Saturday, 1 April 2017

Book Review - Emerging India : Economics, Politics & Reforms

Emerging India – Economics, Politics & Reform is a book penned by the Former RBI Governor & Rajya Sabha member, Bimal Jalan. This is a slightly dated book, in that although it was compiled in 2012, it actually consists of a compilation of a series of lectures from the past 3-4 decades. These lectures and/or articles are those that were penned or delivered by the author at various fora. These include both top national institutions, ministry notes as well as international lectures as far apart as London and Sri Lanka. It is these two factors – the time period, snd the original source of the lecture, that makes this such a fascinating book, one well worth reading for everyone interested in the Indian Economy!
Emerging India : Economics, Politics &Reforms

The book gives a deep and rather detailed look at the Indian Economy through the 70s especially, with much shorter glances at the 80s, before moving on to the 90s. This does leave one wanting for more, especially on the 80s period, which is the period when the first burst of Economic reforms took place in India. The lectures are all either of 70s vintage, or 90s onwards. There isn’t even a single lecture from the 80s so far as I can recall.

SEGMENT ONE - The Political Context

The entire book is organized into 4 sections. The highpoint of this book is the focus on Politics, Administration and Governance; thus making clear that these are central to Economics on a Macro scale. The first section of the book is devoted entirely to the problems & successes of Politics and Governance in India – The Political Context. This section scores for its blunt and factual analyses of the pluses and minuses that we have achieved so far – a searing examination of all aspects, including separation of Powers, Judiciary, Coalitions and Parliament… topped off with a superb speech given in the Rajya Sabha, looking at the implementation of various Government Schemes at local levels.

SEGMENT TWO - India’s Economy, Policy & Prospects

The next section deals with India’s Economy, Policy & Prospects. This starts with a ground-breaking examination of the period from the 1950s – 1990s, which will, for the uninformed, truly break new ground and destroy various incorrect impressions. {The logic for this has been connected up in the 4th segment, so hold onto any thoughts}.  This section also has a detailed explanation of the 1991 crisis and its genesis in economic terms; and the various policy measures / requirements on the Fiscal, Finance, Infrastructure & Public Sector areas, as well as a short Macro-Economic analysis.

But the key chapters here deal with The Social Sector, & Finance and Technology. It was heartening as well as educational, reading a top economists’ take on these two sectors. The short and sharp section on Total Factor Productivity {TFPG} and Incremental Output Ratio {ICOR} of India vs The Developed World leaves a deep learning and impact. This two-page section alone justifies reading this book! For India, there was a positive turnaround on the TFPG as well as the ICOR- TFPG since the early 1980s, and ICOR since the early 1990s, which is again a good sign, as well as putting paid to many a wrong impression that quite a few people have!

SEGMENT THREE - Money, Finance & Banking

The third section, and the one after that, are slightly technical, but engaging nonetheless. The 3rd Section deals with Money, Finance & Banking. The highlights in this section are the base-level explanation of a functioning Finance System, Management of Risk {We shall connect up later in the conclusion}, a detailed look at the International Financial Architecture, and the current and future status of the Indian Financial System. Of special note here are a superb analysis of the East Asian Crisis, and the segment on The Way Forward, which looks at Prudential, Provisioning & Capitalisation Norms,  Legal Reforms, Rural Banking, Credit, Liberalisation of Financial Markets and Institutional Reform and the interest rate structre… we shall look at this a bit more in the conclusion

SEGMENT FOUR : India’s Economic Reforms – A Perspective

The last segment is India’s Economic Reforms – A Perspective. This is a detailed, educational and very revealing look at the history of the Indian Economy, almost – it looks at the various stages of reform and self-examination in especially the mid-70s onwards. This includes 3 unpublished notes from the Ministry of Industry in these years. The papers do highlight the problems we all know were endemic in the system – telling us that by the mid-80s, it was recognized internally by at least some intellectuals that reform was needed. This tallies perfectly with the story that played out – with initial hesitant reform starting in the mid-80s by the Rajiv Gandhi Government, as I recall.

Interestingly, the attached short economic analysis of this period does suggest that the 70s was not conducive to undertaking reform, or rather, there was no choice but do what the Government did in the 50s, 60s and 70s, as the Indian Economic Situation or HDI situation did not permit or give the leeway for any other mode of operation. That said, the licencing and other changes of the late-60s were uncalled for is what I think as of now. But one thing is clear – there is no basis for blaming what happened; the economic performance of the 50s and 60s places that pretty much beyond argument, especially coming on top of zero or negative growth during the colonial period!


In Conclusion, I can state that this is a complete resource on understanding the Marco aspects of the Indian Economy; it looks at structural, international as well as policy issues; it gives facts throughout, and it gives a complete understanding of the History of the Indian Economy as well. It breaks new ground in several matters, makes a thoughtful and deep examination of various issues and the economic status, and is thus a valuable resource.

That said, there is one observation that hit me hard in two places in the book – one is documented above in the 3rd Segment – The management of risk. The second place was in the 4th segment, which had a look at the Basel Committee and its scheduled new norms of 2005 implementation. {There was a third version post the latest crisis – 2010, the Basel 3}. We also have various credit rating agencies, and what-have-yous; yet no one that I know of is talking of the implementation aspects like fake or inadequate documentation, special approvals and so on; and not enough focus is being given on securities and especially derivates, - which were among the key contributory factors to 2007!