizing government ownership at both the central and state
levels; abolishing the reservation of products for small-scale industries; raising
property taxes and tariffs for municipal services; and reforming labor laws. 3
These recommendations echo the suggestions made by advocates of neo-liberal
reform inside and outside of the Indian government since the early 1990s.
In this essay, I survey the current status of reforms—both those that have
already been completed or are underway and those that are finally being pursued
after ten years of false starts—and offer a preliminary explanation for the
difference between the two. 4 In doing so, I focus on one reform strategy that the
government has had particular difficulty implementing: public sector
retrenchment and privatization. I suggest that the growing, though still limited,
success with privatization is due in large part to the new institutional environment
of competitive investment unleashed by earlier waves of market reform.
In what follows I first briefly situate my argument within a larger debate about
the conditions under which market reforms are realized. In the next section I
discuss Rajiv Gandhi's attempt to liberalize the economy in the mid-1980s. This
is followed by a section describing the crisis of 1991 and the reforms to date. 5
The remainder of the analysis will take up public sector reform and privatization,
and draw from the case of the 2001 privatization of one large public sector firm
in northern India, the Bharat Aluminium Company Limited (BALCO).
SECOND GENERATION REFORMS AND COMPETITIVE
INVESTMENT
Scholars investigating the conditions under which market-oriented reforms are
likely, initially posited a relationship between regime-type and reform-
mindedness. Some argued that democracy and reform ability are negatively
correlated, as leaders in democratic societies are encouraged to provide
immediate consumption, thus stealing resources from the pool available for
future spending or investment, and making policy goals like balanced budgets
and the elimination of subsidies impossible feats. 6
A second wave of scholars, finding little systematic evidence of a link between
regime-type and reform abilities, argued that democracies can be equally good
reformers; the spirit of public debate that pervades democratic societies allows
democratically elected leaders to build coalitions in support of reform without
resorting to the oppressive tactics of authoritarian states. 7
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