5 min readMay 18, 2026 02:27 PM IST
First published on: May 18, 2026 at 02:27 PM IST
In 1978, high-level Chinese officials made study tours of several Western and Eastern European countries and Japan. Within weeks, they prepared detailed reports on what China needed to do to economically progress as quickly as possible. Launching his policy for economic reform, Deng Xiaoping made three critical observations: “Recently, our comrades have had a look abroad. The more we see, the more we realise how backwards we are. The basic point is we must acknowledge that we are backward, that many of our ways of doing things are inappropriate and that we need to change.” In his outstanding biography of the Chinese leader, Ezra F Vogel records that Deng instructed his officials: “Look at how (the West) manage their economic activities. We ought to study the successful experiences of capitalist countries and bring them back to China.” This was a stunning policy shift for a Communist nation.
After Covid-19, 2026 is likely to be an extremely difficult year. Indeed, this year is to India what 1978 was to China . India needs to make a similar pivotal shift with a monomaniacal focus on economic growth. Most Indians know the story of Arjun, focusing on the wooden fish circling overhead at Draupadi’s swayamvar. Looking into its reflection in the water, Arjun could see nothing but its eye. It was this single-minded focus, or ekagrata, that made him successful.
The first step to progress is to acknowledge and confront the brutal facts. India has slipped to sixth place in the GDP rankings. The rupee is at an embarrassing low of Rs 96 to the dollar and, at the current trend, is likely to reach the three-digit mark by the next quarter. A weak rupee shakes investor confidence, and overseas investors have withdrawn over $20 billion from the Indian stock markets in the first quarter of 2026, another historic low.
FT Weekend (May 9, 2026, page 17) reports: “The rupee was already Asia’s worst-performing currency this year before the war began, thanks to India’s growing trade deficit and a slump in foreign direct investment in productive assets.” It further notes that the dollar returns of India’s Nifty 50 were at a four-year low, and that Indian stocks had underperformed their Asia-Pacific counterparts by 25 per cent. Adding to these alarming statistics is the fact that India’s trade deficit swelled to almost $120 billion by March 31, compared with $95 billion a year earlier. This abnormal increase is undoubtedly due to the oil crisis in the Gulf.
The second step is to seriously re-examine how inappropriate our ways of doing things are. Most changes are on the periphery; eliminating archaic laws or deleting provisions for harsh punishments do little to attract domestic or foreign investments. There must be a major reduction in state-level regulatory hurdles, licences and no-objection certificates that ensure that it is not easy doing business in India. Every hurdle is a point of corruption, which again discourages investment.
The third, and most important, step is to determine what needs to change. Multinational companies, large domestic companies, and representatives of the MSME sector are best placed to make suggestions on what changes are imperative. The Centre and state governments should prepare a detailed questionnaire that will generate extensive feedback. It is clear that regulated incentive schemes like the PLI can only give limited benefits. There is an equally important need to study the incentives offered by Vietnam, Thailand and Malaysia, and offer even better terms for setting up factories in India. What are the tax liabilities of industries in those countries? What needs to change in the way our taxes are administered? The Swadeshi dream will come true only if we make manufacturing in India attractive and rewarding for large global brands.
The need for Arjun’s hyperfocus on reviving the economy is more critical than ever. Sadly, India’s progress is hobbled by scattered focus on multiple political issues that deserve to be put on the back burner. Almost 50 years ago, Deng made a radical, and almost heretical, policy shift that altered the destiny of China. He did not hesitate to adopt capitalist policies in a communist nation, because that was what was needed the most. The current financial crisis is a golden opportunity for India to radically alter its policies as did China. Undoubtedly, we cannot be unmindful of the needs and exigencies of our country and the limitations of a republican democracy. But we need to go far beyond austerity measures and policy tinkering at the fringes. As was beautifully said: Nothing changes, if nothing changes.
The writer practices in the Supreme Court
