A conversation about economic reform

Gautam Chikarmane's book is a politically intrepid look at India's transformation from an economy 'of the small, by the small, for the small' to one 'of the big, by the big, for the big'

Reform Nation: From the Constraints of P V Narasimha Rao to the Convictions of Narendra Modi

Author: Gautam Chikarmane

Publisher: HarperCollins

Pages: 400

Price: Rs 799

The book is a valuable addition to the several published to commemorate the 75th anniversary of independence. The focus is economic reforms especially concerning trade, business and industry. The history of monetary or fiscal matters are sparingly covered in Part III.

The book’s title suggests it is about post-1991 reforms. “Understanding the past thirty years of India’s economic reforms is a crucial conversation for the world to witness, comprehend and learn from,” the author writes. But given that pre-1991 events have been as extensively (and perhaps more incisively) discussed, the sub-title may well have been “From the constraints of Nehru to the Convictions of Modi”. More than a third of the text is about the various industrial policy resolutions beginning 1948 till 1991. 

Through the introduction and Part 1 laying out his philosophy of reforms, I found myself frequently nodding in agreement — the arguments are pithy and succinct and narrated with a frugality of words. The author is at his convincing and lucid best in chapters containing his analytical comments recounting the turmoil and triumph of the 1991 crisis.

It is good to see someone credit Narasimha Rao (whose party has largely disowned him) and the half a dozen with him for rescuing India from disaster in 1991. The role and weight of each of these has been duly recounted and acknowledged.

Part II is a factual summary of policies pre-1991 laced with spicy comments about their detrimental effect, how they infected the economy with industrial lethargy, apathy towards people and “created a web of controls by those who have zero skin or no stakes in the idea of how jobs are created, value built, wealth created”. The overarching influence of the myopic 1945 Bombay Plan on the policies of the next several decades is well recounted.

The author is politically intrepid, especially when it comes to matters before 1991. He places the compliance overburden before 1991 on people who were “themselves protected by permanent employment with inflation indexed pensions and no accountability”. He reserves his best critical bile for Nehru whose first economic policy (1948 IP Resolution) he charges “laid the policy foundation for the next forty-three years of keeping India poor”.

But that boldness evaporates where it comes to the judiciary. Gautam Chikarmane rightly blames the “control the natives” mindset that infused legal systems and infrastructure inherited from the British for severe handicaps in doing business in India. But when it comes to discussing ideas for setting things right, he backs off with the usual: “Beyond the scope of the book”.

The dangers of discretion in government behaviour overruling the risks of copy-pasting Western solutions, of purchasing votes by offering everything free instead of letting free markets bring prosperity, and the control mindset hardcoded into the DNA of the bureaucracy are well described. Clearly, we need to evolve our own solutions and systems grounded in our context and realities. In several parts, China has done far better with its indigenous mindset and solutions.

Part III, titled “The Journey of Reforms”, talks about the various reform initiatives (69 of them) since 1991 in a chronological order. But some kind of grouping along sectors (agricultural, industry and service) or factors (land, labour), governance (taxation, compliance, laws) would have been helpful. It would have given the reader a better assessment of what has been done on a particular subject.

The Conclusion is a veritable mix of trinities of competing stakeholders, circumstances and opportunities or between consumers, producers and regulators. But one could not miss that a large part of the author’s optimism in the chapter may owe its origins to his manifest faith in the current political leadership. The author would do well to temper his great hope with political realities. We have had three occasions when a strong ruling party left no opposition. When the strong rulers were dethroned what followed was chaos (except perhaps for Deve Gowda’s regime which was short-lived). The consequences of such a messy arrangement in the current geopolitical context can be lethal.

The government seems clueless about controlling the negative narratives from the West, despite the author’s claim that the Left has lost its credibility in its own echo chamber; but they are not the incumbents here and so they have nothing to lose. 

The government would also do well to develop skills in consensus building, getting all stakeholders on board, reforms by instalments rather than big bang, which galvanises dissenters better in derailing initiatives than the government in implementing them.

Sure, the economy has transformed from “an economy of the small, by the small, for the small (the way the author characterises Morarji Desai’s regime)— under the large entitled and controlling state infested with micro-compliances and swarms of inspectors’ into of the big, by the big, for the big. But the rest of it — compliance, controls and swarms of inspectors— largely remains. And with that baggage, it is difficult to tell whether the author’s vision will materialise.

This book is also a victim of the marauding colonisation by Notes and References, which occupy more than a fourth of the book. It may signal academic rigour but distracts the average reader.  

The reviewer is author of Making Growth Happen in India  (Sage)