Author: Pulapre Balakrishnan

Professor of Economics, Ashoka University, Sonipat and Senior Fellow, IIM Kozhikode.

Can Economics Pave the Path to a Good Society?

The critique of neoliberalism is only one part of Joseph E. Stiglitz’s new book ‘The Road to Freedom: Economics and the Good Society’. The greater part of it is on freedom and how to further it.

Economics, as it is practiced in the English-speaking world, had its beginnings as a social science. It addressed society as a whole, focusing on its economic aspect. The early economists, namely Adam Smith, David Ricardo and Karl Marx, were aware that power was unequally distributed between social groups, determining their respective ability to get what they wanted. 

This power derived from the unequal ownership of productive resources, but also from sociological factors such as custom and tradition. No wonder that the study of the economy was termed political economy. 

Joseph E. Stilgitz,
The Road to Freedom: Economics and the Good Society,
Allen Lane (2024).

In the late 19th century, this view of an economy was supplanted by one that conceptualised it as a set of markets in which atomistic individuals interacted; think of the markets for labour and financial capital. 

By the first half of the 20th century, economics had evolved sufficiently to assert that the market system was efficient, in the sense that its performance could not be improved upon through intervention by the state. 

The market, it was held, allocated resources across activities as efficiently as possible and led to an income distribution in which no one individual can be made better-off without making someone else being made worse-off. The latter outcome was termed, after the originator of the criterion, a ‘Pareto optimum’. 

Finally, as far as reward in the market goes, what we think of as income, individuals get their just desserts, for they are paid according to their contribution to the product. Despite its weak moral foundation and intellectual failure to explain the Depression that beset western capitalism in the 1930s – which had negative consequences for India as it was fully integrated into to the world system – this view of economics has had a long run. 

Repeated demonstration that some of its claims are wrong, an intellectual enterprise in which Joseph Stiglitz, the author of this book, was a leading player, did not dim  its prestige. Actually, it was to receive a significant boost in the late seventies, with the rise to power of the ultra conservative Margaret Thatcher in the UK and Ronald Reagan in the US. Both these politicians, especially Thatcher, actually used the contested claims of this strand of economics to glorify their free-market policies. 

However, it is a historical event that needs to be reckoned with that they had repeated success in the hustings, once again, especially Thatcher, who was returned to power four times in succession. Their politics appeared to have been vindicated when in 1991 the Soviet Union finally imploded, a development with which the entire eastern European Communist block unravelled. This gave rise to a set of economic policies promoting an extreme form of capitalism, referred to as ‘neoliberalism’, which is part of the focus of Stiglitz in his book.

Neoliberalism’s hallmark is the near total ending of the regulation of the private sector and a withdrawal of the state from almost everything in the economy other than the defence of the nation. The author states categorically that neo-liberalism has failed. His argument is based mainly on the experience of the United States. 

First, he makes the broad observation that since Reagan, its economy has not grown any faster than it did in the quarter century after the Second World War, a time of considerable government intervention in the US economy. 

Next he points to the worsening income distribution accompanying the stagnant real incomes of the American working class, the global financial crisis of 2008, which followed the deregulation of finance in the US, and the devastation during COVID-19, when western governments privileged the drug companies over people by refusing the invoke compulsory licensing, which would have enabled greater supply affordability of the cure. 

Neo-liberalism also had an influence on the global economic architecture when western economies were able to influence, in some cases arm twist, global multilateral institutions to ensure a world conducive to capital, of which they had a surfeit. 

Stiglitz cites global rules on intellectual property rights, taxation of multinationals, investment agreements and trade policies, much of which benefited the US economy and the giant corporations within it. This is a cracker of a section, with Stiglitz calling out the injustice of the arrangements and naming both politicians and members of the economics “fraternity” (the author’s term) who brought about the changes and argued for them, respectively.

But the critique of neoliberalism is only one part of Stiglitz’s book. The greater part of it is on freedom and how to further it. He rejects the usefulness of the neoclassical model of efficient market and bases his arguments on what he considers is the shape of actually existing market economies. 

