How did the small-ticket reform help India?24 Feb 2011
It has been a constant refrain among economists that the country's budgets have lacked big-ticket reforms. This is an op-ed by TT Ram Mohan, Professor at IIMA:- http://goo.gl/p0T7L. Read it and if you lack time read the excerpts here.
- One area in which ‘small-ticket’ reform has clearly been a blessing for the economy is disinvestment of public sector undertakings (PSUs). It is contended that the sale of government assets cannot solve fiscal problems of a structural kind, it can only be a palliative. This is indeed true, but the sale of government assets helps manage the fiscal problem until the underlying structural problems are addressed. It spares the government the need to effect drastic adjustments in revenues and expenditure that could be politically unpopular or infeasible.
- The other areas of small-ticket reform and their benefits: The gradual movement towards full convertibility and the cautious approach towards foreign bank expansion helped stave off a banking crisis.
- The phasing out of reduction in import duties over a long period gave Indian firms more time to adjust to competition and reduced the adverse impact on banks.
- The measured reduction in subsidies on petroleum and the reluctance to address other subsidies have ensured that economic progress was not derailed by popular unrest.