‘India Unlimited: Reclaiming the Lost Glory’ review: Hurdles to India’s growth

Arvind Panagariya was the vice-chairman of NITI Aayog from January 2015 to August 2017, the crucial initial years in which the Narendra Modi government’s economic policy agenda took shape. He was hand-picked by the Prime Minister for building a new institution to replace the Nehruvian vestige, the Planning Commission.

When an insider who has been the senior-most economist in government writes a book, readers expect sharp insights into personalities and the working of the system. Panagariya’s new book, India Unlimited: Reclaiming the Lost Glory, disappoints on this count. It does not deepen our understanding of India’s political economy.

Believers in socialism

The book’s main argument is an oversimplification: Economic policies of Pandit Nehru, Indira Gandhi and decades later Sonia Gandhi, all believers in socialism, gave the economy its growth-obstructing characteristics, and the people and the political class a distaste for markets. Decades after Nehru and Indira Gandhi’s deaths, their socialist beliefs still hold sway over common Indians, the bureaucracy and even the Bharatiya Janata Party.

The evidence and analysis for making this case is rather thin. A footnote stands out in particular. It documents scepticism towards pro-market reforms the author encountered in an engagement with students of St. Stephen’s College, Delhi.

The author writes that while BJP leaders still draw inspiration from socialist ideas, Modi, an exception in a nation populated by socialism devotees, is reforms-minded and appreciates the role of markets. If his thinking has not guided his government’s policies, it’s because the bureaucracy is sold out to socialist beliefs and there is no luxury of moving around non-performing officers. To break the mould, stock solutions for reforming the bureaucracy are offered: specialised training, introduction of competition to the top civil service and greater number of non-IAS hires.

Praise for Rao

Modi receives lavish, unqualified praise through the book. P.V. Narasimha Rao and A.B. Vajpayee get similar treatment. They are great liberalisers that broke ranks with the socialists to reform the economy with assistance from able teams of bureaucrats. Roles played by other individuals are not acknowledged. Manmohan Singh, whose government awarded the Padma Bhushan to the author in 2012, Arun Shourie and Yashwant Sinha — absolutely no one has impressed the author. A soft corner for Rao is discernible; the Congress party’s coldness towards him finds mention repetitively.

Unanswered questions

Of the many questions that the book leaves unanswered, the most striking is: Why have world renowned free-market economists decamped Modi’s government, even as IAS officers with Ph.D.s in economics from Ivy League colleges and a record of pushing reforms in previous governments are being repatriated to their respective States?

One of the avoidable inaccuracies is the book’s insistence that the Finance Ministry and the Reserve Bank of India (RBI) were negligent of the Non-Performing Assets (NPAs) problem until 2017. A speech (available on the RBI’s website) in Delhi on June 22, 2016 by then RBI Governor Raghuram Rajan clearly delineates the NPA problem and discusses the steps taken by the central bank since April 2015 to address it.

Where the book succeeds is policy critiques. Prime Minister Modi’s policies are not spared — from the reversal of trade liberalisation, return to protectionism and import substitution to the preference for a “strong rupee”. The misguided use of the Goods and Services Tax (GST) to pursue the equality objective is discussed. But again, Modi gets no part of the blame for the muddled thinking in his government, although Nehru, Indira Gandhi and Sonia Gandhi are continuously hauled over coals.

The author lucidly explains unintended consequences of well-meaning policies crafted under pressure from lobbies and costs the infrastructure deficit places on the economy. The progress at “snail’s pace” of projects such as the Delhi-Mumbai industrial corridor is highlighted. The strongest sections are the ones on trade policies.

Common minimum wage

The opening section lays out the book’s central objective: to present reforms for reclaiming India’s “lost glory”. To the current discourse on the topic, it brings much-needed perspective that often escapes lay people. India’s large share — about a third — of the world GDP from AD 1 to AD 1000 is only to be expected, given the principal driver of GDP was the relatively large population.

The policy briefs prescribed range from increasing the target level of inflation for monetary policy, moving rural Indians from farms to factories, rehabilitation and redevelopment of urban slums, setting a common minimum wage applicable for all kinds of skills, to privatisation of public sector banks and other government-run enterprises. Social and public institutions have a marginal role to play in the scheme proposed.

India Unlimited: Reclaiming the Lost Glory; Arvind Panagariya, HarperCollins, ₹799.

The reviewer is the author of The Lost Decade (2008-18).

This article is closed for comments.
Please Email the Editor

Printable version | Jan 23, 2021 8:31:09 AM |

Next Story