A festschriftin honour of Montek Singh Ahluwalia, this brings together essays by economists who have been closely associated with him in college, the World Bank, or in government. There is palpable adulation over his role in the reform process.
India's reform process has not been smooth. It has indeed been subject to the vicissitudes of coalition politics. The nature and content of reform are being debated endlessly.
If, against this background, a reader expected to get from the festschriftan insight into the contribution made by the person being honoured to the reform process, he will be in for disappointment. Some of his personal qualities have come in for praise by some of the writers.
There is internal evidence that these articles were done in 2008, much ahead of the Lehman collapse. It is clear that the chapterson the financial sector had undergone a hurried revision and post-scripting aided by post-Lehman hindsight. This can also be said of the chapter discussing stock markets. They reflect the rethinking on financial reforms. “Calibration” and “gradualism” of bank reforms and capital-opening are respected clichés now. Truly, this is not what ‘red hot' reformers wanted in the pre-Lehman era.
Those who have been following closely the reform process are well aware of the differences between the Government of India and the Reserve Bank of India and the intense pressure the former mounted on the RBI to speed up financial opening. Fortunately, the RBI stood firm and saved the banks from the crisis. It would have been instructive if any of the authors who were ‘insiders' had spoken about Ahluwalia's contribution to the policy deliberations during that time.Surprisingly, there are only three references to the views of Venugopala Reddy, then Governor of the RBI.
On ‘infrastructure', there is a strident attack on the public sector undertakings, — their inefficiency, corruption, et al. It fails to give credit to the PSUs for their role in creating investment demand, filling production gaps, and so on. Unfortunately, the various instruments of privatisation — PPP, BOT, etc. — have not been successful in promoting infrastructure.
In fact, the chapter provides a doleful account of failures in infrastructure areas such as power, roads, and airports, where the private sector involvement was tried out as a part of reforms. The author goes on to narrate how the change ended up in replacing the “licence permit raj” by a new “contract raj” and nurtured rentier class. On the ‘power' front, there is a reference to the Enron debacle, but the role played by Ahluwalia in promoting it is glossed over.
In his article on “inequality and growth,” Suresh Tendulkar provides, rather strangely, an apologia for inequality during years of high rates of growth — this, at a time when the government's avowed policy is for ‘inclusive growth.' Sadly, his work is based on studies that have since been set aside by new research which takes the view that inequality might hinder growth.
Ashok Gulati's piece on ‘accelerating agriculture growth' is provocative. At a time when the country is worried about the state of agriculture, he is upbeat — a mood that stemmed from his studies. He dismisses concerns over food security, including those expressed by Dr. M.S. Swaminathan, as media ‘hype.' He calls for a shift in emphasis from the “farms” to “production chains” backed by a support structure and linked ultimately to the retail chains.
In Isher Judge Ahluwalia's essay on ‘public services', there is no recognition that public services have been constrained by the fiscal reduction enforced under ‘reforms.' The suggestion that education and health services could be improved through a coupon system engaging the private sector is unrealistic. Can the States underwrite a bottomless pit, given the current levels of capitation fees and medical charges in the private sector?
When work on this volume started, the authors would have been in a celebratory mood, and understandably so. Sadly, the financial crisis has played spoilsport in the intervening year. In the event, what we are left with is a collection of musings tempered by the crisis, nothing much about Montek Singh Ahluwalia's contribution in various areas.
INDIA'S ECONOMY— Performance and Challenges: Edited by Shankar Acharya and Rakesh Mohan; Oxford University Press, YMCA Library Building, Jai Singh Road, New Delhi-110001. Rs. 795.
This is a collection of essays written for the Financial Express, an Indian financial daily. There are several themes that I explore in these pieces. The most basic is that of the overall process of, and environment for economic growth in the Indian context. Another strand examines different sectors and their past or potential growth contributions. A third issue is one that often has dominated recent policy discussions in India, namely, how to make growth more inclusive or broad-based. This is related to a fourth theme of these essays, that of governance and policy making in India. A fifth theme of the essays is money and finance in India, again in the context of development and development policy. Finally, I comment on management and management education as a potential contributor to India’s growth. The essays sometimes cut across themes, but I have organized them loosely into these six categories. The two dozen or so pieces were written between May 2006 and January 2008, but I think they still have relevance, as the issues they explore are long-run questions about India’s economic growth and its sustainability. I have attempted to draw on economic analysis in assessing current issues, but the presentation is relatively non-technical.