The Indian state is still to fully unshackle our economy

Economic success needs the state to function as an enlightened referee and be less statist

- NARAYAN RAMACHANDRAN

Indian citizens are hesitatingly capitalist. Perhaps because of this, Indian politicians are unhesitatingly statist.

There are many reasons for this. Independent India was born as a poor country with universal adult franchise. Most developed democracies widened the right to vote only after getting rich. Capitalism works best when the institutional structures of a developed economy ensure equality of opportunity, fair competition and a hefty price for violating rules. For capitalism to work for a large majority of people, you need institutions to encode and enforce the rules, and prosperity to fund the welfare payments required to uplift specific disadvantaged segments of the population.

Given the imperatives of a large and poor electorate, if a political economy becomes redistributive too early, then the wealth pie and institutions do not grow large and robust enough for the job. Since Independence, India's quandary has been just this. While nearly 400 million people have been elevated from abject poverty, any surplus has been distributed even before widespread prosperity could emerge.