Also read: India’s Manufacturing Paradox and the Pursuit of Sustainable Employment and Growth

The core of the author’s argument is best conveyed in his own words: “I be(gan) the book with a straightforward observation: One person’s freedom is another’s unfreedom. Externalities are pervasive, and the management of these externalities – including environmental devastation – that are inevitably the by-products of unfettered markets requires public action(s), including regulations. Indeed, any game needs rules and regulations. I’ve delineated (here) the need for regulations to curb the agglomeration of power and the exploitation of some by others.”

Another key observation is that people can accomplish together what they cannot accomplish on their own. But Stiglitz points out that in many arenas of collective action, the ‘free rider’ problem arises, so that good (efficient) outcomes require some form of coercion that only the government can properly impose. 

Also, it may be desirable to encourage voluntary collective action, through subsidies, for instance. (The non-specialist reader may have to be reminded that externalities are the effects on one individual of the action of another. These can be positive or negative. They are ignored by the market mechanism leading to inefficient outcomes. Stiglitz produces a plethora of examples of externalities, to convey that they are ubiquitous in the kind of world we live in, requiring corrective policy intervention.) 

This is a remarkably clear statement, comprehendible to any undergraduate student of economics, which is quite unusual in a profession that tends to value complexity and jargon over communication. However, an observation about it would be in order. From the first proposition in the passage that I have quoted above does follow a case for regulation, which, of course, would be rejected by neoliberals and the economists whose work has influenced them, namely Friedrich von Hayek and Milton Friedman. 

But is it always the case that one person’s freedom is another’s unfreedom? Surely not. To see this, consider Isaiah Berlin’s concept of ‘positive freedom’, by which he meant an individual’s freedom to pursue one’s own goals or Amartya Sen’s idea of freedom as the ‘capability’ to lead the life an individual has reason to value. It is not obvious that positive freedom enjoyed or capability attained by one person must lead to the ‘unfreedom’ of another.

Stiglitz does provide instances of what he has in mind, such as polluting the river or fouling the commons, yet the proposition referred to above is not universally true. Of course, it goes without saying that the freedom to pursue the kind of life you value is meaningfully circumscribed by the caveat that it does not constrain another’s.

If neoliberalism, which has had a run of close to four decades by now has failed, what should we replace it with? Stiglitz engages with this question at length, providing a definite idea of the ‘good society’ he has in mind.

First, the good society would have no imbalance of political or economic power. In particular, firms would not have the freedom to exploit consumers. At the global level there would be institutions, based on inter-governmental cooperation, that bring justice and fairness to interaction between states and private actors, such in cases of debt repayment.

A key feature of a good society would be that there be much greater public investment than is currently the case in the US, a situation brought about by the adoption of neoliberalism. This investment would be in children and their future, in research and, more broadly, in social and physical infrastructure. The author is quick to clarify that these investments would not just promote growth; they will enhance the opportunities of citizens. The good society for Stiglitz would have greater equality.

However, he cautions that equal outcomes can blunt incentives for performance. Of course, this would be true in the space of production or income, which, surely, is what Stiglitz has in mind. However, if we were to work with Sen’s proposal when we talk of equality being the endowments that enable individuals the functionings they value, and which we should aim to equalise, there need be no blunting of incentives whatsoever.

Altogether, I cannot help thinking that were the author to engage at least a little with the prior work of Berlin and Sen on freedom and social justice, respectively, some of the pitfalls in his argument, which I have pointed out here, would have been avoided. It applies equally to his statement that the philosophical traditions of “the Benthamites and John Rawls can help us think through what set of rules make sense in a good society”. How this can work is perplexing, as the former’s utilitarianism is blind to the distributional concerns which for Stiglitz are of the essence.  

The combination of regulating private enterprise, correcting market failure and providing both public and private goods that promote well-being is eminently sensible, but there is a catch. Stiglitz insists in terming the arrangements “progressive capitalism” which he thinks of as a “rejuvenated social democracy”. Some may argue that the term ‘capitalism” only refers to a mode of production a la Marx. On the other hand, ‘social democracy’ was conceived of as an arrangement far more capacious, also possessing an ethical dimension. It was to be a combination of political freedom and socialism’s concern with equality and human progress. Capitalism is not usually associated with either of these goals to any degree. However, this need not restrain us from endorsing entirely Stiglitz’s description of the contents of the good society.

