Socialism Kills: The Human Cost of Delayed Economic Reform in India

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As the world approaches the 20th anniversary of thefall of communism, it is worth investigating thecosts borne by countries like India that did notbecome communist but drew heavily on the Soviet model.For three decades after its independence in 1947, Indiastrove for self‐​sufficiency instead of the gains of internationaltrade, and gave the state an ever‐​increasing role incontrolling the means of production. These policies yieldedeconomic growth of 3.5 percent per year, which was halfthat of export‐​oriented Asian countries, and yielded slowprogress in social indicators, too. Growth per capita inIndia was even slower, at 1.49 percent per year. It acceleratedafter reforms started tentatively in 1981, and shot up to6.78 percent per year after reforms deepened in the currentdecade.

What would the impact on social indicators have beenhad India commenced economic reform one decade earlier,and enjoyed correspondingly faster economic growth andimprovements in human development indicators? Thispaper seeks to estimate the number of “missing children,”“missing literates,” and “missing non‐​poor” resulting fromdelayed reform, slower economic growth, and hence, slowerimprovement of social indicators. It finds that with earlierreform, 14.5 million more children would have survived,261 million more Indians would have become literate, and109 million more people would have risen above the povertyline. The delay in economic reform represents an enormoussocial tragedy. It drives home the point that India’ssocialist era, which claimed it would deliver growth withsocial justice, delivered neither.

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Swaminathan S. Anklesaria Aiyar

Swaminathan Aiyar is a research fellow at the Cato Institute’s Center for Global Liberty and Prosperity and has been editor of India’s two biggest financial dailies, the Economic Times and Financial Express.