Making Growth Happen in India: A Road Map for Policy Success
Publication Year: 2014
For India's economic reforms policy to succeed, its programmes should be firmly anchored in the reality of the social and micro-institutional context—something our policy makers often regrettably ignore.
To break out of 8 or 9 per cent growth rates, we need more appropriate skill sets, development of proper attitudinal infrastructure, increased capital productivity, a more optimal savings rate and deliberate creation of socially productive market structures in several areas such as healthcare, public distribution and higher education.
Employment is the best way to deliver growth to the vast multitude and reconcile the growth fixation of reformists and socialistic obsession with distribution. The book suggests several unconventional growth engines which can potentially deliver both and make 12 per cent growth rates realistically possible.
The book is aimed at people ...
- Front Matter
- Back Matter
- Subject Index
- Chater 1: Economic Reforms, Social Fissures
- 1.1 Reforms as a Source of Disaffection
- 1.2 Mutual Servitude or Reflexive Slavery
- 1.3 Corruption
- 1.4 Migration Issues
- Chater 2: Laudable Goals Yet Defective Programmes
- 2.1 National Rural Employment Guarantee Act (NREGA) and Food Bill: Can Derail Long-Term Growth in Rural Areas
- 2.2 The Politics of Minimum Support Prices (MSPs)
- 2.3 Cash Transfers and Coupons for Subsidies: What Makes Sense?
- 2.4 Threats from Foreign Direct Investment (FDI) in Retail: Is It Real?
- 2.5 Land Acquisition Bill: A Futile Exercise
- 2.6 Inflation Control: RBI's Inappropriate Response to MSP Genie
- 2.7 Agricultural Productivity Gains Might Marginalise More into Poverty
- 2.8 The Relevance of Right to Education (RTE)
- 2.9 Fuzzy Divestment Logic
- 2.10 Goods and Services Tax (GST): Needs Some Fine-Tuning
- 2.11 Needless Worship of False Gods
- 2.12 The Myth of Delivery Losses
- 2.13 Regulation: Control by a New Name
- 2.14 Four Factors of Production: Whither Indian Reforms?
- Chater 3: Getting Some Basics Right
- 3.1 Achieving Financial Inclusion
- 3.2 Achieving Socio-Economic Inclusion
- 3.3 Let Us Stop the Excuse of ‘Protecting the Poor’ and Start Recovering Proper Prices
- 3.4 Need to Build Attitudinal Infrastructure First
- 3.5 A Strong Lokpal for Breaking the Political Logjam and Reform Inertia
- 3.6 Economic Value of Official Pronouncements and Public Debates
- Chater 4: Reorienting Education to Develop Skills
- Chater 5: Creating Employment
- 5.1 Creating Sustainable Employment Models
- 5.2 Inappropriate Choice of Technology
- 5.3 Greening for Employment and Growth
- 5.4 Railways: Re-Railing to Generate Employment
- 5.5 Recovery of Freebee Externalities to Create Employment
- 5.6 Expansion of Civic and Government Services
- 5.7 Need to Increase Breadth and Quality of Services in Private Consumption
- Chater 6: Creating Appropriate Market Structures
- 6.1 Correcting Distortions in Higher Education Markets
- 6.2 Affordable Health Care
- 6.3 Forex Reserves: Ways to Use Them in Infrastructure
- 6.4 Privatising Public Distribution System (PDS)
- 6.5 Beneficial Legislations for Creating Demand and Growth
- Chater 7: Taming the Twins
- 7.1 Let Us Save Less to Grow More: Reworking Our Savings Rate
- 7.2 Making Our Capital Work Better for Us: Reaping the ICOR Dividend
- Chater 8: Creating New Growth Engines
- 8.1 Developing New Capital Cities and Helping Urbanisation
- 8.2 Extracting Growth and Employment from Urban Wastes
- 8.3 Travel and Tourism
- Chater 9: Feasibility and the Growth Potential of Suggested Actions
- 9.1 Feasibility: Lessons from Other Countries and Indian States
- 9.2 Pros and Cons of Existing Reforms
- 9.3 Action Plan for Growth Summarised
- 9.4 Action Plan for Distributing Growth and Enhancing Welfare
Advance Praise[Page A]
The book gives a fresh insight into several aspects that have a huge relevance at the moment. What is creditworthy is the lucid way in which the author handles these issues. For example on the NREGA issue, he gives a nice example of how ‘NREGA is like giving excessive grace marks to a student who keeps failing his exams repeatedly’. This is an interesting take on the subject and I doubt whether any economist, whatever be their ideological leanings, will disapprove this. Mr Kumarswamy's agenda and blueprint for 12 per cent growth is just the potion India needs at this hour to reach the heights we all aspire to.—Professor
