In an article for the Economic Times of India
, the Legatum Institute's Shanker Singham
explains why simply being 'business-friendly' is not enough to lift the country's people out of poverty. For true reform, government policies must also be 'market-friendly'.
“The Narendra Modi government swept into power two years ago on a reform agenda. The prime minister had promised to unlock the latent power of the private sector to drive increased economic activity and initiated a reform process that has proved difficult to fully realise. National-level reform is difficult everywhere. But it seems particularly so in India. Evidence from the transitions in the former Soviet Union and Latin America, in particular, shows that opening trade and border barriers, without addressing internal economic distortions—government restraints that are anti-competitive—also often leads to partial reform and crony capitalism. It has proved difficult to overcome the vested interests that benefit from these distortions, or anti-competitive market distortions (ACMDs). In this regard, India’s experience is not so different from the experience in other markets that are also in the process of reform.”
“On May 23, the Legatum Institute, a global think tank based in London, launched a ground-breaking report on the challenges and opportunities faced by the modern Indian economy. Anti-Competitive Market Distortions and Their Impact: A Case Study of India explores potential growth areas for the country and quantifies the cost of inaction across several key sectors through the focal lens of domestic competition, trade and property rights ... The opportunity for India to completely eliminate poverty is, by far, the most outstanding finding of this report, and the most encouraging to the future of the country. At present, nearly 60% of Indians (770 million people) live on $2 a day or less, and roughly 23% of Indians (307 million people) live on $1.25 a day or less.”
“If the Indian people are to reap the rewards that can be gained from a reduction of distortions, the government will need to seize the initiative and push structural reform even in the teeth of resistance from the beneficiaries of distortions.”
Read: Market-friendly or Simply Business-friendly? It Depends on How India Pushes for Real Reforms