Can the current and future rounds of reforms give India high growth? High and sustained economic growth is the exception and not the norm in nation states.

So what type of nations have achieved it and how much are economic reforms responsible?

I ask because “reforms" and this government’s willingness and capacity to legislate them are seen as our silver bullet. Are they? In my opinion, no.

You could have rapid expansion even in a command economy (Soviet Russia regularly hit double-digit growth from 1945-75). A nation could score high on the human development index without capitalism, leave alone reforms (Cuba).

We have already known for a long time that democracy itself is not an essential ingredient for high and sustained GDP growth: Germany, Japan, Taiwan, South Korea, Thailand, Singapore show this.

So reforms, which generally address deregulation and ease of doing business, are not the most, or even a most, important element in generating high and sustained growth, as they seem to be made out to be.

However, there are two essential conditions that exist in all nations, without exception, that have produced high growth.

First is penetration of the state. The ability of governments to monopolize violence, to make their citizenry submit voluntarily to taxation, to efficiently deliver justice and services. It doesn’t matter whether the state is capitalist, socialist, dictatorial or democratic. It must penetrate.

The things listed above are all measurable and I need not waste time in demonstrating how the Indian state episodically or continually fails in all of these.

Getting the state to penetrate isn’t the work of one generation and certainly not of one man, however radiant his genius. This is why the Prime Minister will disappoint the innocents who bought his promise of “minimum government, maximum governance".

Indeed, one of India’s problems is not enough government. By what measure do we have excessive government in India? Not courts and hospitals and schools and civil servants per million population, certainly; this is an area where we lag the civilized world. Where else? Not infrastructure and ports and airports and bridges either.

Anyway, so far as the state goes, penetration is the essential condition.

The second ingredient for high and sustained growth is robustness and dynamism in society. It may be found in such things as the quality of literacy, inventiveness, productiveness and morality. In capitalist societies, an understanding of how and why wealth is created is essential. Andrew Carnegie wrote The Gospel Of Wealth and built around 2,500 libraries. Mukesh Ambani built Antilla.

In India, the entrepreneurial talent is caste-linked and entirely missing in large states (generally not to be found among Bengalis and Maharashtrians, whose economies are managed by “outsider" castes).

The base is also small: Vaishnav and Jain Baniyas in western and central India and the Khatri-Arora community of the north. After this it thins out quickly: The Gujarati Shias, the Chettiars and so on are tiny communities, whose members are famous because of their success.

But while Baniyas will continue to do better than the rest of us under any circumstance, reforms or no reforms, they cannot be automatically relied upon to do what capitalists did in the West.

Some think otherwise. Jagdish Bhagwati, professor of economics, law and international affairs at Columbia University, US, believes that “the Gujarat template is ideal: Its people believe in accumulating wealth but they believe also in using it, not for self-indulgence but for social good. This comes from the Vaishnav and Jain traditions that Gandhiji drew upon as well."

There is no evidence for what Bhagwati says. The fact is that the only Gujaratis who follow the Western model of philanthropy are Ratan Tata and Azim Premji (neither of whom is from the Vaishnav or Jain tradition).

When exactly did Vaishnavs use their wealth for “social good"? Here is how Bhailalbhai Patel described in his memoirs the worst famine of Gujarat a century ago. While people began to die of starvation, “the cities of Gujarat had money during the Chhapaniyo (famine of Samvat 1956). The textile mills had started about half a century earlier and they were now well established. There were many wealthy people in the cities but it did not occur to any of them to step in to save people from dying."

Patel wrote that “lakhs of rupees lay in the coffers of the Swaminarayan temples. The wealth in the Jain temples multiplied as interest gathered upon interest generated by the fortune there. Yet not one dharmaguru had the good sense to keep alive the starving people by generating work for them. The well-to-do lovers of the Hindu religion, who profess to believe in vasudhaiva kutumbakam, did not think of extending a hand.

“Only foreign priests believing in a foreign religion felt compassion for the multitude. They begged for funds in Europe and America and used the money to rescue lakhs of people from the jaws of death without a thought to their caste or status. A majority of Gujarati Christians today are those who survived due to the mercy of these foreign padres."

I was not surprised to read this because it would be little different today. This is not the sort of society—and remember that Gujarat is the best state so far as mercantile traditions go, and the state best placed to convert reforms to growth—that can sustain growth for 1.2 billion.

Reforms, which are only a set of rules, are peripheral to the primary conditions. What is being “re-formed" through our economic reforms? Society? No. Government penetration? No.

India, with $1,500 (around ₹ 94,000) per capita in GDP, is at the bottom of middle-income economies. On such a small base, episodic 8% annual growth should not be surprising. It is the promise of sustained double-digit growth that I challenge.

I’m not being a Gloomy Gus. The world’s economies are now connected and inequality between geographic regions will disappear in time. This is indisputable and welcome. But we are not discussing that here.

Many of us think that India is poised to become a high middle-income ($10,000 per capita) or even high-income nation. That is not going to happen in our lifetime, and it’s certainly not going to happen because of reforms.

Also Read Aakar’s previous Lounge columns

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