Mr Kumaraswamy has applied his deep knowledge of consumer behaviour, developmental issues and programmes to come up with a suitable design for accelerating our growth. If India is to rightfully claim its place amongst the world's leading economic powers and provide employment opportunities to its citizens, its policy makers would do well to seriously consider the author's proposals.—
The book blends data, anecdotes and analysis in a way that makes it both insightful and interesting—a combination rare in books on Indian economy.—
[Page B]There is no doubt that a well-implemented good strategy is better than a perfect strategy that is poorly implemented. Mr Kumaraswamy's book provides a very refreshing non-economist's perspective into the design and delivery of economic programmes rather than focussing on the relevance of reforms as a fundamental economic strategy. In doing so, it seeks to search for ways to improve their effectiveness and sug gests new programmes aimed at enhancing the country's growth rates.—
This is an important book, written with a fresh perspective on the vital issues facing the country. Even though Kumaraswamy claims to be a non-economist, he has sufficient insights into the broad economics behind significant policy decisions to warrant a close reading by the policy makers and implementers. A must read for every Indian interested in the future of the country.—Professor
Mr Kumaraswamy's insights into the drivers of change in India need to be widely absorbed. A timeless book at a strategic inflection point when India will certainly get rerated.—
Copyright © V. Kumaraswamy, 2014
All rights reserved. No part of this book may be reproduced or utilised in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage or retrieval system, without permission in writing from the publisher.
First published in 2014 by
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Library of Congress Cataloging-in-Publication Data
Making growth happen in India: a road map for policy success / V. Kumaraswamy.
Includes bibliographical references and index.
1. Economic development—India. 2. India—Economic policy—21st century. I. Title.
HD82.K8196 338.954—dc23 2014 2014006303
ISBN: 978-81-321-1792-6 (PB)
The SAGE Team: Sachin Sharma, Alekha Chandra Jena, Anju Saxena and Rajinder Kaur
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List of Tables[Page xi]
- 2.1. Minimum Support Prices of Key Crops (₹/Quintal) 29
- 2.2. India: Per Capita Availability Per Day 2010–11 31
- 2.3. Terms of Trade (Base Year 2004–05 = 100) 33
- 2.4. Index Numbers of Wholesale Prices 50
- 2.5. Gross Tax Revenues as Percentage of GDP 72
- 2.6. Amount Raised in Primary Market (Equity) 77
- 3.1. Yield Per Coach for Rajdhani between Delhi and Mumbai 112
- 3.2. Incidence of Fatal Road Accidents 119
- 4.1. Number of Seats Offered for Technical Education 138
- 5.1. Employment in Organised Sector 142
- 5.2. Track Record of Indian Railways in Creating Employment 156
- 5.3. Additional Employment Feasible in Public Services in India 160
- 7.1. Growth Rates at Various ICOR and Savings Rates 185
- 7.2. Differential Growth Rates from Gold and Real Estate 198
- 7.3. Comparative Ranking: India versus Select Countries 206
- 7.4. Adjusted Gross Capital Investments 208
- 8.1. Tourism: A Comparison between India and Others 228
- 8.2. India's Ranks on Various Sub-factors of Travel and Tourism Competitiveness 232
- 8.3. Tourism Industry: Contribution to GDP and Employment (2009) 236 [Page xii]
- 9.1. Countries Which Have Seen More Than 12 Per Cent Growth Rates 243
- 9.2. Growth Rates of States 244
- 9.3. Decadal Growth Rates (Average) 246
- 9.4. Pros and Cons of Existing Reform Programmes 248
- 9.5. Action Plan for 12 Per Cent Growth 252
- 9.6. Action Plan for Enhancing Employment, Equity and Better Distributive Efficiency 254
List of Abbreviations[Page xiii]
- 2G Second generation
- ADR/GDR American/global depository receipt
- AIIMS All India Institute of Medical Sciences
