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16 November 2009

Socialism Kills: The Human Cost of Delayed Economic Reform in India

This entry summarizes an interesting report by Swaminathan S. Anklesaria Aiyar, a research fellow at Cato Institute's Center for Global Liberty and Prosperity, who was the editor of the two biggest financial daily newspapers in India, the Economic Times and Financial Express.

India isolated itself from the rest of the world in trade terms and attempted to become economically self-sufficient for the first three decades after its independence in 1947.  During that period, India became more and more socialistic under the influence of the Soviet Union and was more and more managed and controlled by the government.  India's share of the international export market fell from 2.2% upon independence to 0.45% in 1985.  India, being very backward, did grow at at rate of 3.5% per year, but this was slow growth compared to other once backward Asian nations who were more export-oriented.  Since India's population was growing rapidly, it per capita growth in this period was only 1.49% per year per person.  The reforms which started in 1981 started freeing the economy and growth rates increased.  These reforms were undertaken more certainly after the balance of payments crisis in 1991.  In the relatively free period from 2000 to 2008, the growth rate was 6.78% and social indicators were much improved.

But what did a decade of economic development delay cost India?  As is always the case with socialism, the results are ugly.  One decade of delay in economic freedom killed 14.5 million children, kept 261 million Indians illiterate, and kept 109 million Indians unnecessarily in poverty. 

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