The title of this book refers to ,now legendry, speech made by our first Prime Minister, Jawaharlal Nehru “ on the fateful dawn of 15 August 1947’ in Indian Parliament. According to the authors , this title is apt as it heralded the ‘conjunction of the politics of democracy and the economics of poverty reduction’. which has been the cardinal objective of Independent India’s national economic policy.
The then economic policy framework identified for this objective, after a lot of deliberations on then existing economic models of Laissez Faire of the Capitalist West and Command Economy of the Communist Soviet Bloc, was ‘Socialistic Pattern of Society’. Mixed Economy with well demarcated spheres of economic activity for both public and private sectors became the accepted economic model The means adapted to achieve this was the Centralised Planning Process formulated and monitored by Planning Commission in terms of Five Year Plans since 1951 to date.
This selected economic model was more a result of those policy makers who shared the common cause with Nehru’s idealogical slant for socialism. Hence, the long term objective of all the five year plans, till date, has been “ Economic growth with Poverty Alleviance”. Ever since 1951, there has been a contentious debate going on amongst the economists, political parties and policy influencers on how the planning process has failed to balance twin objectives of economic growth and poverty alleviation so far. All these view points gravitate around two major rival approaches of Liberals who believe that liberalised economic growth at a faster rate will finally lead to poverty removal through “ trickle down effect’ and the other extreme of Leftists who believe that just focusing on the economic growth will lead to “rich becoming richer and poor poorer”. This is also the contention of the tussle between GDP as an indicator of economic growth as against Human Development Index(HDI) as an indicator of economic development. HDI is more comprehensive than GDP in that it along with income distribution includes life expectancy and literacy (enunciated by Pro. AK Sen who was awarded Noble Prize for Economics).
The authors of this book, particularly Prof. Jagdish Bhagwati, (who was also a nominee for Noble Prize) has been a liberal all through his professional career spanning over five decades. Prof. Panagariya is far younger but distinguished himself by his scholastic research in terms of his much appreciated recent book “ India- the Emerging Giant” (2008) Both the authors are presently professors at Columbia University, staunch believers in liberalized market- oriented economic growth. In fact, Prof Bhagwati was one of the few economists, after his return to India from Cambridge, who indicted the ‘Socialistic Pattern’ as ‘Socialist Patter’ in one of his articles on “Socialism and Indian Economic Policy’ (World Development, 1975, co-authored with Padma Desai).
Another way of looking at this debate was to view it as a tussle between ‘Growth Economists’( GDP )and ‘Developmental Economists’ (HDI). The former contended that unless the national income pie is made continuously to grow bigger over a period for distribution among different segments, particularly deprived ones, distributing a static small pie is not going to serve any social justice. On the other hand the latter argued that the economic development process has to be ‘inclusive’ factoring the need and aspirations of the deprived classes specifically in the villages.The process of social and economic justice cannot wait till the GDP is increased substantially and both income generation and its distribution should be aligned together. It is interesting to note that “inclusive’ growth was a far cry till recently.
It is recorded, in detail, the reasons for liberalizing the Indian economy in 1991, mostly by default , by ushering in reforms directed by IMF’s Structural Readjustment Programme for initiating privatization and globalization. It also coincided with the sway of this trend at the global level consequent to collapse of the pragmatism of communism along with the disintegration of Soviet Bloc. Naturally, for those economists of the liberal approach, this was almost a god sent change which revived the wisdom of their faith in the market-oriented policy framework. The authors of this book, being the proponents of the liberalization have set up an agenda to defend the need for reformative progress of Indian Economy by factually clearing the misconceptions, by others, of their arguments pre- and post liberalization. That is why the subtitle of the book is “ Debunking Myths that Undermine Progress and Addressing New Challenges”
It is with this broad perspective one has to objectively review this contribution of the eminent authors.
The major objective of this book is to counter the assertions unsupported by facts, which the authors consider as myths, which result in the uncharitable decrying of economic reforms taking place in India.
In introductory chapter , the authors succinctly trace the historical evolution of Indian macro-economic policy framework ranging from Jawaharlal Nehru’s penchant for socialistic ideas to the far more intensely pragmatic implementation of nationalization policies under Indira Gandhi regime to present post-liberalisation era to the future possibilities of enhancing the pace of economic progress with far more reforms in offing. It is interesting to note that while Nehru believes in a “gradualist policy’ of increasing the role of public sector, IndiraGandhi chose ‘the more radical and rapid pathof nationalization on the one hand and ever tightening regulation of the private sector on the other.’(Pp4)
They also narrate how these restrictive policies ended up in reduced growth rate to abysmal levels and increased the social inequality to force Indira Gandhi to come out with a 20 point programme under a much heralded political slogan of ‘Garibi Hatao’(End Poverty). They alsodeal with how ultimately had to respond to liberalism since 1991.
