The government should be an enabler, not a doting parent: Sanjeev Sanyal

“We may finally be shifting from a ‘ sarkar nirbhar Bharat ’ to an ‘ atma nirbhar Bharat ’,” reckons economist and author Sanjeev Sanyal, Principal Economic Adviser in the Ministry of Finance. Sanyal, who has authored several books including The Indian Renaissance: India’s Rise after a Thousand Years of Decline , fuses history with economics. Here, he surveys India’s economic policy-making since Independence, the unfinished business, and the lessons from India's civilisational history. Excerpts:

All political and economic systems are based on a philosophical framework, but they are rarely ‘pure’: they must adjust to the historical, cultural and political requirements of countries. There were attempts to create a ‘pure’ Marxist-Communist state in Cuba, North Korea, Mao’s China, and the Khmer Rouge in Cambodia, but they had disastrous consequences. There are very few examples of ‘pure’ capitalism. Capitalism has proved to be ‘universal’: almost the whole world uses some variant of it. However, its success owes to its flexibility: from China’s ‘state capitalism’ to the US ‘liberal capitalism’ to the ‘social democratic capitalism’ of the Nordic states. The success of these variants of capitalism depends on many things, including a country’s institutional and cultural moorings. However, the basics are the same: respect for enterprise and innovation, enforcement of contracts, a compatible tax structure and so on.

The Chanakyan state, as detailed in the Arthashastra, focusses on defence, internal security, coinage, contract enforcement, infrastructure, regulation and other framework issues. It is not a libertarian minimal state (it takes the role of the state seriously), but the citizen is not considered a dependant. This contrasts with the Ashokan view: that the citizen is a child who must be looked after by a ‘mai-baap sarkar’.

Sadly, after Independence, we opted for a Nehruvian model based on the Ashokan ideal. Although we liberalised our economy in 1991, the Ashokan ideal continued to weigh us down. However, we may finally be shifting from a ‘sarkar nirbhar Bharat’ (an India reliant on the government) to an ‘atma nirbhar Bharat’ (a self-reliant India). The government must still play an active role to support infant industries, revive demand during an economic shock, build infrastructure and so on. But it’s role is of an enabler rather than a doting parent.

India adopted institutional structures from the West, but its socialist-political economy is dominated by an elite bureaucracy, which has failed to deliver.

Institutional structures in India are the result of colonial-era institutions overlaid by socialist-era processes and command-control mechanisms. After 1991, we added new institutions meant to regulate the market economy. However, the system was not holistically reviewed: we’ve ended up with defunct departments, autonomous bodies, and outdated laws. An effort is under way to streamline departments and abolish old laws, but it needs to be scaled up.

Chanakya was suspicious of government officials, but today the official has an exalted status.

One of the facets of Indian bureaucratic processes, laws and regulations is a deep-rooted suspicion of the citizen. This is a colonial legacy: the then government was suspicious of the ‘natives’. The socialist era aggravated this, given its suspicion of private business. This comes with a large cost: every rule/process is designed to punish the rule-breaker rather than facilitate the rule-compliant. The Chanakyan state emphasised restraining the government official – in contrast to the Ashokan view that the official is benign. In my view, good governance must be based on a system of trust – of the citizen and of the official. If one must choose, one should err on the side of trusting the citizen.

COMMENT NOW