India@100: Ex-CEA Subramanian's book addresses India's future macro issues

India @100: Envisioning Tomorrow’s Economic Powerhouse

Author: Krishnamurthy Subramanian

Publisher: Rupa

Pages: 520

Price: Rs 999

The last two chief economic advisors (CEAs) have made the Economic Surveys reader-friendly for the common man and discussed topical issues and solutions outside the earlier rigid frameworks. This book by the CEA who served before the current one appears to bring macro issues concerning India’s rightful place in the future to the drawing rooms and coffee tables.

The book starts by breaking the myth of the state ambition of the Indian economy hitting $55 trillion gross domestic product (GDP) by 2047. That sounds ludicrous on first hearing, but the logic is well laid out, though somewhat laboriously. If India grows in nominal terms by 13 per cent annually and inflation is 5 per cent, growth in real terms will be 8 per cent. But when we measure in terms of dollars, only the differential inflation needs to be deducted, since currencies eventually move relative to the inflation differential. The gap between the inflation in the US and India has been closing of late and if the differential is only one per cent, we would grow by 12 per cent in dollar terms instead of 8 per cent in real terms, which is not altogether unlikely given current global conditions. With this, he also counters several other predictive numbers floating around, such as $26 trillion by 2047 by EY and $50 trillion by 2075 by Goldman Sachs, which are conservative and seem to miss the measurement difference between real and dollar terms.

If these numbers and the logic of the argument are compelling, there is much more to sustain the interest of the reader well into the book, even though the early pages are somewhat technical.

An illustration of how the book induces hope over despair is the chapter on the judiciary, which offers plenty of light through data without the usual heat. The author has sidestepped issues such as repeated stays, uncertainty, delays over judicial appointment, likely corruption and so on and focused on pendency. Using past statistics, he demonstrates that if all pending vacancies in district and sessions courts, as well as high courts, are filled — and a few more added — the entire backlog of cases, along with new ones, could be cleared within 10 years. Quick justice is the best deterrent to crime and this argument offers some hope. 

The book is divided into four pillars of action, besides the big picture. The first is the focus on growth. Besides the known mix of growth steroids, he has rightly addressed the exogenous spoilsports to our growth trajectory — justice and the bureaucracy, which are increasingly becoming hurdles to our progress. The second pillar is on social and economic inclusion, where the canvas is wider than the conventional one — empowerment through employment, creating employment and using our digital advantage to inclusion are all well laid out. The section also addresses climate chasm and changes required in agriculture to focus on small farmers who get a measly share of the pie due to the limitations of  agri-market structures. Third, the author addresses ethical wealth creation, which neutralises many phobias and outdated moral shackles surrounding it. This engaging section discusses  stoking innovation, shedding the thought baggage of the past, letting the markets play, and rolling back the interference of government from business enterprises. Finally, he tackles the vexed question of private investment to make growth happen. Here, he talks about creating a healthy knowledge infrastructure, a healthy population, building skills, a good stock market to provide finance to enterprises, and leveraging private investments as the key to sustaining growth.     An essential ingredient of thought leadership is breaking the mould to think of creative solutions. Countering the myths around middle-income traps and sequencing manufacturing stand out as examples. The strategy of assemble first, join the global value chain, and then target end-to-end manufacture makes practical sense. Another myth is the needless scare-mongering through fiscal deficits foisted by Finance Commissions. The book skilfully argues that the best way to tackle the debt-GDP menace is growth. If the money borrowed is productively used, growth is capable of enhancing the GDP pie enough to overshadow debt. Imitating advanced countries’ debt-GDP ratio prescriptions is more a poison pill than a viable risk management measure. His arguments that tackling poverty can address inequality and that growth is essential to tame poverty are timely reminders to think on our feet rather than paying attention to unwanted bogies. Often, the noise around inequality seems motivated to distract attention rather than offer solutions.

A few drawbacks. Several figures and graphs strain the eye. In some parts, the target audience appears to be those who have read and understood the annual Economic Survey rather than a business daily reader. More attention to the issue of the release of labour from agriculture and the rural sector as productivity grows in that sector and what to do with them would have been desirable. A discussion on the emerging challenges from social and religious tensions would have been useful.

Economic commentators, readers of business dailies or analysts at fund houses would find this book of long-term help. And if you want to converse meaningfully and knowledgeably around the coffee or dinner table, this book must count as an essential read.   

The reviewer is the author of Making Growth Happen in India