- B2B Business to business
- B2C Business to consumer
- BOP Balance of payments
- BOT Build, operate and transfer
- BPL Below poverty line
- BRIC Brazil, Russia, India and China
- CCEA Cabinet Committee on Economic Affairs
- CAD Current account deficit
- CAG Comptroller and Auditor General
- CACC Capital Account Convertibility Committee
- CCI Competition Commission of India (or) Controller of Capital Issues
- CEA Chief Economic Advisor
- CIA Central Intelligence Agency
- CACP Commission for Agricultural Cost and Prices
- CPI Consumer price index
- CWG Commonwealth Games
- DGCA Director General of Civil Aviation
- DPCO Drug Price Control Order
- DTC Direct tax code
- EEFC Exchange earner's foreign currency
- ELSS Equity linked savings scheme
- FCI Food Corporation of India
- FDI Foreign direct investment
- FMCG Fast moving consumer goods
- FRBM Fiscal responsibility and budget management
- FTA Foreign tourists arrival [Page xiv]
- GDP Gross domestic product
- GDS Global distribution system; also gross domestic savings
- GMRC Good manners and right conduct
- GOI Government of India
- GST Goods and services tax
- HDI Human Development Index
- ICOR Incremental capital output ratio
- IIFT Indian Institute of Foreign Trade
- IIM Indian Institute of Management
- IIT Indian Institute of Technology
- IPL Indian Premier League
- IRR Internal rate of return
- ITI Industrial Training Institute
- LARR Land Acquisition and Rehabilitation and Resettlement Bill
- MHRD Ministry of Human Resource Development
- MSP Minimum support price
- NGO Non-governmental organisation
- NHAI National Highways Authority of India
- NHDP National Highways Development Project
- NIFT National Institute of Fashion Technology
- NID National Institute of Design
- NPV Net present value
- NREGA National Rural Employment Guarantee Act
- OPEC Organisation of Petroleum Exporting Countries
- PDS Public distribution system
- PPP Public–private partnership
- PSU Public sector undertaking
- RBI Reserve Bank of India
- ROCE Return on capital employed
- ROI Return on investment
- RTE Right to education
- SSA Sarva Shiksha Abhiyaan
- SEBI Securities and Exchange Board of India
- SLR Statutory liquidity ratio
- SME Small and medium enterprises [Page xv]
- TTCI Travel and Tourism Competitiveness Index
- VAT Value added tax
- WDR World Development Report
- WGC World Gold Council
- WHO World Health Organisation
- WTTC World Travel and Tourism Council
- WPI Wholesale price index
- WTO World Trade Organisation [Page xvi]
For the India of 1.2 billion people, growth is not a choice but an imperative. Without adequate growth the very fabric of the nation is at risk. The tens of millions that join India's workforce must either receive gainful employment or the nation risks severe social disorder and unrest. Further, the inequality of the growth that has occurred so far presents another challenge which must be addressed if the country is to see a peaceful path to prosperity. This is the complex context around which Kumaraswamy has crafted an extremely readable and interesting analysis of the problems that hold India back and how they might be addressed. This is an extremely ambitious and equally laudable undertaking.
As the author notes, ‘economic reforms have three important and, to a large extent, inter-dependent legs on which its success rests, namely (1) appropriate strategy or economic policy at the macroeconomic level, (2) translation of these into meaningful plans and programmes at the segment or sectoral level and (3) effective delivery or implementation thereof.’ By targeting this book at the second and third of these levels, Kumaraswamy does a valuable service. Too often is evaluation and review targeted at the policy level. Yet, whether the policy has any impact is eventually dependent upon what he calls ground realities. For a reform policy to have an effective impact on the people that it targets, it should be ground into reality of the institutional context—something often not considered deeply by policy makers. Kumaraswamy's book, at the broadest level, is a call to draw attention to this often underemphasized but extremely important component of the economic transformation process.
