What holds back reform in India?

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Amitabh Arora wants to know.

Is it interest groups - organized labor, employee unions at electricity boards - that wield political power disproportionate to their numbers and scuttle reform? Mancur Olson has rigorously analyzed the dynamics of collective action to explain why this happens. Mere public debate will not undermine these groups, and certainly not debate that bypasses the vernacular press.

Or is it the inability of the state to tax the winners and subsidize the losers in reform in order to ‘sell’ liberalization? Notice that with the exception of Naidu, no Indian politician has articulately championed reform as key item on the political agenda; liberalization in India has been an elitist project, argued in English by its champions and opponents.

Check out the responses at the Indian Economy blog, too.

Meanwhile Shekhar Gupta, writing in the Indian Express, blames the middle class for siphoning off subsidies to themselves in a column titled 'Our Poor Little Rich'. This is a widespread problem in rich and poor countries alike. The 2004 World Development Report discusses it.

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