MAKING GROWTH HAPPEN IN INDIA: A ROAD MAP FOR POLICY SUCCESS
V Kumaraswamy
Sage; 272 pages; Rs 650
India's economic growth depends on a number of complex and interlocking factors - economic reforms, programmes, implementation and proper distribution systems, besides the deliberate streamlining of socially calibrated market structures. It is creditable that the author, who is not an economist, has chosen to write a book presenting a logical analysis of the Indian economy against the socio-economic realities.
From an analysis of the Economic Surveys, the annual pre-Budget report of the state of the economy, the author contends that the Indian economy has done better in the past 20 years than in the previous 40. However, India's reforms have been far less impressive when compared with Southeast Asian countries, which have achieved double-digit growth. India has lagged, the author contends, because of "lethargy, lack of cohesion, preference for raucous debates and the dysfunctional strain of democracy". For reforms to deliver better achievements, economists have to target poorer segments of the population, their needs and aspirations, current consumption pattern, absorption capability, social conditioning, education levels, immediate priorities, and motivations, family values and sensitivities.
The author has emphasised the fact that India has not been able to achieve the desired level of economic reforms because of certain social fissures - such as disaffection between the voters and the voted, unemployment, increasing aggression against land acquisition for industrial growth, high rate of corruption at all levels, migration from urban to rural areas, and the failure of the justice system.
Despite being a multi-linguistic, -religious and -cultural country, India has managed to coexist and develop peacefully, and the author lists some of its key achievements from the Green Revolution to the Golden Quadrilateral of roads to the Reserve Bank of India's handling of the monetary system during the global recession in 2008.
The author has, however, identified a large number of cracks in the economic programmes that need decisive improvements. The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and the food security Act have derailed long-term growth in rural areas. He provides a striking example of how "NREGA is like giving excessive grace marks to a student who keeps failing in the exams". Instead of infusing Rs 35,000-45,000 crore on the MGNREGA, the government could have easily created additional primary employment for more than 10 million people. The food security Act repeats past failures and does not create a sustainable model to eliminate hunger.
The author has also severely criticised the minimum support price (MSP) and public distribution system. His contention, echoed by many progressive economists, is that MSP is not based on production cost but on political compulsions, whereas the production of agricultural goods has to be based on the calorific value of production and the aggregated calorific energy requirements of the population.
The author is extremely critical of India's economic policy of liberalising imports of goods and services. The opening up of markets through free-trade agreements led to increasing mechanisation of production, resulting in bigger shares for competitive players and the marginalisation of Indian labour, who could have found better employment opportunities if these products had been manufactured in India. The broader point he is making is that employment creation through skilled labour is the best way of achieving social inclusion.
The author has laid great emphasis on employment, which he says has been the biggest casualty of reforms. The only area where employment has grown is in information technology and other services like banking and insurance. The eight per cent growth in the past few years has not resulted in an eight per cent of growth in employment, which should be a real cause of worry for the government. He has suggested focusing on a large number of sectors that have great potential for employment.
Skill development for creating employment and creating market structures as the alternative growth part for the country can achieve 12-15 per cent growth in the next 20 years. The main purpose of education should have been to put some saleable skills in the hands of the recipients for sustained livelihood and enhanced competitiveness. Growth in employment will create market demand, which will attract private investment for fulfilling the demand of the market.
Other employment avenues that the author suggests are creating lifetime employment out of the Golden Quadrilateral; greening and growth through afforestation; re-railing of the railways; recovery of freebie externalities like encroachments along the highways; expansion of civic and government services; an increase in social services in private consumption; and creating appropriate market structures. All these suggestions have been elaborately explained in two separate chapters.
Mr Kumaraswamy's subtle suggestions for economic reforms tailored to the country's social environment are both practical and progressive. Anyone interested in poverty elimination will find this book interesting.
V Kumaraswamy
Sage; 272 pages; Rs 650
India's economic growth depends on a number of complex and interlocking factors - economic reforms, programmes, implementation and proper distribution systems, besides the deliberate streamlining of socially calibrated market structures. It is creditable that the author, who is not an economist, has chosen to write a book presenting a logical analysis of the Indian economy against the socio-economic realities.
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He has divided the book in two parts. Part one provides a factual picture of economic reforms and part two contains suggestions for achieving 12 per cent growth in an inclusive manner.
From an analysis of the Economic Surveys, the annual pre-Budget report of the state of the economy, the author contends that the Indian economy has done better in the past 20 years than in the previous 40. However, India's reforms have been far less impressive when compared with Southeast Asian countries, which have achieved double-digit growth. India has lagged, the author contends, because of "lethargy, lack of cohesion, preference for raucous debates and the dysfunctional strain of democracy". For reforms to deliver better achievements, economists have to target poorer segments of the population, their needs and aspirations, current consumption pattern, absorption capability, social conditioning, education levels, immediate priorities, and motivations, family values and sensitivities.
The author has emphasised the fact that India has not been able to achieve the desired level of economic reforms because of certain social fissures - such as disaffection between the voters and the voted, unemployment, increasing aggression against land acquisition for industrial growth, high rate of corruption at all levels, migration from urban to rural areas, and the failure of the justice system.
Despite being a multi-linguistic, -religious and -cultural country, India has managed to coexist and develop peacefully, and the author lists some of its key achievements from the Green Revolution to the Golden Quadrilateral of roads to the Reserve Bank of India's handling of the monetary system during the global recession in 2008.
The author has, however, identified a large number of cracks in the economic programmes that need decisive improvements. The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and the food security Act have derailed long-term growth in rural areas. He provides a striking example of how "NREGA is like giving excessive grace marks to a student who keeps failing in the exams". Instead of infusing Rs 35,000-45,000 crore on the MGNREGA, the government could have easily created additional primary employment for more than 10 million people. The food security Act repeats past failures and does not create a sustainable model to eliminate hunger.
The author has also severely criticised the minimum support price (MSP) and public distribution system. His contention, echoed by many progressive economists, is that MSP is not based on production cost but on political compulsions, whereas the production of agricultural goods has to be based on the calorific value of production and the aggregated calorific energy requirements of the population.
The author is extremely critical of India's economic policy of liberalising imports of goods and services. The opening up of markets through free-trade agreements led to increasing mechanisation of production, resulting in bigger shares for competitive players and the marginalisation of Indian labour, who could have found better employment opportunities if these products had been manufactured in India. The broader point he is making is that employment creation through skilled labour is the best way of achieving social inclusion.
The author has laid great emphasis on employment, which he says has been the biggest casualty of reforms. The only area where employment has grown is in information technology and other services like banking and insurance. The eight per cent growth in the past few years has not resulted in an eight per cent of growth in employment, which should be a real cause of worry for the government. He has suggested focusing on a large number of sectors that have great potential for employment.
Skill development for creating employment and creating market structures as the alternative growth part for the country can achieve 12-15 per cent growth in the next 20 years. The main purpose of education should have been to put some saleable skills in the hands of the recipients for sustained livelihood and enhanced competitiveness. Growth in employment will create market demand, which will attract private investment for fulfilling the demand of the market.
Other employment avenues that the author suggests are creating lifetime employment out of the Golden Quadrilateral; greening and growth through afforestation; re-railing of the railways; recovery of freebie externalities like encroachments along the highways; expansion of civic and government services; an increase in social services in private consumption; and creating appropriate market structures. All these suggestions have been elaborately explained in two separate chapters.
Mr Kumaraswamy's subtle suggestions for economic reforms tailored to the country's social environment are both practical and progressive. Anyone interested in poverty elimination will find this book interesting.