India must choose its own path for a stronger and more equitable future

Economic Times

09-05-2025

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com .)
Donald Trump got one thing right. Working-class people are hurting. Neoliberal, free-market capitalists want financial capital to roam the world, unhampered by tariff and non-tariff barriers. They are unconcerned about the freedom of human capital - its citizens searching for work and incomes to live, who are being shut out to protect the cultures of rich countries.Trump and his corporate friends are hammering on India's doors again to open its borders to import US corporations-manufactured and agricultural products, and their services. India's leaders must rise above US pressures and reflect. What will be best for India's workers and farmers?History can be a good teacher. The Washington Consensus (read: ideology) was presumed to have won the ideological war with the collapse of the Soviet Union in 1991. Free-market capitalism had defeated government-regulated socialism. Ease of doing business trumped the ease of living of citizens.Private markets were forced on Russia by the US, and its state sector was dismantled, with disastrous consequences. Russia's GDP shrank by nearly 40% between 1991 and 1998, industrial output dropped and poverty rose, with 30% of the population living below the poverty line by the mid-1990s. Ironically, out of the shambles, Vladimir Putin emerged in 1999 as the leader to Make Russia Great Again.China and India took different paths in the 1990s. India toed closer to the US anti-socialist, free-market line. China did not succumb to US pressures. It continued the development of a centrally guided ' socialist market economy ', and to build its industrial capabilities before joining the global game.India's per-capita GDP has grown 7.3x since 1990; China's 42x - six times faster. China's manufacturing sector has grown 9x as large as India's. Its exports of hi-tech goods are 48x. Trump wants to Make America Great Again by curbing China's remarkable growth. He says the global trade regime - which the US itself put in place in the 1990s - is not fair to the US.In 2010, Adair Turner said the time has come to reconstruct economics. Too much reality was being left out of economists' models for them to explain the world. These flawed models are incapable of predicting the future condition of an economy.With a twist of Keynes' famous statement that 'practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist', Turner warned that 'the great danger lies with reasonably intellectual men and women who are employed in policy-making departments of central banks, regulatory bodies, and governments, who are aware of intellectual influences, but who tend to gravitate to simplified versions of the dominant belief of economists who are very much alive'.Communist China escaped the shock therapy Western economists imposed on communist Russia in 1992. China continued its path of reforms to a 'socialist market economy' - China's way of adopting capitalist tools without abandoning socialist ideology.In her book, How China Escaped Shock Therapy: The Market Reform Debate, Isabella M Weber writes, 'The famous Harvard development economist Dani Rodrik represents the economics profession more broadly when he answers his own question of whether 'anyone [can] name the [Western] economists or the piece of research that played an instrumental role in China's reforms' by claiming that 'economic research, at least as conventionally understood', did not play 'a significant role'.India's economists have two challenges before them:Redesign, along with other nations, structures of global trade and financial systems to make them fair for all.Reimagine structures of India's economy, and take a new road to create an equitable, democratic society, and achieve the vision of poorna swaraj - a country that provides equal political, social and economic freedom to all its citizens.The 'socialist' model India followed until 1991 was too top-down and controlled by government. The capitalist model of the economy it followed afterwards has turned out to be too much 'trickle-up'. Inequalities have increased, and incomes are not growing sufficiently in the lower half of the pyramid.India needs a new model of economic growth to strengthen its economy, and to make it a more equitable country.