[Page xviii]Equally noteworthy is the fact that Kumaraswamy has written a book that looks at economic issues but explicitly as a non-economist. This is laudable because it is helping us broaden the discourse from the ivory towers of academia which often have limited exposure to ground realities, and bringing it to the level of the lay (albeit thoughtful and informed) person who has lived those realities and been exposed to them deeply. The book is full of thoughtful analysis, and contains many plausible critiques; it is, however, also likely to generate disagreement as all books that address complex topics do. Many of the problems of programme delivery that Kumaraswamy addresses are open to multiple different interpretations with consequently different solutions. Kumaraswamy's fresh thinking demands our attention even if we may not agree with all his diagnoses and recommended solutions. I think this book should be an important read for all policy makers and social programme designers who are hoping to enhance and improve the life of the average Indian. I have found it to add many layers to my own understanding of the common programmes that we have seen implemented.
Preface[Page xix]History of Indian Reforms
The initial seeds of reforms were first sown by our late Prime Minister Rajiv Gandhi. Useful changes in indirect taxation took place during the succeeding regime. The shortlived regime of late Prime Minister Chandrasekhar faced an acute crisis on the forex front and came up with some path-breaking measures. However, the full-blown implementation of those measures got derailed prematurely due to political events. It was only in 1991 that the government of late Prime Minister Narasimha Rao through Dr Manmohan Singh introduced several initiatives which paved the way for increased role of private sector. There was without doubt much more depth to the various initiatives during their tenure and several measures were taken for the first time in our country. The successive governments in the last two decades have, by and large, followed up on those measures.
India's socialism of the first 40 years since Independence did have its purpose. It was not as mindless as in many other countries. It was blended with democracy judiciously. It created some demand, made up for lack of investments and entrepreneurship at a crucial juncture. However, looking at our own progress and the kind of progress many of the East Asian economies had achieved in the period since 1965, it would be naïve to argue that we should have continued with our socialistic approach. The government and agencies involved in reforms have an obligation to calibrate the reforms so as not to repeat the failures of the past. In several reform policies, there seems to be a fair degree of consensus by now. With the benefit of experience, initial objections and apprehensions seem to have settled down. Whatever shrillness [Page xx]is there in the debates these days seems more about political posturing.Components of Reforms
Economic reforms have three important and to a large extent interdependent legs on which its success rests, namely (1) appropriate strategy or economic policy at the macroeconomic level, (2) translation of these into meaningful plans and programmes at the segment or sectoral level and (3) effective delivery or implementation thereof. This is graphically illustrated in the box below.
To illustrate the difference—increased literacy may be the socio-economic objective while the programme to deliver it can be Sarva Siksha Abhiyaan; removal of hunger and poverty may be the macro social objective which is delivered by public distribution systems through fair price shops and NREGA; increased tax efficiency may be the end-goal achieved through GST, DTC, etc.[Page xxi]The Focus of This Book
This book is more about stages 2 and 3—i.e. design of programmes and delivery thereof and less about the macroeconomic policies and strategies. This book is not about fiscal deficits,1 WTOs, balance of payments, Gini-coefficients,2 Phillips curves,3 finance commissions, plan approach papers, etc. This is more about the programmes like NREGA, GST, DTC, MSPs, PDS and fair price shops, food subsidies, land acquisition initiatives, etc. that are designed to translate overall objectives at macro level into specific initiatives at micro level. The book seeks to identify the lacunae in them and a search for ways to improve their effectiveness and suggest new programmes aimed at enhancing the country's growth rates.
There are specific reasons for my bias towards programme design and delivery systems while I lay far less emphasis on the relevance of reforms as a fundamental economic strategy. Firstly, there are several books on reforms as a strategy from the macroeconomic perspective and there is very little a non-economist can add to the existing available literature. Secondly, there is fair degree of consensus amongst the economists (surprising indeed!) on the need and efficacy of reforms. This is backed by sound theories which have been shown to work in other countries that have achieved sustained growth over a period of time. Lastly, not many can fault the lofty ideals behind many of the reform policies like employment guarantees, MSP, food or education subsidies. There can be few valid arguments against support for people who have [Page xxii]starved for decades, denied equal opportunities and have taken (or have been forced to take) permanent residence below poverty line. That we have failed to solve our basic problems even after six decades of independence speaks poorly of our implementation efficiencies.
