POLITICS TRUMPS ECONOMICS
Bimal Jalan and Pulapre Balakrishnan (Editors)
Rainlight/Rupa
211 pages; Rs 500
The professed aim of the 12 essays in Politics Trumps Economics is to examine the interface between economics and politics in contemporary India. The book begins with the observation that in just a couple of years "the perception of India seems to have swung from one of a land of great promise to that of a country with an uncertain future". It also highlights a fundamental contradiction of India: "why … a globally impressive talent pool coexists with the highest incidence of poverty in the world".
The first essay under part one, "Politics", is an overview by Bimal Jalan. Mr Jalan expresses valid concerns about the high and increasing criminalisation of politics and corruption in contemporary India, aided and abetted by investigative and judicial processes that are kept deliberately cumbersome and slow by vested interests. These issues must be solved if India is to move back to a high growth path. However, the loss of gross domestic product (GDP) growth that Mr Jalan attributes to multi-party coalitions is perhaps really due to weak leadership. After all, India has achieved high GDP growth rather well under several multi-party coalitions. Moreover, the 2014 Lok Sabha election result with a clear majority for one party has made this a non-issue - at least for some time. Mr Jalan has also listed many weaknesses in the delivery systems of the government - both at the Centre and in the states - all of which are well known. The reader will note that the optimism that he projects at the end of his essay is deeply conditional.
Meghnad Desai, Dipankar Gupta and Poonam Gupta are the other authors whose essays appear in part one. Mr Desai has examined the concept of social equity, or "equity of dignity", which can co-exist with income inequality and traced the efforts of the Indian republic to secure both equality of rank and economic progress for its citizens down the years. He has noted the patchy nature of progress and said that the focus has now shifted to women's rights. Mr Gupta argues that the earlier caste and class concerns are now progressively being overwhelmed by common concerns such as massive corruption and the lack of protection for women. He has examined many interesting trends in contemporary India. Ms Gupta has made an elaborate analysis of parameters and numbers relating to the 2009 Lok Sabha elections, but her approach is too theoretical. For a more meaningful analysis, she could have exchanged views with those who have hands-on experience of campaigning.
Part two on governance has essays by Ashima Goyal, Samuel Paul, T T Ram Mohan and Pulapre Balakrishnan. Ms Goyal's analysis, "Institutions, Incentives and Interests in India's Democracy", is excellent, but is also highly theoretical - more appropriate in a book targeted at academics than at the general public.
Mr Paul's essay, "Corruption, Politics and Governance", suffers from the same problem. Mr Ram Mohan's topic - corporate governance, which covers attempts by regulators in India and elsewhere to limit the powers of the owners of companies to misuse their position - has limited relevance in a book on national governance. Mr Balakrishnan's essay is another highly theoretical and abstruse analysis that is unlikely to be of much interest to the general public.
Part three on policy has articles by Ravi Kanbur, Sunil Mani, M Govinda Rao and Deepak Mohanty. Mr Kanbur has brought up interesting aspects of the informal sector outside the state control, which he expects will continue to grow in India for a long time to come. Mr Mani points out that India has very generous tax incentives for innovation, but does not deal with the real constraints holding back innovation in India - the obsession with hierarchy and lack of a culture for creative destruction. Mr Govinda Rao's comprehensive overview of public finance in contemporary India is impressive and full of useful insights, while Mr Mohanty gives an equally comprehensive and insightful overview of monetary policy in contemporary India.
Somewhat surprisingly, however, this book neither examines what enabled India's GDP to grow at 8.6 per cent between 2008-09 and 2009-10 and at 9.3 per cent between 2009-10 and 2010-11, nor points out that a drop in economic activity has caused India's GDP growth rate and productivity of domestic investment to fall thereafter. This drop in economic activity is primarily due to:
(a) Efforts to contain massive corruption, including the cancellation of telecom licences, and a temporary halt on mining in Karnataka, Goa and Odisha to check illegal mining and destruction of the environment. These steps reduced output for a number of large sectors, including rail and road transport, and shipping;
(b) Many hundreds of project delays (including those related to much-needed coal, of which India has abundant reserves) whether for lack of coordination between the central and state governments and their agencies and overzealous and mindless environment protection, or arising from innumerable commercial disputes stuck in the labyrinths of India's infamously slow judicial system.
Apart from the direct loss of output in the industries that were halted and projects not implemented, suppliers of goods and services to these directly affected industries also lost output - and the employees of all directly and indirectly affected industries lost purchasing power - thus, heavily compounding the loss of GDP growth rate. Should at least one essay of this book not have covered these core factors slowing India's GDP growth rate?
