Thursday 29 October 2015

Why India should prefer incremental over big-bang reforms?

    Image Source: The Economist
  • Political entrepreneurs have three reasons to choose incremental over big bang reforms. 
    • First, India is a genuine democracy; it’s clear that, say, Chinese President Xi Jinping would never need to withdraw a GST or land bill. 
      • A benevolent dictatorship might seem to be the best form of government but you are more likely to end up with Robert Mugabe rather than Lee Kuan Yew. 
      • Indians are not irrational, ignorant or dyslexic — it’s just that our citizens and 30 lakh election winners disagree a lot. 
    • Second, big bang reforms imply one solution for all of India, but exports labour markets like Bihar need different interventions than import labour markets like Kerala, whose population is now 9 per cent Bihari. 
    • Finally, big bang reforms create an antibiotic reaction. If you propose 100 or zero, you usually get zero. India got more labour reform in the last one year than the 20 years before that because we stopped equating it with hire and fire and tackled inspections, apprentices, provident fund, decentralisation and online compliance. Of course a labour contract that is marriage without divorce must change but, just like the difference between a list of ingredients and a recipe, successful reform needs sequencing, proportioning and prioritising. Improving the ease-of-doing business involves a million negotiations but it would be delusional to believe that a public target to improve India’s global ranking and publishing a state ranking do not help. 
  • Big bang reforms are surgery without anesthesia; sustainability for India’s reforms will not come from a regulatory beheading, but with death by a thousand cuts.
  • [Ref: Indian Express]


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