While macroeconomic reforms may be well intentioned, many programmes and plans seem to falter more due to ill-fitting designs. They seem to ignore ground realities, end-user reception, social conditioning of people at the receiving end of social services and interventions, suffer bad sequencing and surprisingly in a lot of cases overlook even basic economic principles. The book will illustrate this in several places.
The book by Nobel laureate Joseph Stiglitz (Globalization and Its Discontents) examines how economic policies are framed wrongly in countries after countries ignoring ground realities; how they are designed to serve the donors’ interest rather than donees’ requirements, and how such policies have had to fail. This book examines several places where there is clear disconnect between policies and strategies at the broad level and the plans, pronouncements designed to implement them, between action plan and follow-up, mix up between cause and effect, and programmes laid ineffective due to design defects. This particular leg of reforms seems to have escaped serious scrutiny from economists in India, or at least not analysed to the depth it deserves.
To summarise, this book is less of a critique of reforms as an economic strategy and more of a selective look about its faulty planning, the pitfalls, lessons to be learnt, ways to correct them and the ways (even if unconventional) ahead.Organisation of the Book
Part I of the book looks at the current reform programmes and their effectiveness. It delves into how reforms may be the cause of some social problems and the need for adjustments [Page xxiii]in such areas in order to avoid alienating people or large sections of them and examines the reasons why some of our flagship programmes are failing. Chapter 3 of Part I looks at some essential actions or systemic changes necessary to get better results from the government's policies and plans.
Part II is about an alternative growth path. It combines the learning from the analyses in Part I with new growth initiatives for suggesting a strategy and a set of new programmes for achieving 12 per cent growth rates. It looks at the need to develop appropriate market structures, deliberate actions needed to create employment besides re-orienting our education to facilitate meaningful employment creation.
The sequence does not follow the normal sectoral flow that economists follow; it is not organised as agriculture, industry, service, banking, fiscal matters, human resource development, etc. The flow and placement of topics have more to do with the unrealised potential, their criticality to the success of reforms and their ability to deliver growth the way the country wants.Intended Audience: Non-Economist Economists
There is an economist in each one of us—whether we are a homemaker, student given to serious debating, professional, businessman, politician, journalist, etc. We all think of economic issues all the time in our own ways based on our comprehension and what affects or appeals to us most. The book is intended towards these ‘non-economist economists’.
It is for those who want to understand the issues and perspectives, the whys and wherefores without getting too academic about it. Academics, policy planners and programme designers who are looking for feedback on ways to improve design and delivery efficiencies of programmes would also be interested.
There is no claim or pretence of elaborate statistical proofs, academic rigour and tightness, or conclusions based [Page xxiv]on rigorous sampling, tabulation and analysis of data gathered by interviewing such samples to arrive at conclusions.Caveat
There is a thick air of despondency for the last 3–4 years about India, its polity, its economy, law and social order, etc. Some of the economic woes can be attributed to external global factors but much of it is also due to the nature of our democracy. The prevailing mood is such that even an honest evaluation of our programmes might sound like a critical assault on the institutions.
If the book appears negative in its earlier sections, it is purely incidental. In the latter part, the attempt is to build effective programmes and growth engines to step up growth rates and achieve better distribution of income in a socially inclusive manner. The air of cynicism would hopefully give way to hope in these parts.
1 Fiscal deficit is the amount by which the government's expenditure exceeds its income.
2 Gini-coefficient is a measure of equality of income distribution. A co-efficient of ‘0’ means perfect distribution where everyone has the same income and ‘1’ means where all income is concentrated in one person.
3 Phillips curve is a curve showing the relationship between unemployment and inflation—usually inverse—a higher inflation being associated with lower unemployment.
No book can be written without the active and passive cooperation of the family. I would wish to thank my wife Sharada and my daughter Akhila for being supportive of this venture.
I owe a lot to my employers, the JK Group, for giving me opportunities to travel and witness several parts of the world during the course of my work. Several observations and case studies quoted in the book would not have been feasible but for these opportunities.
Many thanks to Professor Dr Ahuja for agreeing to write the Foreword inspite of his heavy academic load.
I owe a lot of thanks to Yogendra Khurana, Vallur Sundar Raman, Sharada and Ramesh who have helped me in reading the manuscript and offering suggestions in several places to make the book more readable. Their forthright observations were of immense help and guidance.
