Economics Reviews

‘Reset – Regaining India’s Economic Legacy’ review: Flawed policies and a prescription for the future

As a Harvard trained economist, whose work in Index Numbers with Nobel laureate Paul Samuelson is considered a seminal contribution in helping gauge macro-economic performance, Subramanian Swamy is clearly well placed to comment on the current state of India’s economy. In Reset: Regaining India’s Economic Legacy, Swamy additionally dons the mantle of economic historian as he seeks to lay out his case for what ails the economy and what needs to be done to engender a ‘renaissance’.

Over the best part of his 200-page book, the economist-politician looks back at the last 150 years of the country’s economic journey to flesh out the consequences of the economic ideologies adopted from 1870 through to 2019. While it is well established that Britain’s imperial exploitation of its numerous colonies left the colonial economies in varying degrees of disrepair, Swamy asserts that “by bleeding agriculture to the bone, exporting and draining national resources estimated at $71 trillion at current prices, and by blocking native innovation, the British rule set India two centuries back in development.”

In the first chapter ‘Imperialism Uproots Agriculture’, the author provides an interesting narrative of the extent to which Britain’s exploitative “revenue-extracting zamindari system” took a toll on India’s peasantry and the agriculture sector as a whole. Also, as someone who has studied the Chinese economy closely and written a fair amount on it, Swamy makes frequent and fairly compelling comparisons between the pre-independence economic trajectories of China and India, particularly in farm output. While in 1950, around the time that the two countries founded their new republics, China had a comfortable food surplus enabling it to finance rapid industrial growth, India’s two-century-long decline in foodgrain yield left it lacking such a cushion.

It is the second period, extending for four decades from 1950 that attracts the most trenchant criticism from the author, who makes no bones about his complete disdain for the socialist ideology that informed the economic policies of the era. Terming the Soviet command economy model with its focus on planning as ‘The Albatross around India’s economic neck’ Swamy is emphatic that it was this flawed policy approach that caused a “monumental loss of opportunity”.

Socialism, the economist submits, means a large government that needs finances through heavy taxation. “And nothing kills incentive as unthinking taxation does,” he writes. For contrast he cites Japan, South Korea, Taiwan, Hong Kong and Singapore where the governments based their economic strategies on “incentives based on reasonable taxation of the individual.” And while acknowledging the roles of former Prime Ministers Chandra Shekhar and P.V. Narasimha Rao in the first wave of reforms of 1991 that helped free the economy from the restrictive shackles of the preceding years, Swamy (who served as commerce minister in the short-lived government headed by Chandra Shekhar) interestingly credits himself as the author of the reform proposals that opened India’s trade sector to the world.

Key remedy measures

But it is in his prognostication of the economy’s current trajectory that the national executive member of the ruling Bharatiya Janata Party (BJP) pulls no punches. In a ‘tailspin’ since the “monumental blunder” of demonetisation in 2016, Swamy is emphatic that the economy is on the verge of a “serious crisis or crash.” With loads of data, backed by tables and graphs, the economist highlights multiple pressure points that have hobbled the Indian economy, most notably agriculture. Prescriptions to remedy the situation range from the seemingly straightforward to the radical. The key ones include abolishing income tax so as to incentivise savings, fixing the exchange rate for the U.S. dollar at ₹50, abolishing participatory notes and invoking a UN resolution to facilitate the repatriation of $1 trillion in black money hoarded abroad and the printing of rupee notes to fund infrastructure projects while suspending fiscal deficit targets.

Aside its excursions into the esoteric domain of “integral humanism”, which reflects the author’s abiding association with the BJP’s ideological fountainhead, the Rashtriya Swayamsevak Sangh, Reset offers an alternative perspective on the Indian economy — past, present and future.

Reset: Regaining India’s Economic Legacy; Subramanian Swamy, Rupa, ₹595.

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Printable version | Mar 7, 2021 7:51:30 AM |

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