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India’s Economy Performances and Challenges

Shankar Acharya and Rakesh Mohan, eds
Oxford University Press, New Delhi, 2010
Hardback, 504 pages

India is today among the fastest growing countries in the world and it has been a remarkable journey since the reforms process was initiated in the early 1990s. None would disagree that Montek Singh Ahluwalia has played a key role in this growth process. It is in honour of his important contribution to India’s growth story that is highlighted in this volume, which brings together essays by leading experts.

As the title of the book suggests, the aim is to cover the main aspects of India’s development in terms of reviewing past performances and developments and focusing on future challenges. The volume, edited by Dr Shankar Acharya and Rakesh Mohan, is divided into four sections: growth, inequality, and reform; the evolution of macroeconomic and financial policies; review of progress in key sectors of the economy; and India’s role and place in the global economy.

Acharya and Mohan pragmatically note in their introduction, “the essays clearly document the tardy pace of infrastructure reforms and development, the glaring deficiencies in the social sectors, particularly in education and health, and the reforms needed for modernising agriculture to meet the needs of the future… However, we have not been able to gear up public administration structures to improve the delivery of public or semi-public goods and services. It is this area that needs the focused attention from all levels of the government in the years to come.”

This analytical tone is evident through the volume as the essays analyse the key economic challenges facing India today and suggest policy measures that can propel India towards inclusive growth. The volume notes that while the Indian growth experience is well-documented, bottlenecks and gaps, sectoral and social issues, and the changing international arena are increasingly emerging as concerns.

In our reading, some clearly stood out. Suresh Tendulkar looks beyond poverty and inequality numbers and makes a distinction between inequality and inequity. Isher Ahluwalia’s piece on the social sector is interesting, with lessons for future centre-state relations. She concludes that the excessive centralisation of the control of the services (health and education) at the state level and low accountability at the local level are the main reasons for the poor outcomes on human development indicators in India. C Rangarajan recounts his experience of two reform episodes, first the reform in exchange rate which is crucial for the success of the structural reforms and the trade policy of the early 90s and second that of the phasing out of the issuance of ad hoc treasury bills between 1994-97. Gajendra Haldea’s contribution lies in bringing into sharp focus the difficulties encountered while inducting the private sector into the domain of infrastructure. Shankar Acharya’s essay concentrates on macro-economic performance and policies since the year 2000. He suggests that the achievement of high growth, along with low inflation and price stability, as well as sustainable external balance are the ultimate targets of macroeconomic policy.

The last three essays in the volume address India’s role in the world. One article, by Nicholas Stern and coauthored by Ruth Kattumuri and Nandan Nilekani, stands out for its visionary analysis of the global climate deal. As the authors observe, “if we do not act strongly on climate change, it will undermine development… At the same time, action on climate change cannot be successful unless it promotes development.”

Martin Wolf, who also has an essay in the volume, wrote in the Financial Times soon after the book’s release: “The book gives a strong sense of the confidence of the technocratic elite in India’s performance and prospects. Similar confidence is palpable among the business elite. This confidence makes this a radically different India from the one I knew when I was the senior divisional economist for India, at the World Bank, in the mid-1970s. The emergence of an elite consensus on where the country is going is clear to any regular visitor. When entering the commerce ministry, bastion of opponents of open markets in the 1970s, I was struck by a poster describing India as the “world’s largest free-market democracy”.

Overall, the book makes interesting reading of India’s experiment with liberalisation in the economic arena and provides deep insight into the policy interventions that are required to further energise the Indian economy. The essays are compact but at the same time touch upon a wide spectrum of issues relevant to that sector. India has traversed a long way since the economic reforms of the early 1990s, and this book succinctly captures the journey.

Team Inclusion

INCLUSION is the first and only journal in the country that champions the cause of social, financial and digital inclusion. With a discernable and ever- increasing readership, the quarterly relentlessly pursues the three inclusions through its rich content comprising analysis, reportage, features, interviews, grassroots case studies and columns by domain experts. The magazine caters to top decision makers, academia, civil society, policy makers and industry captains across banking, financial services and insurance.
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