Ahluwalia (2004)

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Ahluwalia (2004)

The advantages of Gradualism include the ability of a government to build consensus on reforms. Its disadvantages are that it is so slow, which can result in the weakened perception of benefits of reforms

Gradualism in India, takes the form of reforms having initial clear goals, but the detail of how to get there is decided as and when an opportunity arises. It is unplanned and so the time of change is immeasurable. An example is trade liberalisation, where the goal of lowering trade barriers was announced, but how much so and when was not clear and so it never really happened properly

Reforms in the 1980s were not from an economic or political crisis, but to compete globally, particularly as other Asian countries were becoming vastly more competitive. In the early 1990s, the acceleration of growth of the economy rose from an annual 5.5% in the 1980s to 7.5%.

However, the gradualist approach meant that it lost momentum and the rate of growth decelerated in the late 1990s back to what it was in the previous decade. Nevertheless, this growth was one that was self-sustaining, as the 5.5% in the 1980s was based on a build up of external debt and without the spurt in the early 1990s, India may not have been able to maintain the 5.5% of the 1980s.

Improve India

To achieve the 8% growth needed for economic reforms, the author suggests the government build up the following:

1. The agriculture industry, being that it makes up for 25% of the nation’s GDP. It needs to increase to about 4%. For this to happen, the government needs to invest in the rural roads and irrigation.
2. The infrastructure, including energy, telecommunications, roads, airports etc.
3. The deficit the country faces in the public sectors, including health and education. This funding needs to come from the States and the Centre.