“India needed a mix of socialism widely represented by public sector and free market economy to enable private sector contribute to the development process,” argues veteran Journalist K R Sudhaman in his recent book on public sector—the good, the bad, the ugly.

Both state and civil society are needed for improved and efficient delivery of social schemes as witnessed after the liberalisation of the economy in 1991. This mixed economic system has stood the test of time and has been very handy in dealing with difficult situations arising out of external factors, be it wars of 1960s, oil crisis of 1970s, collapse of Soviet Union in 1991, East Asian Economic crisis of 1997 or global financial crisis of 2008. Even at this juncture of corona virus pandemic and lockdown, Public sector has played role like Air India ferrying stranded Indian abroad or Indian Railways carrying migrant labour to their native towns and villages.

Now the global economic recession due to Corona virus pandemic and the consequent lockdown has thought India that social safety net was critical to overcome difficult economic situation, Sudhaman says in the book brought out by Har-Anand Publications.

The World economy has not fully recovered since the 2008 crisis and now when there were green shoots of recovery, the pandemic made it worse pushing global depression worse than that of 1930s.

Wisdom dawned among experts after the collapse of Soviet Union in 1991 that extreme Marxian philosophy of socialistic pattern of development did not provide answers to all the weaknesses and ills of an economy. Likewise the 2008 global financial crisis also thought a lesson that unbridled free market economy practiced by the capitalist United States did not possess the Adam Smith’s invisible hand to correct the weaknesses in the economy.

The 2008 global financial crisis has only corroborated India’s founding fathers belief that mixed economic pattern of development in the formative years with a tilt towards socialistic pattern of development and later with a tilt towards capitalistic, more precisely market oriented, system of development in an era of globalization was the most preferred sustainable development model, Sudhaman points out.

Past experience clearly showed that only mixed economy can “weather the storm.” It gave the economic strength to face the emerging economic challenges, Sudhaman argues.

No country can be insulated from the contagion effect of the crisis but the conservative approach and gradual reform process has ensured that India had a safety valve during the 2008 crisis. This helped the economy recover in view of the macro-economic stability and strong fundamentals. It is noteworthy that public enterprises and public sector banks contributed immensely to mitigate the crisis.

India’s growth might not have been as rapid as China’s but reforms ensured that the Indian economy moved to a higher growth path on a sustainable pace.

India always had a soft landing in a crisis. Many emerging economies faced hard landing from time to time during economic crisis, Sudhaman emphasis adding even miracle economies of South East Asia or Latin America had problems because of overzealous pursuits of reforms. India survived during the collapse of Soviet Union with the timely opening up of the economy in 1991. Calibrated current and capital account convertibility ensured India was insulated during the East Asian currency meltdown, which did not spare even miracle economies of South East Asia, South Korea, Brazil and Argentina.

These empirical evidences clearly indicate that extreme developmental models are not sustainable.

In early stages of development, public sector played an important role in creating industrial base in India. During globalization, public sector geared itself to take on competition and become role models for private companies.

If public sector built up basic and heavy industries in early stages of development, it took on competition from private sector after reforms. Large public enterprises like ONGC, NTPC, SBI, MMTC, BHEL, NMDC and so on were standing tall in front of some of the new generation and some old generation private companies, Sudhaman says adding there were some failures in public sector like ITI and HMT, which did well during pre liberalisation era and unable to cope with competition in post reform era. (IPA Service)