MANMOHAN SINGH AND ECONOMICS Sanjaya Baru’s article "The economist as saviour", an account of Prime Minister Manmohan Singh’s economics could have juxtaposed specific issues of economic policy with Dr. Singh’s stance on them.
Sanjaya Baru’s article “The economist as saviour” (editorial page, The Hindu, July 4, 2012), an account of Prime Minister Manmohan Singh’s economics could have juxtaposed specific issues of economic policy with Dr. Singh’s stance on them. What we get instead is unhelpful double reductionism: first, that Dr. Singh is a post-Keynesian and second, that the job of a post-Keynesian is to coax “animal spirits” into higher investment on private account, which is precisely what Dr. Singh is doing through his chosen “middle path.”
Keeping aside Dr. Singh’s Cambridge pedigree and his pre-1991 engagement with economic policy right up to the days of the South Commission, one should indeed be hard put to associate post-Keynesianism (a broad church certainly, but made even broader by Mr. Baru’s inclusion of Mr. Kaushik Basu) with Dr. Singh’s policy utterances and silences taken together over past two decades. We need only raise four issues of policy relevant for the period.
Four issues
First and foremost, no post-Keynesian concerned with a post-colonial, and fundamentally agrarian, economy such as India’s would make a fetish of the rate of growth, regardless of its quality. Dr. Singh as Finance Minister and as Prime Minister extolled India’s rate of growth and attributed it to reforms. In fact, however, the main driver of growth in the 1990s was a fortuitous sequence of good monsoons. In the first decade of the new millennium, the growth story revolves around the amorphous services sector which failed to make any dent on the quantum or quality of employment economy-wide. The question that looms very large in a structural sense is that despite all the incentives given to corporate India, the share of manufacturing in national income has not registered an appreciable growth. This by itself is a major indictment on economic policies Dr. Singh has espoused while in or out of power.
Second, a post-Keynesian would recognise that growth depends on growth of demand in the short as well as in the long-run. He would then pitch for continued growth in public expenditure both for stimulating demand and easing a number of constraints on the supply side. What we notice, on the contrary, is a steadily declining share of public capital formation, especially in agriculture, with the well-known disastrous consequences for the countryside. This was no doubt aggravated by Dr. Singh’s fiscal fundamentalism that is patently un-Keynesian. Neither the importance of exploiting a large home market nor fashioning a more egalitarian distribution of income to sustain domestic demand, both eminently Keynesian possibilities, seems to figure in the policy discourse animated by Dr. Singh as the Prime Minister.
Third, the Narasimha Rao-Singh reform process followed a sequencing that favoured the external and financial sectors over domestic and real sectors. In the bargain, the public sector and agriculture remain untouched by any serious reforms till today. Even so, India’s share in world trade flows is still minuscule while many Asian neighbours have surpassed her in export performance. At the same time, financial sector reforms have only led to the ascendancy of central banking to the detriment of development banking (of which directed credit was an integral part) built assiduously after bank nationalisation. It is a complete paradox that today we are made to wonder about financial inclusion. The Singh legacy is particularly evident when it comes to policy (non-) response to the continuing saga of inflation. The response is one of ping-pong between Finance Ministry and the Reserve Bank of India (RBI). The Ministry thinks inflation control is primarily in the domain of RBI, by way of monetary tightening, while the RBI suggests that nothing can be done until the Ministry reins in fiscal deficit numbers.
Finally, there is nothing quite Keynesian about leaving the exchange rate and current account deficit to the market or to global recession. As a student of Kaldor, Dr. Singh would have hinted at the possibility of dual exchange rate and restrictions on inessential imports, especially gold, to prevent a liquidity crisis. Doubtless, Dr. Singh and his able aides in economic policy-making have two protective belts against the tottering Indian economy, besides the art of soothsaying. Either the global economy is the culprit or coalitional politics prevent neo-liberal reforms to the hilt.
(G. Omkarnath is Professor of Economics at University of Hyderabad.)
Keywords: Manmohan Singh, economic policy, Indian economy
Whatever may be the understanding and applicability of past and current theories of economics to put country's deteriorating economy on better path of progress, Indian citizens have been expecting from our learned economist as PM to put all his theoretical knowledge and vast experience gained during his several responsible positions held in India and abroad as also having paticipated in plethora of international conferences to ensure that right type of economic policies and programs are put in place that can yield better results.
Very good article. Some data to substantiate opinions stated would have
been great. Couple of things I am not sure about are the claim that the
90s growth was mainly due to monsoons and the suggestion of exploitation
of home market. The home market wouldn't have existed without the growth
in the "amorphous services sector". I completely agree with the rest of
the article and think it's very thought provoking.
People talks about the policy vacuum etc because there a problem now.For the last 8 year the growth rate was good.At that time who was the leader? At that time "Brilliant MMS " have no role to play?Who is there to listen his words? Every major reform is stopped by opposition and others .Even simple decisions are tanken aback because parliment is stalled .Still MMS is blamed.Till the other day he was hero .Center can not increase the fuel price (Reason supporting the corporates). But all the state governements can increase the milk price, bus fare etc .The so called alternatives (Modis, Jayas, Kumars etc) never reduce the ST on the fuel .That is the situation of our counrty.Why to blame him alone?
