Why a market economy remains India’s best bet even though the idea has taken a volley of Cold War II blows

Subscribe to enjoy similar stories. It has been 34 years plus since the Cold War triumph of ‘capitalism’ over ‘communism’—or rather, of the free-market idea over the Soviet model of a centrally run economy, to put it less crudely. And as India approaches another budget, industry may want the Centre out of the way in some sectors, but is largely looking for it to lend its fiscal heft to the big wheel of output expansion.

After all, big government has plenty to its credit. India’s post-covid infra stimulus has been a growth aid, a factory subsidy has unlocked a few new export avenues and policy levers are trying to raise domestic demand and supply—all amid broad macro stability. Since retail price flare-ups pose no threat and capital is far from costly even with a budget deficit in excess of 4% of GDP, it would seem our post-1991 ‘remix’ of policy in favour of market forces can safely be remixed with a larger state role in the allocation of resources than we had assumed.

What began as pandemic relief, though also as a way to pick up the slack of weak private investment, has been all but normalized. The state’s return as the economy’s prime mover, however, does not mark India out. As Cold War II thickens, it’s a global trend.

America’s dial-back of market forces by way of industrial props and trade barriers, even as Uncle Sam projects imperialist-style extractive power, signals a sort of pivot to autarkic statism. It’s not definitive, but a China scare is apparent in this dramatic tilt. Sure, Beijing can plausibly be accused of gaming free trade by using statist tools for its export thrust.