Understanding the real meaning of economic reforms

It is quite clear that the recent budget presented by Mr Pranab Mukherjee had little by way of structural reforms. A few economists and businessmen had the courage and conviction to point this out while others, who valued their relationship with the finance minister more, made weak or no references to this aspect of the budget. It is about 20 years since India embarked on the path of economic reforms. So this is indeed a good time to take stock of the situation. But before we do that we need to understand he meaning of the word, " Reforms".

It would be too much to cover the topic exhaustively in a blog but I shall make an attempt to convey the essence. Reform means a new approach to doing things.For example, if the Government has been running certain businesses so far, where it is not really needed, it must gracefully withdraw and pave the way for the private sector to take over.

Reforms also mean that there is no free lunch. If we as consumers have been getting something free or at lower than the market prices, we need to start paying more so that over time the inbuilt subsidy is eliminated.

Reforms means that the Government gives up its powers in areas where it does not need to be a policeman so that businessmen can spend more time strategising and running the business instead of worrying about taking approvals from the government and complying with regulations.

Reforms mean that unproductive and wasteful activities that are a drain on our limited resources are stopped. This is turns means an easy exit route that enables companies to shut down operations which cannot be turned around.

Reforms means making the government's activities more transparent and imposing accountability on Government staff.

And now let us try understand what the word" Reforms" does not mean.

Reforms does not mean postponing price increases of items as justified by market trends.

Reforms does not mean giving lollipops to people by way of ad hoc tax reductions.

Reforms does not mean tinkering with excise and customs duties from time to time and thereby creating uncertainty in the minds of entrepreneurs.

Reforms does not making various futuristic statements of good intentions without the data to back them or the discipline and will power to implement them.

Reforms does not mean making grandiose announcements to spend more for the poor but without even bothering to check how much of this money will ever reach the poor.

Now examine the proposals in the recent budget. It will be amply clear how committed our Government is to structural economic reforms.