Negating Nehru

INDIA'S new prime minister, P. V. Narasimha Rao, has startled nearly everyone by putting forward economic reform proposals that would steer his country away from the socialist course set a half century ago by Jawaharlal Nehru. Mr. Rao was supposed to have been a mild transitional figure who would help India past the turbulence caused by the assassination of Rajiv Gandhi.But the prime minister has, instead, taken advantage of the current yearning for stability to address India's underlying eco- nomic problems - like perpetual public-sector red ink, a huge balance of payments deficit, and a towering foreign debt. These problems are tied to overregulation and economic isolationism. Companies need government approval for such basic decisions as starting a new product line. Foreign involvement in India's economy has been seen as a threat to independence. Rao and his finance minister, Manmohan Singh, say the old constraints must go. Foreign investment will be welcome. Plans are afoot to lower government subsidies for such sensitive goods as fertilizer. Liberalization along these lines has both long-term implications and an immediate goal: qualifying for new loans from the International Monetary Fund. To some fellow Congress Party members, Rao's proposals don't go nearly far enough. One faction wants reforms that would truly junk the Nehru economic legacy - to which Rao still pays lip service, at least. Other Congress members, identified with the Gandhi dynasty, are concerned that reform could undermine India's bureaucratic "permanent government," a key constituency. Outside Congress, socialists decry Rao's reforms, while Hindu nationalists approve of many of them. What are Rao's chances of taking his 850 million fellow Indians down a path where many icons of their political life - like the subsidies and the tight control over business - could be broken? He may have only six or eight months in which to show some results before the calls go out for a change of government. These are difficult times for the world's largest democracy. Poverty and communal friction are constant threats. Economic progress is critical, and it will come only with liberalization and an opening to international trade and investment. The country has abundant talent and a growing middle class. But in India, particularly, capitalism will have to prove it can coexist with a deep concern for upgrading the lives of hundreds of millions for whom middle-class luxuries are, at most, only a flickering, frustrating image on their village's one TV set.

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