BackBook Review: ‘Restart’ by Mihir S. Sharma
In identifying the problems facing the economy, the author faults the ineptitude of both the state and the private sector
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Mihir Sharma, as his columns in the Business Standard newspaper show, is not one to pull his punches. That is also the best thing about his book Restart: The Last Chance For The Indian Economy. If you want a warts-and-all look at the economy, told forcefully in the style of calling a spade a bloody shovel, this is just the book for you. But although the author has an excellent ear for the telling phrase, this book is about much more than style.
“India," says the author, “has a passion for under-capacity as enduring and inexplicable as its love for cricket." The problem is we need to create capacity very rapidly, because jobs need to grow by 3% every year, almost twice the rate at which they have grown since liberalization.
Why haven’t we done as well as we should have? There is, of course, a whole cast of villains, including “The Mahatma’s Malign Legacy", the heading of one of the chapters. The reference is to the mistaken emphasis on protecting rural India and rural livelihoods, in spite of young Indians wanting to escape what Karl Marx called “the idiocy of rural life". Forcing the poor to stay on in unproductive marginal farms or in make-work programmes like the Mahatma Gandhi National Rural Employment Guarantee scheme (MGNREGA) is a guarantee they will stay poor. The same argument holds true for the protection of small-scale enterprises, which too ensures they remain unproductive and unable to afford modern technology.
Then there’s the failure of the Indian state, about which so much has been said. Politicians have at best been able to push through half-hearted reforms, wrongly assuming that welfare and reforms do not mix.
But the good thing about the book is that it doesn’t tread the well-worn ideological path of merely bashing the state. Instead, Sharma minces no words in saying that “an inept private sector has been a willing co-conspirator with a controlling government; together they have sent India careering into a low-cost, low-quality, low-innovation equilibrium that will be hard to escape".
The government was either unable or unwilling to discipline its private sector partners. Sharma quotes eminent journalist T.N. Ninan as saying that India is a strong state when it comes to bullying the poor, but a weak state when it comes to controlling the rich. The failure of the PPP model, Sharma says, was responsible for investment drying up during the UPA’s second term.
The problem, Sharma believes, is of crony capitalism. As exemplars, he identifies businessman Vijay Mallya, who has a chapter, “The King Of Good Crimes", dedicated to him, and the Indian Premier League which, he says, “manages to insult women, history, cricketing skill and the intelligence of its viewers".
But it’s not just cronyism. Governments, for example, are loath to take on the landed elite in villages because they are the ones who can deliver the votes. Unlike the autocracies of East Asia, the Indian establishment has been unable to assert itself when it comes to powerful sectional interests. The tendency has been not to rock the boat, but to take the easy way out. The stimulus package for industry after the financial crisis was one such example. Indian industry has got used to freebies.
What then needs to be done? India, says Sharma, needs another way to grow. We must stop throwing good money after bad. If promoters have made wrong decisions, they must suffer the consequences and their projects handed over to others. And the decision whether to continue with the projects or to hand them over must be made by the market. We need to allow the process of price discovery to work and for that we need free markets in land, in labour and in capital.
What about the UPA’s supposedly unsustainable subsidies? Sharma says a welfare state is inevitable in a democracy but it would be best to give money to poor people directly, rather than through convoluted subsidies that distort market prices.
While most people agree on what needs to be done, the problem lies in the political will to implement reforms. Can we really expect radical change from those who live in what Sharma calls “the racist imperialist fantasy that is Lutyens’ Delhi?"
Nevertheless, there are high expectations from Prime Minister Narendra Modi. Says Sharma, “He was not a candidate whom people looked at as anything but a radical break from the old order…. If he tinkers at the margins, if he stops short, it will be the Indian state’s final betrayal of those who have so patiently expected so much from it. This time I fear they will not be as quick to forgive."
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