Kunji on reforms

Last Updated: Tue, Jan 01, 2013 19:31 hrs

“Time to go,” scream the headlines about Sachin Tendulkar after his disastrous recent season. To draw an analogy, perhaps Jagdish Bhagwati needs to reconsider his position after his current book, which comes as a huge disappointment. In large part, the book is a rehash of an edited book by him and Arvind Panagariya, India’s Reforms: How They Produced Inclusive Growth, published by Oxford earlier this year. What’s even more disappointing is that the book appears to be a hurriedly put together précis. It lacks the rigour and scholarship that one associates with Mr Bhagwati and Mr Panagariya, especially after the latter’s previous seminal work on the Indian economy.

Though there are a couple of superbly redeeming chapters, as a whole the book is a cut-paste affair, leaving much to be desired. The other interesting part of the book is that some of the narrative is in the form of popular myths about the Indian economy and responses to it, which are quite readable. However, not all the myths mentioned are really myths, nor are they subjects of mainstream discourse. For example, Myth 3.4 suggests, “Planning Commission plays politics with poverty lines to exaggerate its achievements in poverty reduction.” Though there was a hue and cry over the Rs 32 figure, no one – not even the Left – argued that the Planning Commission was playing politics with its figures. There was debate on its accuracy and relevance, but that had nothing to do with politics or the Planning Commission trumpeting its achievements.

Overall, this book is a “quickie”, or what we used to call in our college days, a kunji, which provides a rough and ready guide to India’s economic reforms, and makes a strong case for why reforms are good for the country. It doesn’t have the academic depth one would associate with a book by Mr Bhagwati or by Mr Panagariya; instead, it is perhaps aimed at targeting the Twitter generation, which wants everything in life within 140 characters.

Take the chapter on infrastructure. A 285-page book devotes all of seven pages to one of the most important issues confronting the Indian economy at present! Even in that limited space, the book argues that Jet Airways, which is steeped in debt, ought to be a model for privatisation of Air India. If the authors had done some serious research, they would have realised that airlines such as Air New Zealand, Qantas and even British Airways were – or are – state-owned airlines that went through some forms of privatisation. Jet Airways is hardly the right example when it comes to privatisation of a state-owned airline, which it is not!

The authors also discuss contracting failures and the gridlock between the Planning Commission and other ministries, but there is no mention of the causes or the way forward. Nor do they explain why the ultra-mega power projects are stuck; or why open access in power doesn’t happen in practice; or how environmental Talibanism is ruining the power sector; or how contractual manipulation is making financial closure almost impossible in large projects. Further, in just two paragraphs the authors dismiss urban infrastructure; nor do they touch on the subject of ports or show any scholarship with regard to why road construction isn’t happening on the ground (or why roads are being constructed in Gujarat and Bihar with consummate ease). There is nothing much in the book about governance, or the absence of it, which is what is killing the best intentions of the brightest economists. This is a huge gap in the book, which defeats much of its central purpose.

The best chapters in the book are those on health and education; almost a third of the book focuses on these issues. They describe the “Kerala model” and then go on to demolish it, arguing that while the state has been an overachiever in human development outcomes, one cannot attribute it to a specific Kerala model.

The book also makes an interesting distinction between Track 1 and Track 2 reforms. The first track deals with policies that aim at accelerating and sustaining growth while making it more inclusive, and the second track covers programmes that distribute this wealth created through Track 1 reforms to the masses. Some might take exception to this categorisation, for many view decontrol and liberalisation as Track 1 reforms. According to the authors, the Mahatma Gandhi National Rural Employment Guarantee Act and the upcoming food security Bill are not, and will not, produce the best results; the book makes a case for cash transfers to avoid leakages and distortions in the labour market, even though such transfers are known to suffer from many weaknesses in implementation.

In sum, coming from Mr Bhagwati and Mr Panagariya, the book is a disappointment. It seems to be a hurried compilation of thoughts and articles. Nonetheless, it is highly readable and insightful in parts.

The reviewer is an IAS officer.

These views are personal.

Jagdish Bhagwati and Arvind Panagariya
Collins Business
285 pages; Rs 599

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