Economic Survey: From Crony Socialism To Stigmatised Capitalism
The shadows of morning commuters are cast as they cross the road in the central business district of Singapore (Photographer: SeongJoon Cho/Bloomberg)  

Economic Survey: From Crony Socialism To Stigmatised Capitalism

India has moved from an environment of “crony socialism” to one of “stigmatised capitalism”, making the environment for policy reforms a tough one, said Arvind Subramanian, the government’s chief economic adviser. Subramanian, while releasing the Economic Survey for 2017-18, spoke of India’s past experience which has left the country with an ambivalent feeling towards private enterprise.

Subramanian refers to two experiences in particular. The “licence-quota-control Raj”and the rent-seeking and corruption associated with the allocation of resources.

During the licence raj days, it was widely felt that private enterprise, which was close to the governance machinery, had an undue advantage over those who may not have had the same privilege.

“Some of this stigma was washed away during the IT boom that started in the 1990s, because the sector had developed on intrinsic competitive merit rather than proximity to government, had adopted exemplary governance standards, listed on international stock exchanges, and thrived in the global market place,” noted the survey. It added that these developments had improved the credentials of Indian capital.

Then came another setback to the reputation of Indian private capital. This time from the allocation of natural resources.

The intense rent-seeking and corruption associated with the allocation of spectrum, coal, land and environmental permits reinforced the stigmatisation against private capital, the survey said.

The two experiences have left the public believing that Indian promoters have little skill in the game and that India has “capitalism without equity.” The perception that Indian promoters don’t just have “limited liability” but “very little liability” has further exacerbated the negative perception of Indian capital, said the survey.

It concluded that India may have moved from “crony socialism to stigmatised capitalism”, which makes reforms difficult.

So, one might say that India had moved from “crony socialism to stigmatized capitalism.” It is that zeitgeist (or Maahaul) of stigmatised capitalism—an accumulated legacy inherited by the government—that made policy reforms so difficult and makes the recent progress in addressing the Twin Balance Sheet challenge noteworthy.
Economic Survey 2017-18
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