AS the world is going through this Novel COVID-19 Corona Crisis, the concerns about how this will impact the global economy and particular national economies are imminent. As of now, India has declared more than 50 Days of total lockdown to contain the spread of this virus affecting the economic activities across the majority of our sectors. Corona Virus Pandemic is the biggest policy challenge of post-world war generations. And on this background, a recent book published on this topic of Public Policymaking in India, written by a noted bureaucrat and a doyen in Indian policymaking Dr. Vijay Kelkar along with Professor Ajay Shah is a fascinating read. <\/p>\n\n\n\n
The book is titled-” In Service of the\nRepublic: The Art and Science of Economic Policy.” To quote Vinay\nHardikar, “India is a sociologist’s paradise and a nightmare of an\neconomist’s.” The more one explores and understand the complexities of\nIndian reality, the more fascinating the idea of curating policies to such\ncomplex situations occurs. And this book with all its limitations-can be used as a magnifying\nglass into the panorama of policymaking in India. <\/p>\n\n\n\n
The book tries to outline the key theoretical as\nwell as policy conundrums in the contemporary political economy of India.\nWritten in a non-linear way, it presents the panoramic view of past and present\ndialectics in Indian-State’s economic thinking. The book revolves around the\ncentral question of “Why did the reforms introduced from 1977 onwards\ndeliver success during 1991\u20132011, but falter thereafter?”And through this\nquestion, the authors have tried to present the anatomy of policymaking in\nIndia. While answering the above question directly, the authors have made it\nclear that to regain the momentum back, mere (re)intensification of the 1977\u20132011\nstrategies will not be enough. It is a high-time to rethink the very\nfoundations of our policymaking. And adopting the “LIBERAL WAY” and\n“LIBERAL ECONOMIC STRATEGIES” has been seen as the way in that\ndirection. This is where it gets tricky. While referring to the ‘Liberal Ways’\nthe authors do not argue the case for any particular strand of Liberal economic\ntheory but see it as a whole panorama of liberal theories ranging from\nClassical\/neo-classical liberalism to Keynesian Liberalism. This lack of single\ncoherent economic ideology can be seen as a reflection of wider cluelessness in\nIndian policymaking. <\/p>\n\n\n\n
With the fall of rivalling socialist systems,\nthe discourse surrounding the liberal market economy and liberal democracy is\ncentred around the question of “WHAT IS THE ROLE OF STATE IN THE\nMANAGEMENT OF ECONOMY?” And the book too is keen on contributing the\nauthor’s version to this debate based on their first-hand experience in\npolicymaking. Here the authors have advocated the case for Keynesian Liberalism.\nThe authors argue that – “Left to themselves, free men and women achieve\nreasonably good outcomes in most situations.” Now, this idea is\nessentially Adam Smith and classical liberalism. But taking into consideration\nhow markets and societies have evolved over the last two centuries, the common\nliberal wisdom suggests that, “Freedom works well most of the time, but\nthere are exceptions, which are in the case of economics known as the market\nfailures. And by addressing the market failures, the State can add value to\nsociety. Otherwise, the economy works better when it allows human intelligence\nto flourish on its own. The predominant narrative from this book essentially\noperates within the framework of the minimal State intervention in the economy.\n<\/p>\n\n\n\n
Based on this theoretical premise, the authors\nfurther expand upon the topic of market failures and the State’s response to it\nwhich in a way is one of the central themes in the book. After the initial\nstandard academic classification of characteristics and causes of market\nfailures, the authors present the four common errors in Indian policymaking in\nresponse to such failures. These commons errors are, a)situations where freedom\nworks well, where the right thing for the government is to do nothing but the\ngovernment is doing something, b)a market failure is present, but the politics\npointed state power in the wrong direction, c) a market failure is present, the\npolitics worked outright, but the wrong intervention was chosen; and, d)a market failure is present, the right\nintervention was chosen, but the implementation was lacking. On the backdrop of\nthis, one can evaluate India’s current response to the Corona Pandemic. <\/p>\n\n\n\n
Drawing on the Indian experience, this book too,\nlike many of its predecessors make the case for excessive government\nintervention in the markets. During the pro-liberalisation movements in the\n1980s, a very popular dictum was that the Indian government hardly governs, it\nalways intervenes. This books in a way put an official seal on this argument.\nThe central argument against the excessive governmental intervention in our\neconomy is effective summed up in this following remark about how we distort\nthe grain of price system in India. The authors wrote and I quote, <\/p>\n\n\n\n
“In India, the legislature, the executive\nand the judiciary have all repeatedly undertaken actions that go against the\ngrain of the price system. These actions are doomed to failure. When the\npolicymaker tries to control the price, this is harmful, and the greatest harm\nis done when the policymaker tries to control both the price and the\nquantity.”<\/p>\n\n\n\n
