Prior to the reforms of 1991. India’s economic policies were dominated by welfarism, self- reliance, socialistic ideals and others. The State pursued the policies of import substitutions, encouragement of public or state entrepreneurship and imposed regulations and controls over private enterprises and others. The public sector suffered from lack of autonomy in policy making. It lacked motivation and neglected profit making. There was neither innovation nor reform. This made the public sector sick instead of becoming the instrument of restructuring of the economy. Because of these environmental compulsions, restructuring was felt as the crying need and was seen as inescapable. As a result market controlled economy was seen as a solution to address the societal inequalities.
The primary objective of liberalization is claimed to be the reorientation of economies in the direction of market principles. All the activities and projects were weighed on the basis of its economic returns. The emphasis was laid on removal of subsidies, price supports, user pay principle, privatization and others. These market principles have ignored the social concerns of poor and need to compensate the interests of the market players like MNCs and TNCs. The State was also made to bear the costs of not only transition towards market but also commit its own resources towards that. The result is that instead of market serving the ends of the economy, the State and economy are in turn reoriented to serve the growth of markets.
The net results of liberalization for the economies of the third world nations have serious social implications. Liberalization has led to the growth of elitist interests, exclusion and marginalization of poor and unsustainable patterns of development. New investments through MNCs and TNCs which are seen as creating new jobs have also displaced traditional sectors of the economy. Liberalization has oriented the economy against the poor, both directly and indirectly. The presumption that market would become the corrective mechanism of the social maladies through its trickle down effect simply did not work. Let us remember India’s widespread poverty, high unemployment and poor record in health, nutrition and literacy and ask how far the reform process has helped. Government has initiated many programmes and policies like poverty alleviation programmes (PAP) and social services are expanded and broadened. It is aware that many areas of social concerns, growth and development could not be left entirely to market mechanism.
The Human Development Report (1996) has rightly held , that the goal of development process should be improvement of social and material conditions and enhancement of life chances of all of society’s members and income growth is but one of the means to this end. In the absence of determined efforts by societies and their governments, the end result may be growth that is ‘jobless, ruthless, voiceless, rootless and futureless’. Therefore, there has been no retreat of the State rather there has been a shift from one form of State intervention to another. The State has given up its redistributive role and entered into a new partnership with the private sector through the mixed economy structure. This has of course narrowed the social base of the State. There is a greater need of State intervention in social sphere but the stress seems to be on empowering people meaning making them capable of competing effectively in the market.
Witnessing the indispensable intervention of the State, consensus between State and market to achieve development through various policy measures has clearly given us an understanding that ‘markets fail, but so do governments’. To justify the interventions, it is not enough to know that the institutions are failing; it is also necessary to come up with the alternative institutional arrangements to complement and supplement the role of market and the State in order to assist both the State and market to achieve their policy concerns of economic growth and social equity.
1. Can you explain: restructuring was felt as the crying need and was seen as inescapable.
2.What does `the statement market controlled economy was seen as a solution to address the societal inequalities’ mean?.
3. Explain: The net results of liberalization for the economies of the third world nations have serious social implications. `The result is that instead of market serving the ends of the economy, the State and economy are in turn reoriented to serve the growth of markets’..
4. How far has there been a ‘ trickle down effect?’
5. Can you discuss some of the ‘poverty alleviation programmes’
6. What is `The Human Development Report (1996)’
7. How far do you agree with the statements that the Reforms have led to a ‘jobless, ruthless, voiceless, rootless and futureless’ situation. `The State has given up its redistributive role and entered into a new partnership with the private sector through the mixed economy structure’.
8. How far has there been a ‘retreat of the State’?
9. In what sense have the people been empowered? Can you suggest measures for real empowerment?
10. Explain ‘markets fail, but so do governments’.
11. Liberalization has of course narrowed the social base of the State.
12. What ‘alternative institutional arrangements’ will promote `concerns of economic growth and social equity’?