The Indian model

WHY adopt India as an economic model? This poser is likely to have occurred to many who gave ear to Prime Minister Mahinda Rajapakse's comments at the 'Made in India' trade and industrial exhibition which opened in Colombo on Thursday. A related issue is how Sri Lanka would stand to gain by integrating her economy with that of India.

We believe Premier Rajapakse has introduced to current national discourse some very vital issues by touching on these propositions.

They take on a special significance when viewed against the misleading notion currently doing the rounds in opposition circles, that the country would be taken back to a closed economy dispensation by the SLFP Presidential candidate.

In terms of the speed taken in liberalizing economies, Sri Lanka stands ahead of India. Sri Lanka adopted the open economy model in 1977 while India - adopting a more gradualist approach - de-regulated her economy in the early Nineties.

Yet, India has soared ahead of not only Sri Lanka but very many other Asian countries in the upward climb to economic advancement.

Today, India stands out as one of the foremost industrial powers in Asia, figuring along with China, as two regional heavyweights making exceptional material progress.

In contrast, Sri Lanka ranks today as a "middle-income country" but she is by no means an industrialized state. India possesses a sizeable, indigenous industrial base which gives her relative economic independence but Sri Lanka could not be said to be rid of the dependent development syndrome.

Yet, it was the proud boast of some past ruling establishments that they were first in the race to economic liberalization in South Asia.

It is very vital that we think on these things at this juncture when a Presidential election campaign is beginning to gather pace.

Over the years the open economy has proved a buzz phrase among both the rulers and the ruled. It has taken on the mesmeric aura of almost a mantra among some sections and its associated hype has hitherto been used assiduously by many of those vying for the plum office in the land.

However, the widening wealth gap in the country and the sizeable ranks of the poor of Sri Lanka beg the question: is the open economy the great gateway to material prosperity it is claimed by some to be?

By posing these questions the suggestion is not being made that a return must be effected to the closed economy which bred a plethora of economic difficulties and hardships for the people of Sri Lanka in the early and mid Seventies. Those nightmarish days should never be revisited.

However, no country which wishes for economic stability could veer from one extreme to the other. This is where India has scored handsomely. She has gone in for economic de-regulation and the relaxation of economic controls but has done so in a gradualist, measured fashion. She has not done away completely with central control too.

What India has established is a mixed economy where central control and economic liberalization co-exist. The result is a durable economic base.

The mixed economy model, thus, needs to be looked at very closely. By doing so we would not be selling out to the "Robber Barons" nor would we become prisoners once again of the queues and quotas ear.

These issues, we hope, would be vibrantly debated in the days ahead. Economic advancement which fattens a few but brings gruelling hardships and discontentment to the many is no development. Nor could the market ensure that the essential needs of the people would be met consistently.

While the productive energies of the people must be unleashed through deregulation, the institutions of the State must be rendered vibrant to ensure that economic equity takes hold.