Fortunately, the Indian economy is slowly moving\naway from this excessive government controls in some economic sectors. However,\nby and large, no political organisation in India has any clear mandate about\nreducing the State’s control significantly. And at this critical juncture when\nNeo-liberal ideas are getting pushed back across the world, we are experiencing\nan increase in the patronising (State) tendencies. And as far as the Indian\neconomy is concerned this dialectic between the need for liberal reforms in the\ntimes of Neo-liberal retreat will mark the central policy challenge in the\ncoming decade. The present book while passionately arguing the case for\neconomic reforms, does not sufficiently address these challenges. <\/p>\n\n\n\n
Another important argument in this book is that\nof Prioritising institution-building over just GDP growth. Robust institutions are the basic most\nrequirement for the decentralisation of the liberal democratic political\neconomy. And weaker institutions have a direct (positive) correlation with\nexcessive patronising and centralising tendencies in any democracy. As rightly\nargued in this book, weaker institutions lead to low faith in them, which\ncauses the social craving for the ‘MIRACLE MAN,’ who would get thinks done\ncorrectly at one stroke. And\nhistorically this kind of Political Romanticism has led to greater economic and\npolitical centralisation often subverting the liberal democratic model of\ngovernance. Therefore for the sake of\nour democracy and sustainable economic growth\/development, Indian policy-makers\nand opinion-makers need to rethink their obsession with the GDP growth.<\/p>\n\n\n\n
GDP has been used as a symbol of nations’\ndevelopment and it is a good indicator in many respects. But on a larger scale,\nthe GDP rate only reflects half a picture. Because GDP growth can be\naccelerated for a short span without really making the necessary structural\nchanges in the economy. The experiences of the USSR and Japan are salutary\nreminders of the ability of states to set up short bursts of growth through\nmethods that lack sustainability. As is\nevident from the discussions during last year’s prestigious American Economic\nAssociation’s annual conference in December 2019 in San Diego, the spectre of\n‘Japanification’ is haunting the world economy, wherein, high GDP growth is\nachieved at the cost of increasing public debt and loose monetary policy.<\/p>\n\n\n\n
In the\nconcluding chapters of the book, the authors have briefly explained the interrelations between\nthe need for a strong and robust institution and the phenomenon of the\n‘middle-income trap.’ The central argument here is that at the early stages of\neconomic development mere mobilisation of labour and capital can be\ninstrumental in economic growth. But as\nit matures further, there is a need for a new mechanism that can deal with the\nincreasing complexities arising out of these new political-economic evolutions.\nTherefore if the market economy is evolving without mature institutions, the\ngrowth stalls. This decade saw several developing economies world-wide getting\ninto such Middle-Income Trap. But recent World Bank Report on Poland shows that\nif a nation can get it’s economic as well as political institutions right, it\ncan transform itself from middle to high income in a decade or two. But doing\nthis is easier said than done. Hence despite making a wise case for\nPrioritising the institution building, the authors have not provided the\nroadmap towards that end. <\/p>\n\n\n\n
This book has attempted to cover wide aspects of\nIndian policymaking ranging from fiscal & monetary policy, agriculture to\npublic health and whatnot. As a result of which it has ended up giving us a\nrather overview than in-depth insights. But more importantly, it lacks\ntheoretical coherence. The book while trying to simple and straight forward at\ntimes becomes too simple. Personally, I am not a big fan of the way this book\nis produced. They have followed a school like technique of first introducing\nthe area, then explaining its aspects with title in 150 words, then summing the\nsame arguments again at the end of each section as well as summing it entirely\nat the end of every chapter. This has caused this to be repetitive work. <\/p>\n\n\n\n
The book does not pay enough attention to the\nidea that in India, the political wing spearheads and quite often drags the\neconomic policymaking. The book assumes that politics will correct its course\nin the future to fall in line with economic reality. In my view, it is rather\ntoo hopeful to be true. Hence on the topic of public policy, equal if not, more\nfocus should be made on the ‘political’ wing of policymaking. It is not\nsufficiently covered in this work. <\/p>\n\n\n\n
Despite its pros and cons, this book is a very\ngood beginner guide into the complex and yet fantastic world of Indian\npolicymaking. Through this book, the authors perform the “curious\ntask” Frederich Hayek assigned to economists: “to impress upon men\nhow little they really know about what they imagine they can design”<\/p>\n","protected":false},"excerpt":{"rendered":"
Romanticism has led to greater economic and political centralisation often sub-verting the liberal democratic model of governance. Therefore for the sake of our democracy and sustainable economic growth\/development, Indian policy-makers and opinion-makers need to rethink their obsession with the GDP growth.<\/p>\n","protected":false},"author":72,"featured_media":137205,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","footnotes":""},"categories":[7,281],"tags":[372,370,371],"class_list":["post-137204","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-book-reviews","category-economics","tag-ajay-shah","tag-in-service-of-the-republic","tag-vijay-kelkar"],"yoast_head":"\n