The author does deserve a larger podium. Vajpayee took major decisions after listening to
the experts and keeping the politics in check, while pushing forward the PVN policy
prescriptions and imparting the momentum to get infrastructure programs off the ground. He
also followed the middle path between the right and left ideologies and inspired confidence
among the broad population. Sadly there is no such leadership in any political dispensation
today.
i want to say one thing if you go for a policy and in timses when it has to show its effect it fails, then what is the meaning of making such policy. think of that.
A common grocery shop man with one assistant, how he manages his
business, we will wonder. He takes into account market survey - what
people of the locality wants, how much stock he has to hold, he
remembers where each item is located and how much balance -
accounting, and what not. He is not an MBA. Take Kamaraj,MGR, NTR,Lal
Bahadur Sastry.. they are not specialist in any field which the modern
day governance require. But they understand their people, their
aspirations and above all they were sincere to the cause. GDP,
inflation, FE reserve, Share market, Corporates growth, .. everything
OK. But villagers, farmers, weavers, artisans and such people
completely he has Manmohan Singh has neglected. His background, makes
him for a bureaucrat only and not that of a nation of this size and
divergence.Even with all economists advise, west has sunk to economic
downfall. All theories are not universal. Our PM's economics
knowledge's power has gone down with years.
Rarely do economists get chance to run a country. One point is right that our
reforms were confined to financial and banking reforms. The recommendations of
the two committees chaired by Mr. M.Naraimham formed the basis for banking
reforms. The demolition of the licence raj is at the centre. The reforms in real
sector are yet to take place. There are no massive programmes for agricultural
reform. Whatever had been done earlier under the mixed economic pattern
continues. So much is talked of Cambridge economics but in an emerging
economy as India is agriculture continues to have its importance. Again, when one
is Prime Minister of a country a specific set of economic policies cannot be
practised in entirety because in political and social policy-making it is only
economic practices are fused in and only a pattern has to emerge to suit the
country, that too, at a point in time. Theoretical application of set is not possible.
Again, as Keynes said the Economist has to draw from his kit.
A thought provoking article. It all boils down to what TIME has to say and what is widely perceived now: A Policy Vaccum. Having received the country on the cusp of a growth trajectory, it is highly disappointing to see that UPA I&II has failed miserably to even sustain that growth levels. A stable leadership makes a great difference. PVN Rao showed it. Vajpayee Ji showed it. An indecisive leader, how much ever intellectually capable he may be, is doomed to fail if he is not able to lead from the front.Pushing the agrarian deficit under the carpet by doling out funds in the form of MGNREGA is only encouraging more people to turn away from work and inturn adding more burden to the already broken economy. Hope MMS makes an impact in the remanining of the last tenure that Congress should ever rule this country.
Thought provoking. Clearly articulates the missed opportunities and
suggests corrective measures.
Dr. Manmohan Singh is good enough to work under good leadership... he is not capable to lead...
In 1991 he succeeded under leadership of Mr. Narsimha Rao, who is counted one of the top 3 successful PM... while he failed in UPA tenure where real leader is Sonia and with Singh as puppet PM... Sonia only expert in collecting money to win election with money power and zero in economics... so naturally bound to fail in economic front...
Please remember UPA1 shown some progress was purely due to result of NDA govt. policy who started some real infrastructural initiative and real developmental initiative policy... without going into vote bank politics policies...
When post independence history will be written , the period 2004-2014 , under this Economist PM will be remembered for GDP growth riding on the back of mind boggling corruption .
Superior analysis: it shows faults, and also poses opposite/alternative actions. The overall effect is similar to other nations where purchasing power/credit worthiness of farmers, unemployed industrial workers, or persons holding real property (even a humble homestead) has steadily declined. I've seen it in Mexico, Ukraine, US. Broad monetary circulation/velocity at ground level is necessary to long term economic health/growth. Daily 26rs poverty line doesn't create enough demand. Global policies of the last 30 years have instead worked to accumulate wealth in a few personal, low risk, stationary offshore accounts. Tangible, brick & mortar non-finance investments on rare occasions they are made tend to be those which yield short term results for a few. Perhaps instead of economists, we need historians that recall the Meiji era in Japan? Long term public investments in education, land reform, public works created the basis for future growth. The author deserves more time at the podium.
This country does not require too brilliant(?) doctors like MM Singhs
or Motek Singhs or Pranabs or Chidambarams to set right things which a
common middle class man can do with sheer common sense which these
people lack!! The rich and aflluents need not worry and so are their
counter parts poor people dumped with all freebies by these politicians!! The main sufferer is the middle class people who are not
supported by anyone.
Excellent article. Precised and well said. An important point missed out seems black money circulation within india.
Wonderful and admirable piece of article on the misplaced policies of our economist PM.Incentives galore to industry(manufacturing) sector without commensurate increase in contribution to GDP, impoverising the agriculture sector with consequent lowering of internal demand for manufactured goods(since they are not exportable being noncompetitive in terms of quality and technology),and the tertiary sector(read IT and ITeS) services being independent of Government policy framework while at tha same time being highly vulnerable to international economics are all he major reasons for the sorry state of affairs and they are definitely non-Keynisian as pointed out by the author and they are simply Manmohanomics.
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