Thanks are due to Professor Abraham Koshy, Professor of Marketing Area, IIM Ahmedabad, Chandu Nair and Li'l Ram for their valuable encouragement at crucial times and not allowing me to give up. Thanks are also due to M.K. Subramaniam, Adi Saravanan, Professor S. Manikutty, M.K. Chandrasekar and Dr Saha for their help.
Many ideas explored in this book have been published in some form in economic dailies like Business Line and Business Standard over the last over a decade and a half. Thanks are due to them in large measure in honing my writing skills and for their necessary permissions. However, it should be mentioned that this book is in no way a reproduction; all ideas explored in the published articles have been re-visited and re-written in the current context.
[Page xxvi]Thanks are also due to SAGE Publications. Publishing a non-economist writing on an economic subject is not a small risk to take. They have been bold enough to bet on me and guiding through several edits to see this book through.
The most fatal illusion is the settled point of view. Life is growth and motion; a fixed point of view kills anybody who has one.—
When a socialist and of late the officialdom see a hungry man—they see an empty belly. The reaction is one of patronisation and benevolence to feed him. The alternative is to see a set of hands that are idling, to train them so that they contribute to the national kitty of goods and services.
The latter approach will not only provide income for him and his family in the long term, but from what he earns and spends create employment for someone else as well. Such an approach will essentially be expansionery in nature. The current benevolent approach is contractionary and hence will in the long-term impede inclusion. It also dilutes individual initiative, drive and ambition so vital for personal growth and makes him settle at a low individual economic equilibrium.
Firstly, GDP is just the quantum of goods and services produced by the country. If more people work, producing socially or economically desirable goods or services, the society's GDP should rise. India has a high unemployment rate of 30–35 per cent (hidden though in an official unemployment of 10 per cent). If only we can find some way to productively employ all those—even if by contrived mechanisms or induced demand—over the next 10 years at our average income levels of ₹5,000 per month, it will mean a 30–35 per cent increase in our GDP.
Secondly, our skill sets and levels are rather low when compared to several comparable countries. If the productivity is improved by appropriate training and skill development, it [Page 258]is inconceivable why we cannot achieve an additional GDP of 30–40 per cent over the next decade. Development of skills and improvement of productivity together should give 60–75 per cent additional GDP in about a decade. This implies an additional 5 per cent per annum growth.
A 12 per cent growth is feasible. There is sufficient material in economic history to prove it. But to attain it we have to first start thinking about it. We need to overcome the mental blocks and self-imposed restraints so that we can design programmes without being saddled with the baggage of the past. Informed debates will definitely open up more possibilities.
We need to think employment instead of growth alone. For example, can we make people pay for clean surroundings and deliver the same by training people? How do we ensure better road safety—another concern of citizens—by employing more people? Can we reduce our road accidents by better discipline which can be brought about by increased policing? We need greater green cover. Can we deploy more trained resources to develop it and deliver commercial value to willing users? If we train and deploy even 1–2 million in each such activity, it would do a great deal more to reduce poverty than the Food Security Bill kind of schemes which are highly ineffective in delivery and have limited long-term potency. Creation of 20–30 million low-skilled jobs for the tribals, poor and landless labour promises faster reduction of poverty than dubious schemes.
Estonia, a part of erstwhile USSR, was one of the most crime-prone areas in the world. But in 15 years since the early 1990s, it has become one of the least crime-prone and safest places. While there are social problems in Estonia—marriage rates are falling and divorce rates are increasing alarmingly and one sees signs of drugs on the streets of its capital Tallinn, the crime as we know it has largely (if not fully) been controlled.
Closer home we witnessed Surat being transformed after the plague in the early 1990s from being one of the dirtiest cities to being one of the cleanest within the decade itself.
[Page 259]Recently, when gold prices were plummeting, there was a long queue in front of a particular shop in Chennai. This shop had guaranteed its buyers price protection for the next 3 months, i.e. any customer who bought gold was promised reimbursement of the difference in case the prices fell. What perhaps would have happened is the owner would have bought equivalent 3-month options for selling gold from which he would have recovered the difference for reimbursing the clients. Thus, what was an adversity was made use of by him for gaining long-term loyalty of the customer and establishing his name firmly in the minds and psyche of his existing and new clients.
