An idea of India's economic reforms

Can a researcher make an impact on economic policy debates and formulations even while staying outside the government or academia? Indeed yes, and Isher Judge Ahluwalia was a shining example of that

A New Reform Paradigm: Festschrift in Honour of Isher Judge Ahluwalia

Editor: Radhicka Kapoor

Publisher: Rupa

Pages: 584+LV

Price: Rs 995

Of all the contributions in this festschrift, brought out in honour of well-known economist Isher Judge Ahluwalia (1945-2020), the one that is the shortest and yet the most impactful comes from India’s former Prime Minister Manmohan Singh. This is a four-page long foreword to the festschrift, where Dr Singh makes three important observations.

One, he describes how Ahluwalia carved out a space for herself as a “policy-oriented researcher” outside the government and academia, batting for liberalising economic controls that had strangled India’s industrial growth. His implicit suggestion is that a researcher can indeed make an impact on economic policy debates and formulations even while staying outside the government or academia and Ahluwalia was a shining example of that.

Two, he explains why government policy makers must listen to researchers in a free and frank environment. He refers to an incident of 2012, when he was prime minister and even though beleaguered by charges of policy paralysis, he had agreed to attend a book release function only to listen to what researchers and commentators had to say about the pace of his government’s reforms programme.

Dr Singh had been forewarned by none other than Ahluwalia that at the book release function, eminent panellists could criticise the government. But he chose to attend the function, listen to those views, thanked them for their comments and later took some corrective action, including the appointment of a new chief economic adviser. What can hardly be ignored in that message from Dr Singh is the importance of maintaining a political environment in which researchers and commentators can freely air their criticisms of policy before the government.

Finally, the former prime minister talks about what appears to be a fundamental flaw in assessing the importance of planning policy reforms. Dr Singh says: “Designing reforms may be a science, and technical experts have a major role to play in getting the design right. But executing reforms is an art; politicians and others in public life have to bring all the skills of persuasion they can muster to build the consensus necessary to make progress.”

These observations are worth their weight in gold, coming as they do from India’s foremost economic policy reformer. Indeed, the 17 essays that follow Dr Singh’s foreword once again highlight the bigger difficulty in executing reforms. These are excellent essays by some of the finest economists and researchers, whose ideas on how policy needs to be designed to take the reform agenda forward are beyond dispute. But Dr Singh’s warning that reform execution is as critical as its design is perhaps the most important takeaway from the essays in this volume.

The essays have been neatly segmented under four sections —India’s development strategy, sectoral perspectives, environmental sustainability and future challenges. Josh Felman and Arvind Subramanian provide a gripping analysis of how the Indian growth story has flagged in the last few years and what financial sector fixes are needed to revive the pace of the Indian economy. There is no getting away from a continued focus on five Rs  — recognition, resolution, regulation, recapitalisation and reform —  but speedy decision-making is equally important.

Rakesh Mohan, in his policy prescription for accelerated growth, stresses the need for reorienting policy with enhanced government expenditure for producing public goods and services and for providing universal basic services.

M Govinda Rao outlines the evolving landscape of India’s fiscal federalism and laments the steady deterioration in Centre-state relations. His prescription is to institute an independent system for intergovernmental bargaining and conflict resolution so as to resolve differences, regulate competition and encourage cooperation. Bodies such as the Inter-State Council or the National Development Council have ceased to be relevant and effective, according to him.

The essay by Ashok Gulati and Ritika Juneja provides excellent food for thought on how to make agriculture competitive and self-sufficient, while Radhicka Kapoor (who has done a commendable job in editing the volume and making it accessible with the use of data and charts) offers a pragmatic solution for achieving faster industrialisation and promoting job creation at the same time. Viral Acharya and Raghuram Rajan bemoan the fact that despite promises of giving more functional freedom to the public sector banks, little has changed on the ground. They recommend privatisation of public sector banks, but rightly warn that this must be accompanied with an independent governance structure for the privatised banks.

The challenges of regulation, overcoming the learning crisis that already threatens to undermine India’s demographic dividend, and meeting emerging requirements without pollution have been dealt with sharply focused essays from Rajat Kathuria, Yamini Aiyar and Kirit S Parikh. Given Ahluwalia’s focus on urbanisation in the latter half of her career, the volume has a couple of essays —by Prasanna K Mohanty and Junaid K Ahmad —  on the challenges of urbanisation and its governance, providing fresh perspectives on an issue that does not receive much attention in public policy debates or in framing India’s reforms agenda.

The only jarring note that the volume creates is the inclusion of an essay by Pramod Bhasin, who writes mostly on his experiences of working for GE Capital and Genpact to usher in an outsourcing revolution in India, without really establishing how that experience could be woven into crafting India’s future reforms agenda.

This review will not be complete without a mention of a short, touching essay by Montek Singh Ahluwalia on how he viewed his wife’s role as an economist and researcher. That also makes you wonder if, just as there is said to be a woman behind every successful man, there is also a man behind every successful woman.