Right from the contents page of economist and author Arvind Panagariya’s new book, India: The Emerging Giant, he makes you feel a bit uneasy. The first page lists all the prime ministers of India in chronological order. Why on earth would a book on the economy of India start with this information?
The reason is not clear, even after you have finished reading the book. With the exception of Jawaharlal Nehru and, to some extent, Manmohan Singh, no Indian prime minister has shaped the economic design or destiny of this country. If there is some logic, it ought to have been made clear to the reader. This is a methodological problem that plagues the entire book.
India: The Emerging Giant:Oxford University Press, 544 pages, Rs775.
Consider the structure. The book is divided into distinct parts: “Growth and Economic Reforms”; “Poverty, Inequality and Economic Reforms”; “Macroeconomics”; “Transforming India”; and “Government”. By conventional practice, and for analytical reasons, growth and inequality are part of macroeconomics, as is economic reforms. So, why has the author segmented these fields and dealt with macroeconomics separately? The macroeconomics section deals only with the fiscal economy, the external economy and the financial sector. It gets even more curious. International trade is not covered in the chapter on the external sector, but in “Transforming India”. Similarly, discussions on the fiscal economy are split between “Macroeconomics” and “Government”.
The quibble is not about sequencing; it is about the fact that a far better and more integrated story could be told, indeed has been told by others, within the author’s own framework.
Anyone with a sound knowledge of India’s policymaking and its influence on growth cannot ignore the monetary management and reforms that complemented the economic and public policy reforms. In fact, after the fiscal reforms in the early 1990s, monetary policy has had a dominating impact on growth in the economy. Also, one of the unique features of public policy has been the nuanced and sophisticated use of monetary policy. The way in which the impact of external crisis on domestic policy has been restricted is a high point of Indian economic policymaking. The author devotes less than three pages to this area.
In terms of style and method, the book fluctuates between being a textbook, a newspaper article and a scholarly treatise. Having the way to derive the savings-investment identity—meant for an undergraduate student— as an appendix is just one example of how the book is written.
Big picture: The chapter ‘Poverty, Inequality and Economic Reforms’ is about the coexistence of poverty and development in modern India.
But that is not where the quibbles end. The book also lacks academic rigour. It reminds this reviewer of the genre of commercial Hindi films made with an NRI audience in mind. These films thrive on glossing over complex social relationships and giving the viewer a mushy, sanitized version of India to make up for their lack of emotional punch. Similarly, Panagariya’s book is full of trivial simplifications of complex political and economic processes.
For example, Panagariya discusses how the decision on bank nationalization was taken. From his account, it would appear that Indira Gandhi took such a major decision without much debate, dialogue or consultation. One day, so it is made to appear, Gandhi called I.G. Patel (an economist, and then finance secretary and issued point-blank orders. Panagariya’s account is not only dramatic, it is also fictional.
It is well known and very well documented that it was in 1967 that the All India Congress Committee (AICC) issued a 10-point programme, in which the social control of banking institutions was the first point; and the nationalization of general insurance, the state takeover of commodity-wise trading in imports, exports and foodgrains came later. A committee of four economists was formed to prepare a report on bank nationalization, which made a strong plea for it and takeover of the banking system. This report was handed over to Gandhi and published in 1969. Indeed, the Prime Minister herself submitted a note to the AICC meeting in Bangalore stating that the Congress had always favoured the nationalization of financial institutions. Numerous debates followed in the cabinet. K.N. Raj, one of her economic advisers, was made to do a radio broadcast on this issue to generate consensus.
Panagariya has not used or referred to the existing body of research and literature that is already available on the subjects he has chosen to deal with. This is evident from his scanty and peripheral use of data. Over the years, a phenomenal database—cross-sectional and time series—has been built that can be used to validate some of the assertions. Yet, the way data is used in the book is highly aggregative.
It is impossible to write a “definitive” book on the Indian economy without adequate use of data from relevant sources, which is what Panagariya sets out to do. There is hardly any data from the Central Statistical Organization (CSO) that has been used; only tow tables on sectoral growth rates are sourced from CSO. Nor does one find any data from the Annual Survey of Industries that is successfully used to validate assertions, trends and patterns. Even the gross domestic product has been taken from a Reserve Bank of India source. Besides issues of authenticity, the book loses out on details that finally support the big picture.
It appears as if in his desire to make the book accessible to everyone—from undergraduates to professionals—Panagariya has avoided complexity of any kind. While trying to simplify, he has sacrificed the richness of details and complexity of the process of economic growth. What appeals to his school of thought is glorified and romanticized, and what doesn’t fit in is left out. As a result, the reader is left looking for fresh insight and shrewd analysis in the book.
Haseeb A. Drabu is chairman of the Jammu and Kashmir Bank.
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