The treatment of the topic of the book falls under three major Parts.
In Part 1, the authors focus on countering the unascertained myths on the imbalance between growth and social justice.
“These myths define a rich tapestry relating to growth, poverty and social goals.”(Pp6). And hence “since these myths , endlessly repeated, muddy the discourse on the post-1991 reforms,……..it is important to sort them out, and refute them systematically with the logic and facts.”
As this is the major purpose of the authors, Part 1 forms the major bulk of the book amounting to half of the total pages. This is spread over 5 chapters dealing with major domains of macro-socioeconomic aspects. The total number of myths dealt under these aspects are 21. It is interesting that most of these myths are not only debating points in macroeconomics but more so as potential political scoring points for political parties, national and regional, in the ensuing general elections. They are also equally relevant as macro- management issues for further discussion. Hence a cross section sample of the issues under different aspects is mentioned below.
1.Development Strategy in Historical Perspectives: (Ch2. Total 5 myths)
Indian planners persued growth as an end in itself, ignoring poverty reduction (and other social objectives)
Growth is not necessary for poverty alleviation; redistribution
2. Reforms and Their Impact on Growth and Poverty: (Ch.3 total 5 myths)
Reforms do not explain the faster growth in India since 1991.
The Planning Commission plays politics with poverty lines…
3. Reforms and Inequality: ( Ch 4, total 2 myths)
Reforms have led to increased inequality
Thanks to the reforms, India is now in the Gilded Age…….
4. Reforms and their Impact on Health and Education: (Ch 5, total 4 myths)
The Kerala Model has yielded superior education and health outcomes
Despite high growth, Gujarat has performed poorly in health and education.
5. Yet Other Myths: (Ch:6, total 5 myths)
Reforms have led to increased suicides by Indian farmers
The post-1991 reforms have led to increasedcorruption.
The authors have ably countered these total myths with authentic facts and figures and argue that only growth can provide sufficient revenues for the provision of education and good health for the success.
Part2 of this book deals with what the authors categorise as Track 1 Reforms , which will further help accelerate growth and make it more “inclusive’. These reforms focus on the vast imbalances and inefficiencies still persist in the Indian economic structure such as multitude of labour laws, antiquated land acquisition regulations, need for building twenty-first century infrastructure, need for higher education reforms and trade liberalization inter- state and international.
Part3 deals with Track2 Reforms. As per authors, which focus on making redistribution programmes more effective as their scope widens. The specific social issue discussed include ‘Direct Transfers Versus Wage Employment’, ‘Transfers in Cash versus Kind’, Attacking poverty by guaranteeing employment (NREGA), Adult Nutrition and Food Security, Reforming Health Care and Elementary Education.
In conclusion the authors exhibit enormous optimism on the future prospects of Indian economic progress in balancing growth with social objectives and opine that Indian reforms have become irreversibly whatever the type of coalition government comes to power at national and states as proved by earlier minority government headed by Shri Narasimha Rao and coalition headed by Shri Vajpayee. Their optimism is objectively based, as per the authors, on increasing positive public attitude, mass appeal against social ills as Anna Hazare movement and gradual diminishing of anti-reform political power centers and revival of economic fundamentals. In their opinion, even though China is fast developing, it has its own built in weakness of authoritarian regime which leads to glaring social imbalances in the future. “ By contrast, India will continue to move along , albeit at a slightly less hectic pace, with its ‘agitation and response’ model, where by grievances are aired and government responds to them. Her growth will be slower but surer” (Pp250).
This book has received mixed reactions from the readers and reviewers as available in print and social networks. Most of the criticism is on authors’ refuting of Kerala Model and defending Gujarat Model.
The objective view of this reviewer is that this book reflects only one point of view of those of Liberals. A balanced assessment cannot be skewed and some of the myths mentioned cannot be wished away merely by marshalling available facts and figures. Some of them are not merely economic but holistic in nature embedded in the socio-cultural fabric of India. More than this, one cannot be very sure of political overtones which need uncomfortable compromises in give and take in the coalition governments at the, Centre and state levels, which has become a reality to live with.
The final solution is not economic, social or political but a national will and efficient and effective ‘Management of much needed Social Change’ through objective and unbiased macro- governance, devoid of political compulsions.
– Dr.Ramesh. G. Tagat, Academic Mentor , ISME