Before moving on to the final section of my review, I wish to make two points. First, Stiglitz gives too much importance to Milton Friedman’s popular writing on capitalism and freedom as a staging post in America’s shift to neoliberalism. The choice of Friedman is of course appropriate (Paul Samuelson credits Friedman as having single-handedly shifted the American economics profession to the right.)

However, arguably, Friedman’s influence stems from his 1968 paper on the role of monetary policy. Though it relies on ad hoc assumptions, stated and implicit, including that of the absence of involuntary unemployment, an example of what Joan Robinson would speak of as “placing the rabbit in the hat before pulling it out in full view”, it has undoubtedly been influential. Its apotheosis was reached when his proposition of the ineffectiveness of macroeconomic policy to affect the rate of unemployment was embellished by Robert Lucas with the construct of “rational expectations”. The ‘new classical macroeconomics’ that emerged provided the ammunition for the neoliberalism that followed in the political sphere.

A second observation on the book is that it would have helped if the author had clarified the sense in which he is using the expression “efficient” when he refers to the market outcome. While no doubt obvious to the author himself, it need not always be so for the reader, for we can think of four forms of market efficiency, namely – allocative, distributional, technical and informational. As he is referring to theoretical results, a greater precision would have been ideal.

As someone living in India, I am unable to refrain from reflecting on how Stiglitz’s book matters for this country. But before I do so, I speculate on how two strands of opinion here are likely to perceive it. Prime Minister Narendra Modi’s supporters would be peeved by the near complete omission of the country from the discussion. Modi is spoken of as a demagogue, in the same league of authoritarians such as Trump, Putin and Bolsonaro. As a former chief economist of the World Bank, Stiglitz is unlikely to be unfamiliar with the chant that India is today the fastest growing major economy of the world. But he is equally likely to be apprised of India’s lowly ranking in the global per capita incomes league table. Elsewhere, he has spoken perceptively of the agricultural challenge and environmental degradation here.

Also read: Accountability Vacuum: In India, Inequality Reigns, Jobs Vanish, and Citizens Are on Their Own

A second cohort that is likely to be dismayed by this book would be the old left-wing establishment. The author barely mentions the Soviet Union, suggesting that there is nothing to be learned from its economic history. He brackets “Hitler, Mussolini and Stalin” together, and speaks of Russia and China having imposed hardship on their own peoples. Even as he savages the neoliberals in America, Stiglitz displays no nostalgia for the erstwhile communist regimes. He is an uncompromising champion of democracy.

There are two absences from this book which assume importance in the Indian context. Stiglitz devotes considerable time to the monopoly power of the “for-profit private sector” which can be a source of exploitation of consumers. Indeed, he believes that the tech giants have become far too powerful in the United States. Naturally, he calls for a regulation of this sector by the state.

Now, there is in India a force that is similar in its power, vis-à-vis the public, as the giant corporations of the US. This is the apparatus of governance. This apparatus was set up in the colonial era to extract revenue for the colonial state, initially from the peasantry and subsequently, in a more sophisticated and less transparent way, through budgetary transfers to England by the colonial Government of India. This machinery of government was carried over lock, stock and barrel after 1947. As a result, India remains saddled with an unaccountable bureaucracy that extracts revenue from its poorest citizens by demanding financial gratification for routine services rendered. This, when it is not presiding over waste and pilferage in the public sector that it lords over.

The bureaucratic maze installed to control Indians by a foreign power now serves a small coterie of natives who enrich themselves at the expense of the vast majority. Politicians, who alone can change this state of affairs, do little, as they rely on the bureaucracy to further their agenda. The dead-weight of the bureaucracy in India is an example of Acemoglu-Robinson’s thesis on the colonial origins of comparative development across the globe. It is undoubtedly a factor in the painfully slow progress India has made in the past seventy-five years. The upshot of my characterization should be clear. It would be that while the private sector certainly needs regulation, as argued by Stiglitz, in India, at least, the power of the bureaucracy would have to be curbed in the good society to come.

