Pune, Feb 23: The economic turmoil that has engulfed south-east Asia is no reason for India to regret, in retrospect, its liberalisation policy. South-east Asia's Achilles Heel was "croney capitalism", economist Gangadhar Gadgil said.Gadgil, who spoke on the `Present crisis of recession', pinpointed reasons that have led to the present scenario in India. A large part of the resources which should have gone into productive activities found their way into government coffers, owing to the genius of accountants who showed non-recoverable loans as otherwise, he said.
Gadgil urged that the rupee should be allowed to fall to its natural rate of exchange, though agreeing that instability needs to be taken care of. He targeted Reserve Bank of India (RBI) governor Bimal Jalan for trying to stabilise the value of the rupee by increasing interest rates, which he said ultimately leads to the equity market going into depression. In this context, he appreciated finance minister P Chidambaram's efforts in bringing downthe rates of interest.
With the present rate of exchange, exports become difficult, leading to an increase in imports because of the norms set by the World Trade Organisation. So far, India has been encouraging exporters but not exports, he regretted.
Gadgil pressed for the adoption of an exit policy, saying that fifty years of protection to the industry without impetus for growth is the prime reason for Indian industries inefficiency in comparison with foreign firms in the post liberalisation phase. Pampering sick industries will get Indians nowhere, he added.
Terming speculation at the stock market as "absurd", Gadgil added that in a market economy "a fool pays for his mistakes", while in a socialist economy, "one gets fooled at the expense of the public".
The lesson to be learned from the south-east Asian debacle is that liberalisation should take place completely and properly. This will require further regulation in the banking system, exposure to competition to indigenous industry by encouragingforeign investment and facilitating infrastructural growth.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
