The Ethical Dimension in Political Market Orientation: A Framework for Evaluating the Impact of India’s Look East Policy on Regional Income Convergence

Journal of Business Ethics https://doi.org/10.1007/s10551-019-04169-w ORIGINAL PAPER The Ethical Dimension in Political Market Orientation: A Framework for Evaluating the Impact of India’s Look East Policy on Regional Income Convergence Homagni Choudhury1 · Zoltan Laszlo Kopacsi1 · Gunjan Saxena2 · Nishikant Mishra2 Received: 17 May 2018 / Accepted: 26 April 2019 © The Author(s) 2019 Abstract In this paper, we employ what we term as ‘the ethical dimension in political market orientation (PMO)’ framework to underline how an integration of information from relevant stakeholder groups can inform the formulation of market-oriented, yet ethical policies. Against the backdrop of India’s Look East Policy (LEP), we undertake a critical analysis of historic economic data from 1980 to 2014 in the states of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura, often termed as the Seven Sisters because of their interdependence. Our analysis of the data, using time-series methods, reveals that policy changes ensuing from the economic reforms of 1990s and the initiation of the LEP in 1991 have resulted in regional income convergence in North-Eastern India. A key contribution of our work emanates from the fact that we determine two structural breaks endogenously from long time-series data, thereby identifying three distinct policy regimes, rather than specifying exogenous breaks based on historic and theoretical conjectures. Overall, our work offers both conceptual insights into processes that enable ethical and inclusive policy making, as well as empirical evidence emerging from stochastic convergence of incomes per capita for the Seven Sister states in the North-Eastern region in India, to illustrate how regional economic inequality can be reduced through targeted market-oriented policies. Keywords Look East policy · Ethical policy making · Political market orientation · Regional inequality · Stochastic convergence · Structural breaks Introduction Electronic supplementary material The online version of this article (https://doi.org/10.1007/s10551-019-04169-w) contains supplementary material, which is available to authorized users. * Homagni Choudhury Zoltan Laszlo Kopacsi Gunjan Saxena Nishikant Mishra 1 Department of Economics, Kingston University, Penrhyn Road, Kingston upon Thames, Surrey KT1 2EE, UK 2 Faculty of Business, Law and Politics, University of Hull, Cottingham Road, Hull HU6 7RX, UK This paper examines how India’s Look East Policy (LEP), originally focused on building institutional linkages with the Association of Southeast Asian Nations (ASEAN) and strengthening bilateral relations with its member states, also resulted in income convergence in its North–Eastern Region (NER). The launch of the LEP (1991–2014) coincided with a range of economic reforms starting in 1991 and resulting from a combination of factors—the collapse of India’s valued economic partner, the Soviet Union and severe financial crisis along with a growth in globalisation (Bhaumik 2014; Sikri 2009; Choudhury 2010, 2012). It should be noted that whilst the LEP was not a direct product of comprehensive economic and structural reforms of 1990s (like other policy changes, e.g. trade liberalisation and industrial reforms), it emerged as an ancillary policy response at a time that saw India opening up to the world in the 1990s. Officially launched in 1991, the LEP, together with the macro and structural reforms of the 1990s, brought about a paradigm 13 Vol.:(0123456789) H. Choudhury et al. shift, unleashing private enterprise that engendered radical economic transformation (Haokip 2011). We examine this shift through the conceptual lens of political market orientation (PMO) (see Ormrod 2005; Ormrod and Henneberg 2009), focusing in particular on what we consider the ethical dimension in PMO, to argue that marketoriented policies are both dynamic and contribute to ethical policy making, as they are informed by the values of relevant stakeholder groups (Freeman et al. 2004, 2007). Our work is one of the first to engage with the domestic dimension of the LEP (i.e. its impact on regional income convergence in the context of India’s NER). Indeed, on one hand, market-based reforms initiated in 1991 resulted in significant reductions in tariff and non-tariff barriers, the pruning of public sector monopolies, and an easing of the inflow of foreign direct investment. On the other, they led to an ethical reframing (i.e. by taking stock of the importance of non-materialist aspirations such as inclusion, citizenship and community) of economic policy, which acquired a more human face for the local populace. The emphasis moved towards gaining a deeper understanding of issues such as access, inclusion, equity and social justice in the sub-regional connectivity projects, aimed at improving the economic integration of the NER with national and international markets of South and South-East Asia (Ziipao 2018). In order to grasp the impact of the LEP on the unconnected and underdeveloped communities of the NER, we employ a unified analytical framework that combines the theoretical context informed by political market orientation (PMO) with an empirical approach embedded in work on income convergence from the regional economics literature. Our cross-disciplinary analysis of historic economic data (1980–2014)1 provides unique insights into the impact of the LEP on regional convergence of incomes in the NER. Although the 1980s precede the LEP, we include data from this time period for it acts as the benchmark (i.e. pre-policy intervention phase), allowing us to gauge the deep-seated nature of economic reforms and the impact of policy interventions since the 1990s on income convergence in the long run. In fact, it will not be unfair to regard the 1980s as constituting a ‘policy void’ in the region (see Das 2010). During this phase, India relied on a strategy of import substitution industrialisation (ISI), that saw significant tariff and non-tariff protection as well as industrial licensing, which favoured larger industrialised states and bypassed the peripheral economy of the NER.2 Thus, having the 1980s as the 1 The data we use are based on financial years from 1980–81 until 2014–2015, but for brevity we refer to this time period as 1980–2014 in the rest of the paper. 2 Economic policies prior to 1991 were more favourable towards states in mainland India (ignoring the peripheral NER states). For example, heavy industries were supported in larger states like Karnataka (Hindustan Aeronautics Limited—HAL was set up in 1964 13 basis for our empirical analysis allows us to understand the regional income dynamics better and to empirically capture the long-term processes of income convergence.3 Against this backdrop, the specific research questions examined in this paper are as follows: – What are the key insights provided by the ethical dimension in PMO in theorising the strategic role and th (...truncated)