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Introduction

Coined by John Williamson in 1989, the Washington Consensus promoted liberalisation, privatisation and deregulation. However, global crises, inequality and geopolitical fragmentation have encouraged a shift toward pragmatic policy mixes, redefining the developmental role of the state in economies such as India.

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Shift in global economic order: From Washington Consensus to Pragmatic Eclecticism

• Declining free-market prescriptions: Uniform fiscal austerity, deregulation and privatisation often ignored diverse institutional and social realities of developing economies.
  Eg: Structural adjustment programmes of IMF and World Bank.
• Lessons from financial crises: Exposed vulnerabilities of deregulated markets and unchecked capital flows.
  Eg: 1997 Asian Financial Crisis.
• Rise of strategic industrial policy: Governments increasingly support domestic industries and technological capacity along with market incentives.
  Eg: Industrial strategies after COVID-19 supply-chain disruptions.
• Geopolitical protectionism: Strategic competition is encouraging selective protectionism and domestic capacity building.
  Eg: Export restrictions, reshoring and technology controls among major powers.
• Pragmatic policy pluralism: Adoption of flexible policy mixes combining markets, state intervention and welfare safeguards.
  Eg: Hybrid policy frameworks discussed in global economic forums.

Changing role of the state in developing economies like India

• Strategic industrial promotion: Support domestic manufacturing and technological capacity to reduce import dependence.
  Eg: Production Linked Incentive Scheme encouraging manufacturing in electronics and semiconductors.
• Infrastructure-led economic development: Public investment stimulates growth and crowd-in private investment rather than relying purely on market forces.
  Eg: National infrastructure expansion under programmes such as PM Gati Shakti National Master Plan.
• Welfare and social protection: Stronger redistributive role to mitigate inequalities arising from market-driven growth.
  Eg: Ayushman Bharat providing health insurance coverage to vulnerable households.
• Digital public infrastructure: Governments are building digital platforms to enable inclusive markets and efficient service delivery.
  Eg: Digital ecosystem built around Aadhaar enabling direct benefit transfers.
• Trade and economic resilience: Combining openness with calibrated protection to strengthen domestic capacity in critical sectors.
  Eg: Make in India promoting domestic production and reducing import dependence.

Way Forward

• Balanced state–market partnership: Combine market efficiency with strategic state support for infrastructure, technology and human capital.
• Context-specific strategies: Design policies based on domestic institutional capacity and development priorities, not universal models.
• Strong regulatory capacity: Ensure transparent regulation and effective governance to manage the state’s developmental role.
• Inclusive and sustainable growth: Integrate welfare, climate sustainability and employment with industrial expansion.
• Global cooperation in multipolarity: Shape emerging economic rules through platforms like the G20.

Conclusion

The decline of the Washington Consensus signals a broader transition toward pragmatic and context-driven economic governance. For countries like India, this shift strengthens the developmental role of the state, balancing markets with strategic intervention to ensure resilience, equity and long-term economic sovereignty.

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