Fiscal federalism and economic freedom can drive our prosperity

A trade war must not distract India from pursuing a clear domestic agenda for economic success

- NITIN PAI

Imagine there was no other country but India. The subcontinent was all the landmass that there was on the planet, with oceans all around. And all 1.5 billion people in the world were Indians. The Indian national economy would be the global economy. There would be no such things as international trade, foreign investment and immigration. The Indian economy would be an autarchy. By definition, it would be self-sufficient.

Now think how such an economy could also be prosperous. The immediate order of business—as Bhishma teaches us in the Mahabharata's Shanti Parva—would be to establish the rule of law, protect property rights, govern justly and ensure that people live peaceful lives where they can enjoy the fruits of their labour.

The next task would be to ensure economic integration of the vast subcontinent, where goods, services, people, ideas and capital can move freely from one place to another.

Now that basic political and economic integration has been achieved, let us look at economic policy. What will we do for energy? There is very little oil we can pump out of the ground. There are no foreign countries that we can buy it from.

So we will have to rely on solar, wind and hydro-electric sources. We will have to use the coal that we have and invest in nuclear power plants. This might not cover all our requirements. So we will have to economize on the use of energy. Electricity cannot be provided free of cost to anyone, not even farmers.