Tomorrow's route map for India's economy

Eleven essays by noted economists and academics tackle questions concerning India's economy, society and polity, and explore pathways for the country to emerge from the prevailing turmoil

The Indian Economy: Navigating a Global Turning Point

Editors: Kaushik Basu, Sonalde Desai, 

Ashwini Deshpande, Nirvikar Singh

Published by -Simon & Schuster India

298 +VI pages ₹899

 In October 2023, Cornell University organised a conference at its campus in Ithaca (New York State, US) to examine the Indian economy’s prospects in a changing global landscape. Prominent economists, corporate leaders and policymakers were invited to present their papers to help analyse how India could emerge from the prevailing turmoil, caused by a combination of geopolitical tensions and the rapidly spreading digital revolution.

 

Eleven essays in this book capture some of the thoughts participants shared at this conference. The essays have dealt with three broad themes: India’s growth aspirations in the context of innovation, technology and financial access; consequences of India’s liberalisation with adverse implications for industrial concentration and jobs; and obstacles for growth posed by inequalities in the labour market.

 

 

The editors, all noted economists and academics of repute, have done well to use the introductory chapter to provide a perceptive account of how India evolved after independence. They ask whether the Indian economy, already buffeted by a series of shocks and disruptions, can take advantage of its geopolitical position, overcome its many weaknesses and emerge as an advanced economy. They admit there are no easy answers to that complex question. But they conclude that the essays in this book should help find an answer to questions concerning India’s economy, society and polity.

 

What stands out in this book are interesting research findings that shed new light on the Indian economy. Sonalde Desai and Pallavi Choudhuri examine the heterogeneous benefits of college education in India and conclude that the gains from a college education bypass those who overcome initial adversity. Instead, most beneficiaries from college education belong to privileged sections of society.

 

Ashwini Deshpande presents a similarly dire finding, underlining the perennial problem of the low female labour force participation rate in India. Significantly, she attributes this not to women opting out of the job market, but to a systemic failure in generating inclusive growth. Her research underlines the need for policy interventions that simultaneously expand job opportunities and dismantle patriarchal constraints.

 

An even more important essay in this volume is about India’s poverty headcount. It provides an alternative set of estimates for India’s poverty level, questioning studies by economists who argued that the number of poor people in the country fell dramatically between 2011 and 2020. Written by Maitreesh Ghatak and Rishabh Kumar, the essay questions the claimed poverty decline on two grounds: A stagnant share of agricultural output in India’s gross domestic product (GDP) for about two decades and a high rate of informal employment. Their analysis suggests that the poverty headcount remains around 20 per cent, contrary to earlier estimates by economists who argued that the poverty rate fell from over 22 per cent to around 10 per cent between 2011 and 2020.

 

Nirvikar Singh’s essay on India’s green transition offers hope that the country’s plans for an accelerated green transition can be achieved with the right strategic focus, especially in the key sectors of electric power generation and transportation. But there is an important caveat. Substantial institutional barriers and disturbing inertia in government action at both the Union and state government levels threaten to obstruct the rollout of feasible and optimal policies to expedite the planned green transition.

 

The essay by Anand Mani, based on his paper presented three years ago, is prophetic. He underlines the role of sustained civic participation in movements to ensure that the people’s democratic rights are protected and governance does not suffer. His call will remind readers of what India witnessed earlier this year when a movement by students forced the government to accede to demands for better governance.

 

Backed by research, Prachi Mishra and Aditi Singh forecast a further decline in savings in India, underlining a positive outlook for consumption. They, however, do not offer a clear view on whether this would hurt investment and growth. Using data and research, Devashish Mitra buttresses the familiar argument that rising tariffs not only check imports but also harm exports, undermining efforts to create more jobs in the process. Regarding India’s trade policy, the essay bemoans how it has become protectionist, though with some correction in recent years.

 

Similarly, Kunal Sen and Rajesh Raj Natarajan question the effectiveness of a services-focused development strategy, arguing that labour-intensive manufacturing should still be the preferred path for growth in a world where China is vacating many areas of low-end manufacturing. Equally relevant questions have been raised by Viral Acharya and Rahul Singh Chauhan on the need to expedite factor-market reforms in land, labour and power to attract more foreign investment, instead of pursuing a centralised and concentration-based industrial policy.

 

Two respected voices from industry also find a place in this volume. N R Narayana Murthy points to the need for companies to adopt a strategy for promoting innovation and Naushad Forbes underlines the importance of industry and the government collaborating to make the national innovation system work for both industry and the country’s future.

 

A rich anthology of deeply researched essays, however, suffers from two minor shortcomings. It does not carry brief biographical sketches of the essay contributors, although the editors have theirs on the inside jacket of the book. And the introduction mentions that a few chapters were later added to those essays, which were largely based on papers presented at the Ithaca conference. However, it is not clear which of these essays the editors added later. Barring these glitches, the book will provide important inputs for policymakers in the Indian government, just as it will serve as a reference document for students of the Indian economy, helping them understand the country’s challenges and opportunities.