These only indicate that with appropriate plans backed by official will it is not difficult to achieve transformational growth rates. This seems applicable for cities as well as nation states, not just corporates. Constraints and impediments are mainly between our two ears.
The difference between 8 per cent and 12 per cent growth means leaving twice as much to the next generation; in 20 years, our incomes would be twice as much with 12 per cent growth as it is with 8 per cent growth—a very enticing prospect indeed. That should be enough motivation and reward to give it our best.
If an individual is regular with his exercise, takes care of his diet, follows hygienic habits and avoids harmful addictions, his health will most likely take care of itself. Sound health cannot be achieved by regular monitoring of blood pressure, ECG, cholesterol, or by taking medicines, scanning, etc. These are just checks that can help with course corrections. Most of the intensely debated topics in our economic spheres such as Current Account Deficit (CAD), CRR, Sensex, inflation, forex rates or reserves are just like health check indicators. There is unfortunately excessive concentration on these. Instead our debates should be to get our micro-level initiatives right and generate several creative alternative programmes and designs and implement them with regular course corrections to fine-tune them for better results.
Economics is extremely useful as a form of employment for the economists.—
It appears that economics as a discipline requires serious cross pollination with creativity, ground-level realities and social circumstances. Most of our economists are urban trained and most of economics as a subject of study has evolved in the last century or two in the Western social and industrial settings. People who have been trained in these surroundings seem to miss some vital links of native logic and domestic compulsions with the result we end up with ineffective programmes and difficult-to-market policies.
Sure they are at least as patriotic as the political class. Their inability to appreciate the ground realities leads to raucous arguments where the well-meaning economic designers call to question the wisdom and financial discipline of the political class (as indeed anyone who stands in their way) and stand in an intellectual island of their dreams and theories. Sure, our political class instead of engaging with them and finding viable solutions in the long-term interest reciprocate with equally vicious arguments or defeat economic reforms on the floor of the house wherever feasible.
It looks like there are two distinctly separate good Samaritans guiding the country these days—the reformists/economists and politicians, and the distance between them seems to be increasing day by day. Marriage between the socially desirable and the economically viable is seemingly becoming increasingly unattainable: witness the petrol price scenario, debates on NREGA, land acquisition reforms and the fate of the railway minister presenting a reformist budget.
[Page 261]The most basic unit of economic action is the individual— his actions and his motivations. By a proper understanding of these, it is possible to come up with solutions of a far wider depth and breadth than the current state of macroeconomics would suggest.
Macroeconomics as a discipline looks too bereft and unimaginative, still thriving on ideas thrown at it more than half a century ago and some intellectually incestuous breeding thereon. If socialism as a dogma is dead or dying, macroeconomics increasingly looks as dogmatic even if it exhibits far less moral overtones. It looks more like a king who has lost touch with his subjects. It needs to go in disguise amongst its subjects to understand their travails, ground-level reality, their aspirations, hierarchy of wants, the way people think, social, psychological, and physical settings, their chain of action–reaction, causality, etc. and get to grips with the real problems afresh and reboot itself.
India somehow seems wedded more to theories than its own ground realities unlike many East Asian countries. Programmes designed as a consequence are struggling to deliver the kind of superior results as in other East Asian countries.
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About the Author[Page 272]
V. Kumaraswamy did his schooling in Chennai and later graduated from IIM Ahmedabad in the 1980s, where he studied under some of the leading economists of India. The institute encouraged freedom of thought by its unique system of pedagogy. Both the tutelage under illustrious teachers and the system have encouraged him to experiment boldly while writing his columns in economic newsdailies.
He has been working with the industry since the mid-1980s. His corporate work in search of natural resources takes him to several remote rural areas in India and abroad. The unconventional ideas and insights in several parts are born out of first-hand experience during such sorties. He enjoys travelling and loves talking to people at various strata in remote areas here and elsewhere which has given him unique insights and helps him get into the core of some of the key issues affecting them.
He has been writing on reforms and economic policies in economic dailies such as Business Line and Business Standard for well over a decade which has honed his skills as a writer.
This is his second book. The first book Corporate Insurance published by Tata McGraw Hill was co-authored with his wife Sharada. Both his wife and daughter have dabbled in writing for magazines.
He can be reached at email@example.com.