The Oxford Handbook of the Indian Economy is a doorstopper of a book. Nine hundred pages long, and shoulder-strainingly heavy to pick up. It is, also, something of an achievement. The volume’s editor, Chetan Ghate of the Indian Statistical Institute in New Delhi, has gotten together almost 50 of the most thoughtful of India’s economists to talk about not just the features of the Indian economy as it undergoes its decades-long transition, but where the discipline is likely to go next, and what unanswered questions deserve our attention. That last question is rarely asked — edited volumes, indeed academic subfields in general, rarely like to draw observers’ attention to the things that they are not talking about.
The book is divided into eight sections: on past development; rural poverty; industrialisation; the social sector; political economy; macro reform; economic openness; and future perspectives. These sections display varying levels of focus and accessibility to the lay reader. However, the one thing that they have in common is a use of academic rigour to elucidate ongoing questions of policy. This is far from easy to accomplish, and is in itself a sign of the transformation of Indian academia over the past 15 years. In the 1990s, a similar volume would struggle to explain the changes the country was going through — and would, most likely, ignore them. The economics and political economy of a process of transition or reform was considered, largely, below academic interest. This reflected, perhaps, the belief current in the early years of reform that the process was either reversible or would be reversed — or, if your political sensibilities were at the other end of the spectrum, that it would be a relatively quick process. Twenty years on, and we’re nowhere near the end of the reform process, and thus volumes such as Oxford’s embrace the economics of change rather than that of steady states, following a moving object rather than mapping one standing still.
Even the long chapter written by Sadiq Ahmed and Ashutosh Varshney on the Indian political economy since Independence is far from static. It takes up as questions for investigation, how and why growth and reform and development continue to be politically unpopular; on how policy-making circles in India learn and adapt; and whether growth has sufficient “quality”. Each of these questions directly informs debates that are, today, ongoing; and they are written in a style clear enough that their implications can immediately be grasped.
The other chapters are written in varying styles, and apparently with different aims in mind. Some are excellent reviews of the literature. In particular, Vegard Iversen on caste and upward mobility – a subject not generally part of an economic compendium, though it should be – does an excellent job of rounding up the recent research on the causes and consequences of relative deprivation. In contrast, consider Rubina Verma’s chapter on sectoral growth, which instead develops its own general equilibrium model and then examines counterfactuals that drive home how unique India’s services-led growth has been. This is nicely complemented by the chapter on industrial growth and bottlenecks from Poonam Gupta and Utsav Kumar, which helps explain why that uniqueness has persisted.
Abhirup Sarkar’s chapter on development, displacement and food security is perhaps a little broad in its sweep, but the subsection discussing the “hold-out problem” in land acquisition should be required reading for those puzzling through the implications of India’s debates over land use.
Ashok Kotwal’s concluding chapter asks the question, “What more do we want to know about the Indian economy?” It is interesting that even this comprehensive collection of essays is still forced to leave a great deal out — though in most cases because the economic discipline as a whole hasn’t worked hard enough on the subject. Professor Kotwal, for example, zeroes in on the constraints facing the informal sector as one major gap. I would go further, and argue we lack proper theorising about the success of the informal sector in the first place, or even about its practices. How is credit arranged for, paid back, renegotiated, for example? What are the cashflow management mechanisms of India’s millions of small shopkeepers and roadside entrepreneurs, and how do their inventory-keeping, markups and tax practices affect the macroeconomy? The informal micro-foundations of the Indian macroeconomy desperately need study. Professor Kotwal also mentions decentralised government and “appropriate” institutions as worthy of study in the Indian context. In fact, much work has been done of late on post-colonial “extractive” institutions, and differing legal origins and how they affect property rights — a thoughtful chapter on the subject from a political economist should perhaps have been arranged.
Overall, congratulations are due to Oxford and to Chetan Ghate for producing a book that, unlike most recent compilations on the Indian economy, is far more than just a randomly thrown through collection of specialised papers with a grandiose title that promises far more than the book delivers. The fact that most chapters are written clearly and with an eye to the lay reader means that this is much more than a textbook: it should weigh down one corner of the desk of anyone interested in Indian economic policy.
THE OXFORD HANDBOOK OF THE INDIAN ECONOMY
Chetan Ghate (editor)
Oxford University Press;
958 pages; Rs 4,995