Reformation Circa 2021

Context: India needs a fresh air of reforms encompassing constitutional and institutional structures to evolve the governance template for the 21st century.

Re-visiting reforms the of 1991

• A brave political call: A sharp break with the past and an opportune confluence of circumstances.
• Relatively easier: for the following reasons - 
  • Barring industrial delicensing, they were about border measures like quantitative restrictions, tariffs, exchange rate, export subsidies, foreign direct investment (FDI).
  • They were Union government domain, not about factor markets (land, labour), involving state governments.
  • The political economy of resistance was weaker.
• Concerns: 
  • The unfinished agenda of ‘2-G’ reforms (1991 reforms) continues to be the unfinished agenda of ‘5-G’ (contemporary reforms) 30 years after.
  • In 1991, the reform template had an economist’s toolkit, ignoring institutions.

Reforms agenda for the future

• Furthering competition and liberalisation agenda of 1991: Bringing in competition in all services such as higher education, medical, legal, accountancy etc., agri-marketing reforms etc.
• Focus on productivity from efficient land, labour and capital markets: Cleaning up land titles on a pilot basis, IBC facilitating the efficient exit of capital, monetisation of PSUs and labour reforms are all facing enormous resistances in implementation. 
• Focus on institutions: Need for evolving 21st-century governance structures encompassing reforms across the Constitution, functioning of the legislature(s), the judiciary, the civil service, Union-state relations, formation of states etc.
• Bring out so-called reforms by stealth approach:  Without stoking too much controversy and backing off if necessary. At best, such reforms will amount to tweaking and be incremental, compared to the ambitious agenda.

Conclusion: Reforms are never win-win. They are win-lose — welfare gains to winners more than compensating losses to losers.