ntrod        tion       1.11
     challenges could only be faced properly once the                    the needy cannot be left to the private
     state and the market both are given a balanced                      sector as this is a loss-making exercise. It
     role in an economy—the balance to be defined by                     means, the state will have to take the sole
     its present condition and the direction of future                   responsibility or may need to expand its
     goal of the economy. Striking the right balance                     role in such areas—as we see it in post-
     between the role of the state and the market in                     reform India.
     the economies came to be known as the process of              As the private sector becomes capable of
     economic reform in the post-WTO world.                  playing the proper role in producing and supplying
           If we analyse the need of an economy, we see      the private goods, state saves its important human
     some compulsory roles for the state in it:              and economic resources which is transferred to
           (i) If the regulation and control of an           take care of the production and distribution of
               economy is left to private individuals        public goods.
               or groups (i.e., firms) they will be using          Basically, the WB study, the East Asian
               the regulatory powers to maximise their       Miracle (1993), recognises the above-given shift
               profits and returns at the cost of others.    of one kind of mixed economy to another kind of
               That is why this role must rest with          mixed economy—in the cases of the Malaysian,
               the state. It looks more logical in the       Thai and South Korean economies—taking place
               democratic political set-up, wherein the      since the mid-1960s. Experts believe that this shift
               interest of the largest numbers is being      could not take place in time in India. And once it
               represented in the regulatory provisions.     started (1991–92) it was too late and this choice
                                                             was not voluntary but obligatory. The East Asian
          (ii) The responsibility of producing and
                                                             economies had gone for the same kind of reform
               distributing private goods to the people      process but by their choice.
               could be well handled by the private
               sector as this is a profit-fetching area. The
                                                                Washington consEnsus
               state should not burden itself with this
               responsibility as this could be well taken    The term ‘Washington Consensus’ was coined by
               up by the private sector. But in the absence  the US economist John Williamson7 (in 1989)
               of the proper presence of the private         under which he had suggested a set of policy
               sector in an economy, many countries in       reforms which most of the official in Washington
               the world gave this responsibility also to    (i.e., International Monetary Fund and World
               the state; India being one among them.        Bank) thought would be good for the crisis-driven
               But as the private sector became capable,     Latin American countries of the time. The policy
               in some countries this responsibility was     reforms included ten propositions:
               given up by the state in favour of the               (i) Fiscal discipline
               private sector and better development has          (ii) A redirection of public expenditure
               been possible in those economies. In this                 priorities toward fields offering both
               sense, India delayed this process while in
                                                                 7.    John Williamson, ‘What Washington Means by
               Indonesia, Malaysia, Thailand and South
                                                                       Policy Reform’, Chapter 2 in John Williamson
               Korea allowed entry of the private sector               (ed.), Latin American Adjustment: How Much Has
               much earlier.                                           Happened?, 1990; Institute for International Economics
                                                                       and John Williamson, ‘What Should the Bank Think
         (iii) The responsibility of producing and                     About the Washington Consensus’, Background
               supplying the social/public goods to                    Paper to the World Bank’s World Development Report
                                                                       2000, Washington DC, July 1999.