The Rise of India: Overcoming Caste Society and Permit-License-Quota Raj, Implementing Some Economic Freedom

다국어 초록 (Multilingual Abstract)

Two or three centuries ago most of mankind was still very poor. When the West outgrewmass poverty, India was a British colony and suffered from stagnation. When East Asianeconomies exploited the advantages of backwardness and benefited from export-ledgrowth, India remained inward-looking and poor. The ‘Hindu rate of growth’ preservedmass poverty. Since the reforms of the early 1990s India has exploited the advantages ofbackwardness and some global markets. In this article, the roots of India’s failure to growrapidly before the end of the twentieth century are analyzed. Stagnation is blamed onrestrictions of economic freedom, whereas growth is explained by the expansion ofeconomic freedom. Before the mid-twentieth century, the caste system and the legacy ofsultanism curtailed economic freedom and contributed to economic stagnation. Thereafter,democratic socialism distorted incentives and generated ‘permit-license-quota raj’or a rent-seeking society. When some obstacles to growth were dismantled, vigorousgrowth followed. Although expanding economic freedom remains limited. India’s growthpotential is not yet fully exploited. Indian infrastructure and human capital formationremain inadequate, regulations intrusive, and the budget in deficit. The rule of law looksbetter on paper than from the ground. Compared to China Indian public policy still hasa lot of room for improvements. ‘Maoists’ or Naxalites threaten political stability andeconomic freedom. Geopolitics may explain India’s late, slow and incomplete reforms. Therise of Asia, in particular of China and India, generates geopolitical challenges of its own.
Conceivably, the global expansion of economic freedom permits not only the rise of Asia,but the peaceful management of the coming power transition between Asia and the West.

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