New Delhi: India's Chief Economic Adviser (CEA) KV Subramanian said on Saturday that India has some distance to go in fully shifting from pro-crony to pro-business policies. He added that it will be pro-business policies that will enable the "invisible hands of the market" and will take the country to the goal of $5 trillion.
"Pro-business policies are those that enable fair competition in the country. We have some distance to go in terms of enabling that fully. Pro-crony policies on the other hand just help incumbents and that is something that we have to stay away from in enabling the invisible hands of the market," he said at an alumni conference of his alma mater IIT-Kanpur here. Indian policies have been criticised for favouring crony capitalists in the initial decades after Independence until the economy was opened up by means of liberalisation in 1991. CEA Subramanian said that after the CAG report on telecom spectrum allocations came out in 2011, investor returns from "connected companies," a euphemism for crony firms, have been very low as compared to the broader indices.
While noting that the problem with cronyism is that it is not better business models and processes which drive the growth, CEA Subramanian said that we should always aim for "creative destruction" where the incumbents are challenged.
Making a reference to first Prime Minister Jawaharlal Nehru's famous speech when India attained freedom, Subramanian said, "The tryst with socialism did not deliver the tryst with destiny." He also stressed on not depending only on recent work in economics to make policy choices and neglecting age-old texts like the Arthashastra. "Scholarly work isn't something that was written in the last 100 years but dates back millennia," he said.
If governance standards have to be increased in the country, there has to be a greater focus on disclosing related-party transactions, Subramanian said. The Union Budget's focus on 'Assemble in India' should not be seen as a substitute to the government's flagship 'Make in India' programme, but as a complementary aspect that will act as a precursor to other goals, he said.