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14 August 2013, Gateway House

A new ecosystem of liberal principles

Inclusive growth means inclusive reforms and equity in economic freedom, which empowers the formal sector as well as the huge informal sector in India. In the social sector, the government must fund beneficiaries, while in the political domain the ‘ruled’ and the ‘rulers’ must be equal

Founder President, Centre for Civil Socitey

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The liberal agenda for India should be to apply, comprehensively and consistently, the principle of economic freedom in the domain of economics, the principle of choice in the social sector, and the principle of political equality in the realm of politics.

The guiding principle in the economic domain should be the equal distribution of a high degree of economic freedom, available equally to all classes and entrepreneurs. The post-1991 economic reforms in India have so far not distributed this freedom equally.

The reforms brought in trade liberalisation and industrial de-licensing, which expanded the economic freedom of the formal sector. Starting a factory or business became easier, as did selling goods and services abroad. The liberalised formal sector has done well, and so have the people working in this sector.

But in at least three areas of the Indian economy, trade liberalisation and de-licensing remain inadequate: In the vast urban “informal” or “unorganised” sector; amongst forest-dependent or tribal communities; and in agriculture, particularly for small and medium farmers.

For example, in the informal sector, to work as a street vendor or cycle-rickshaw puller in our cities requires a license. Tribal communities living in forests cannot access bamboo for their traditional needs without the permission of the Forest Department, though Forest Department contractors can harvest bamboo. In agriculture, a sugarcane farmer in Maharashtra cannot take his produce across the district line without the District Collector’s permission, let alone across the state line or national border. A farmer in Kerala cannot change the crop grown without the government’s permission. The Essential Commodities Act and the Agricultural Produce Marketing Committees determine the fate and income of our farmers.

The challenge of inclusive growth is really about achieving inclusive reforms, which empower not only the formal industrial sector but also the vast informal sector. The inequity in economic progress is due to the inequity in economic freedom. Introducing this equity will end crony capitalism and usher in competitive capitalism. Equal economic freedom should be the first goal of the liberal agenda.


In the social sector, state interventions and support – for example, in education and healthcare – need to be guided by the principle of citizens’ choice. The state must provide support in a way that empowers people and respects their autonomy and dignity, not make them permanently dependent clients. People must find providers that best serve their needs, instead of having the state impose one-size-fits-all programmes. Certainly, the state can provide schools and hospitals, but it must not compel citizens to access only its own services: Choice should be the guiding principle in all social sector programmes.

In education, the government must fund students, not schools. Those who need state support for education should get vouchers to go to a school of their choice. Public funds should follow the pupil; she can choose to attend a government school or a private school. All schools – state and private – must attract and retain students to be eligible for funding, and be directly accountable to parents.

Just like parents, schools too should also be able to choose their own curricula and education boards, pedagogies, certification and qualification levels for teachers, and whether they want to be non-profit or for-profit. It is the school’s freedom to choose that in turn will make the parents’ choice meaningful.

In working towards these goals, the first task of the government is to move from being a controller to becoming a facilitator, from producer to financier, from inspector to informer about the quality of education. In short, it must build an ecosystem where citizens can access as many different providers as they choose and parents can make choices that are right for their children.

In healthcare, the state must fund patients, not hospitals. The Rashtriya Swasthya Bima Yojana (RSBY), or the national health insurance programme, is a good example of this principle. The government subsidises the purchase of private health insurance for the poor by paying a premium. The RSBY ensures that illnesses that require hospitalisation will not bankrupt a poor family.

For illnesses that don’t require hospitalisation, doctors are usually either unaffordable in urban areas, or inaccessible in rural areas. To address these gaps, we must expand the number of medical service providers. This will lower the prices and increase the access. By some estimates, doctors with more than seven to nine years of training are not really necessary to treat more than two-thirds of illnesses. The western model of only MBBS or MD doctors is unnecessary; it makes medical care unaffordable and inaccessible. Registered nurses, Registered Medical Practitioners (RMPs) and paramedics should legally be able to provide medical services. This will work better than the completely untrained people on whom poor patients sometimes have to depend.

Even after increasing the supply and thereby lowering the fees, those who still cannot afford medical services can be helped directly by health vouchers or conditional cash transfers. Many state governments are already implementing such programmes for maternal and neo-natal care: For example, the Janani Sahyogi Scheme in Madhya Pradesh, the Sambhav Voucher Scheme in Uttar Pradesh, the Thayi Bhagya Scheme in Karnataka, and the Ayushmati Scheme in West Bengal.

Instead of the government operating as a monopoly supplier of social services, it should fund beneficiaries so that they have a choice of suppliers. This is best achieved through vouchers and cash transfers.


In the political domain, equality between citizens and their elected representatives and public officials is critical. The “ruled” and the “rulers” must be equal before the law and in practice. All rules, regulations and laws must apply to both equally.

In the private market, the players are consumers and businesses. In a political “market,” the players are the politicians, bureaucrats, and voters. Equality among these players can have several dimensions. For example, when someone starts a company, it has to be registered under the Companies Act and has to abide by the regulations and norms about disclosure and transparency in decision-making, remuneration, finance, and audits. When politicians start a political party, is should similarly be registered under a Political Party Law, with similar norms and regulations.

Workers in private markets have rights but they don’t get fixed pay increases across all types of businesses every few years. More importantly, their salaries and bonuses are linked to their performance. Why should workers in the government have different rules? Workers in both private and political markets must be treated equally.

When a criminal case is filed against a publicly-listed company’s director or top management, they typically resign even before they are convicted. Why do politicians and bureaucrats see equal treatment as undue harassment and an infringement of their rights? They claim that rival political parties could bring frivolous charges and destabilise the political system. Why don’t businessmen do the same to each other and force competitors out of the market? Is it easier to bring false charges against politicians than against businessmen?

Similarly, when companies collude against consumer interest, they face anti-trust laws or anti-competition laws. Shouldn’t there be a similar law against political parties when they collude against voter interest? If consumers have the Consumer Protection Act, which covers truthfulness in advertising, promise-keeping, negligence, and malpractice, shouldn’t voters get a Voter Protection Act? Once we apply the ideal of equality in politics, many dramatic conclusions follow.

Some would say that this is not a liberal but a libertarian agenda for India. In any case, I believe that in the economic, social, and political domains, the guiding principles should be freedom, choice, and equality, respectively.

Parth J. Shah is founder president of the Centre for Civil Society, an independent, liberal think tank in New Delhi.

This article was written exclusively for Gateway House’s Independence Day special report, ‘India’s Liberal Agenda. You can read more exclusive content from Gateway House here.

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