The Indian Experience of Liberalizing Economy : A Lesson for Nepal

The Indian  Experience of Liberalizing Economy :  Lessons for Nepal

(The lessons for Nepal from the Indian experience is that liberalization of economy and building of state's regulatory capacities should progress simultaneously to ensure benefit to the common people and keep the general economy healthy. Half -hearted liberalization committed under pressure and in the face of impending   crisis does not carry any people or any nation   long on the path of peace, stability and prosperity.)

 Indian experience of liberalizing the economy from 1991 up till now is  interesting for all the developing countries. It is crucial for  Nepal because of the nature of  ties that exist between  India and Nepal. Last year only, the Government of Nepal concluded an agreement with India commonly knows as BIPPA to pave way for

Investment of Indian money in Nepal. There has not been any substantial Indian investment after that, yet the agreement has aroused people's hope for investment. There is opposition to the agreement as well, yet common people do not seem to be against that. There are talks to conclude BIPPA like agreement with China as well to bring Chinese investment. That is part of Geo- politics  as Nepal is situated between India and China.  

But India does not seem to have a happy story at its home front after the agreement. According to a research conducted by an international organization, the growth index in India and Nepal are the same this year as earlier. India's position is 56 on the scale of some 180 countries where as Nepal's position is 123 .The Indian Government was held  underachiever by International economic observers and media. In the given context, the general impression is that the recent reforms are essential to lift the image of India and the image of the present government in the international community. Others say the declared reforms are must to avert any future economic crisis similar to European economic crisis. PM Man Mohan Singh hinted at that in his recent speech. Some say that to cover up non performance of economy, the government has used the crisis to introduce harsh measures to invite foreign money against the interest of the common people at this juncture.

Indian Prime minister Man Mohan Singh made it clear in his speech that the balance between the income and expenditure is no more good and reliable and the government needs  money. Obviously, the intention of the reform measures are to find new sources of money to balance the imbalances of the general economy in which income from the exports have not increased to meet the rising expenses.If money can not come from exporting goods, then it should come  foreign investors.

There has been increase in magnitude of import  of goods but no  increase in the magnitude of export of goods in India,it is observed. Obviously  it is so because the Indian manufacturers could not do well in the international competitive market. The reason for this  could be that there is  no good enough environment for competitive business within  home  and so the business community is lacking in the required  skills and aptitude. The manufactures, mostly living in the urban areas, are getting  much of the subsidies for manufacturing, but their non performance has proved that the subsidies  has been  a burden upon the hard working  but neglected farmers and people living in the rural part of India.

One of the reasons accounted for the non performance of manufacturing sector in any developing country  is corruption at the political and bureaucratic level. Because of deep rooted corruption, state's regulatory capacities for  liberalizing economy  does not develop properly and that affects the prospects of economic development adversely. That also affects the capacities of the manufacturers. It happens so when powerful business people co opt state officials and the resources and decision making power of the state are wrongly used for the benefit of the powerful. The common people and the general economy then suffers.

But when water starts running over the head, then it is the hard work, resources and entrepreneurship of the Aam Aadmi- common people that is targeted  for extraction of resources by those who are powerful. The  labor and the capital of the common men are always the last resort to undo the losses  caused by the powerful  and to fill up the blanks of the economy in developing countries. Now India seemingly is in need to introduce harsh measures to balance the imbalances of economy by using the capital of the common people.

FDI in retail market is definitely going to place the burden of economic non performance upon the shoulders of  the farmers and poor people. If  fifty percent of the Foreign Direct Investment would go for making of the go downs and cold storage, as Indian PM has said in his speech, God only knows who would  ensure food security for  the poor people in India, the foreign investors or the Government of India!

I am also wondering how Nepali farmers and people are going to be affected by FDI in India's retail markets when our border is open and is regulated for non regulation to benefit  the powerful. Though, governments of three neighboring states are against FDI in retail market, it would still be crucial for Nepal  because the number of food deficit districts have been constantly  increasing over the years and Nepal is importing food products from outside to meet its need.

It is ironical that there is no reliable data about agricultural produces in the country. There is  no convincing  explanation also as to why the number of food deficit districts has gone on  increasing  over the years. Our business community and the government have maintained silence on the issue of current reform measure in India and its probable affects on Nepal, though we are directly and indirectly going to be affected by the changes in the neighborhood.

In India the rich business community  and market gurus are happy because they see the prospects of money coming to India. But how would that  work upon the labor and capital of common people and how would that affect the poor  and the middle class people in times to come is a big question. After two decades of opening the economy, disparities in income and poverty is still a very big challenge for India.

The lessons for Nepal from Indian experience is that liberalization of economy and building of state's regulatory capacities should progress simultaneously to ensure benefit to the common people and keep the general economy healthy. Half- baked liberalization committed under pressure and in the face of impending  crisis would not carry any people or any nation  long on the path of peace, stability and prosperity. There are values and norms of liberalization and not only rules, and those values and norms should also  be internalized by the stakeholders for creation of wealth for the society and the state. And  finally, it is the state's responsibility to educate and cultivate the values and norms of liberalization among the business people, manufacturers and the common people along with writing and implementing  the rules.

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2069 .6.7

Kathmandu