T.C.A. Ranganathan spent four decades in the banking sector in senior positions and Srinivasa Raghavan had long and varied stints as an economist-cum-journalist with financial papers. Their treatise on the Indian economy over the past several decades sends several messages but falls short in some areas.
Their book, All the Wrong Turns , is divided into six sections each analysing a separate sector such as agriculture, manufacturing, and so forth. There is no interconnection between them except for manufacturing and international trade. Nor is there an over-arching economic philosophy for assessment. Indeed, there are obligatory references to China’s growth and the Korean and Taiwanese miracles. Though the authors appreciate state intervention in those countries, they feel India’s interventions are flawed.
Western influence
The writers argue that in India’s efforts to promote development, the state took on a responsibility for which it was not equipped as it ‘never had a history of either manufacturing or entrepreneurship.’ The other is that, there was too much micromanagement and, beyond a stage, the state should have divested its role. Yet another point is that India had inherited western institutions which were unsuited to serve its goals.
In the same tenor is the edict that India should ‘stop paying heed to economists trained in the West and working here.’ But if, as the authors claim, India did not have a manufacturing legacy, how did the indigenous private sector inherit that capacity?
In the section on agriculture, a rosy view of growth since Independence is presented, both in the aggregate and in sub-sectors. They explain that India has done well compared to other countries.
However, the writers underplay the phenomenon of agricultural distress, attributing it to other causes such as poor water management, absence of marketing, frequent changes in export quotas and lack of finance or credit.
The section on manufacturing covers a gamut of issues. They blame the poor performance of the private sector primarily on the shackles imposed under the Industrial Development Act and the Industrial Policy Resolution (IDR/IPR). They feel that if the private sector was ‘left alone to their own devices...[they may] have performed even better....’
On international trade, the lament is India has not done as well as China, Korea and Taiwan. As the authors aver, the failure is in not ‘focussing on governance and building blocks of modernity.’
The section on banking is rich with insightful analysis. It is not possible to take up all the issues in this brief review, but two valuable points they make deserve attention. One is that even as Basel compliance is strong for individual banks, it is low for the system as a whole and this has led to increasing bad loans. The other is that in India reliance on banks is heavy, while in other countries the reliance is more on the real economy and less on banks. This imbalance has to be redressed and it may not be easy to achieve it in the near future.
This book is a mixed bag, falling between two stools.
However, it deals with an array of economic issues, and offers ideas, some contrarian, others valuable.
All the Wrong Turns: Perspectives on the Indian Economy ; T.C.A. Ranganathan & T.C.A. Srinivasa Raghavan, Westland, ₹799.
The reviewer writes on economic and strategic issues.
