Deep economic reform is needed

Mr Luthra, the shopkeeper at my local market who sells me once-scarce Western delicacies has views on many subjects.

Oddly, the new measure brought in by the Indian government last week to allow foreign supermarket chains to sell directly to customers, rather than through retailers, is not among them. Though he is one of the millions of small businessmen who critics of the measure say are likely to lose out, Mr Luthra is unconcerned, even when told Walmart has said it hopes to open a store in India within a year to 18 months.

"I have been here 30 years. I know everybody. How can some American compete with that?" he asks.

Fly into Delhi and you'll arrive at the international airport's new terminal building, opened in 2010. It is a concrete ­­manifestation of what 20 years of sustained economic growth can produce. Since a package of reforms designed by Manmohan Singh – then India's finance minister – was implemented in the early Nineties, India has enjoyed up to 9% growth each year.

But leave the airport and within minutes you really enter India. The roads are chaotic, clogged and pitted. The new Metro link to the airport is broken. All the gaps in India's growth story are glaringly obvious. The most recent batch of Indian reforms, introduced by the same Manmohan Singh, now prime minister, is inspired by the fear that these holes will swallow the progress made if drastic action is not taken.

Close aides explain that Singh's sudden courage stems from victory in a battle within his ruling Congress party, which has long been split between those favouring economic policies that owe much to socialist-style central planning and those looking to boost private-sector growth and foreign investment and cut back state spending. But first came a change in finance minister, and then party president Sonia Gandhi was convinced by Singh that unless some money was generated, the various dole schemes she believes are essential to improving the lot of India's poor (and her party's electoral chances) could not be funded.

"It is understood now that without money there is no welfare," an aide to the prime minister says. "There are many more [reforms] to come."

This is a huge shift, but the most recent reforms, though impressive in the context, are less so in the grand scheme of things. They may bring investment and reassure the markets, but they will not tackle the fundamental bottlenecks stifling growth – runaway public expenditure and soaring inflation. For this, new legislation is needed. And even Singh's loyal aide admits this is impossible.

The result is that India, at least until the 2014 election and almost certainly beyond, will not see the deep reform needed to return to high growth. It will putter on at 6% at best – just about enough to meet the current needs of the growing population, economists here say.

Outside Singh's office, the sun is slanting across the vista towards the Gate of India. Children play, labourers sleep under trees, coup-les stroll and snacks sellers do brisk business. Like Mr Luthra, no one seems very worried about the imminent arrival of Walmart. – © Guardian News & Media 2012

Jason Burke
Jason Burke works from in transit, probably. Africa Correspondent of The Guardian, author of books, 20 years reporting Middle East, South Asia, Europe, all over really. Overfond of commas. Dad. Jason Burke has over 38885 followers on Twitter.
Advertisting

Mkhwebane moves to halt ‘grossly unfair’ impeachment process

Mkhwebane moves to halt ‘grossly unfair’ impeachment process

Chaos theory: How Jürgen Klopp has harnessed the unpredictable

The Liverpool manager has his side playing unstoppable football but it’s the attention to detail off the field that has bred the success

Miners speak out against Sibanye

Not a year into buying Lonmin, Sibanye is accused of mistreating the mineworkers who were injured eight years ago during the Marikana massacre. But the platinum giant says it is a miscommunication. Athandiwe Saba and Paul Botes visit Marikana to find out the truth
Advertising

Press Releases

Wellcome Trust award goes to UKZN mental health champion

Dr Andr? J van Rensburg, a senior researcher in UKZN's Centre for Rural Health, received the Wellcome Trust Discretionary Award.

MTN gears up to deliver improved customer service

On 28 January, the first batch of MTN contract customers will be migrated onto the new customer service platform.

Request for expression of interest on analysis of quality and outcome indicators for regional and district hospitals in Lesotho

Introduction The Ministry of Health of Lesotho with the support of the World Bank funded Nutrition and Health Systems Strengthening...

MiX Telematics enhances in-vehicle video camera solution

The company has launched the gold MiX Vision Bureau Service, which includes driver-coaching tools to ensure risky driver behaviour can be addressed proactively and efficiently.

Boosting safety for cargo and drivers

The use of a telematics system for fleet vehicles has proved to be an important tool in helping to drive down costs and improve efficiency, says MiX Telematics Africa.

Silencing the guns and firearms amnesty

Silencing the guns and firearms amnesty

Gender-based violence is an affront to our humanity

Gender-based violence is an affront to our humanity

UK-Africa investment summit 2020: Think Africa Invest SA

UK-Africa investment summit 2020: Think Africa Invest SA