I turn now to the second aspect missing, or at least not stressed enough, in this book. India remains a space of perpetual threat to the well-being and physical safety of women. In the latest National Family Health Survey (NFHS-5), anaemia among women was found to be  67%, having increased over the preceding decade. Notably, men suffer less from this infirmity that stunts humans. Though female education levels may have grown, this has not translated to a higher labour force participation rate. World Bank data show this rate to be lower in India than in Saudi Arabia, reflexively assumed to be among the most conservative societies in the world.

After the recent incident in which a young woman doctor was first assaulted and then murdered while on night duty in a Kolkata hospital, we can see why this would inevitably be the case. Women face violence at the workplace and must fear stepping out of their homes.

In a heart-rending statement made on television, the mother of the young woman who dies, said, that “women are not safe anywhere.” This is a serious indictment of Indian society, and points to how far it must go to become the good society described in this book.

No amount of welfare schemes that transfer money to women can compensate for the toxicity that they routinely face in India’s public spaces, including their workplace. The road map to the good society in India would be useless if it does not include women’s empowerment. The challenge is that much of this would have to come from the women themselves, for men after all are the guardians of patriarchy.

However, we can see that this is possible after the recent events in Kerala, where a women’s collective in the film industry has brought public attention to the bodily exploitation women are often forced to endure at their workplace and the inequality in financial compensation for similar work.

Though these particularly Indian concerns do not figure in the book, in a riveting passage in his final chapter, Stiglitz outlines what would be needed for India to initiate passage to a better place for itself: “I still believe that if we could move the discussion out of the realms of ideology, identity, and absolutist positions (and) into the realms of healthy debate, a consensus might emerge, not on every matter, but on a much broader range of issues, which would allow us to move easily toward a good society”. Indians who believe they are progressive want to heed this sage advice, for our democracy is severely challenged by identity politics opportunistically fanned by all political parties.       

So, what do I make of this book? It would be difficult to claim originality for it. Both the theoretical arguments pertaining to market failure and accounts of the ideological roots of neoliberals have long been aired in the profession, not least by Stiglitz himself, close to 50 years ago, in his joint work with Sanford Grossman on the informational (in)efficiency of markets, and more recently in his solo study of the unequal gains between countries under globalisation.

Yet, Stiglitz has here delivered a masterclass in the use of economic theory to understand how the economy functions and how to think about building it back better. The achievement is that much more impressive as he has resorted to only the simplest theoretical apparatus in economics to do so, enabling the widest possible dissemination. This is my view of Stiglitz’s most recent book. It may not be particularly new in the ideas it expounds but has placed a great deal of economics in perspective and parsimoniously identified the economic elements of the good society.

Reading it reminded me of John Maynard Keynes’ homage to his teacher Alfred Marshall, “The master-economist must possess a rare combination of gifts …. He must be mathematician, historian, statesman, philosopher in some degree. He must understand symbols and speak in words. He must contemplate the particular, in terms of the general, and touch the abstract and the concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man’s nature or his institutions must be entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood, as aloof and incorruptible as an artist, yet sometimes as near to earth as a politician.”

Very few economists have managed to come even close to achieving this. Stiglitz, on the other hand, goes one step further by bringing sociology to the analysis. There are demonstrations in the book of how employers in early 20th century America were forced to discriminate against black workers through peer pressure even when they were not racist themselves. We are also shown how individual preferences today can be shaped, i.e. ‘made endogenous’ in the economist’s parlance, via a combination of deceptive advertising by corporates and peer pressure on social media. Clearly, it would be naive to ignore sociology when accounting for economic outcomes. Wisely, Stiglitz does not. 

It is to be fervently hoped that this book will be read in India, which desperately needs a social scientist’s touch over the promise of technocratic fixes, in order to address its current malaise. Hopefully, it will raise the quality of the debate on its future. Alas, I am somewhat sceptical, as the economics profession here has got bogged down in the very “dreary desert sand of dead habit” that Tagore had cautioned us against over a century ago.

Here, mathematics is privileged over reasoning and the statistical treatment of transparently disingenuous claims, based on hopelessly tenuous data, celebrated, as long as the method is considered prestigious by the fraternity and the hypothesis is politically correct in its eyes. This has led to a loss of the ability to evaluate ideas independently and, even more tragically, to see the big picture. It would appear to be a formidable task to rescue the practice of economics in India from this impasse. Hopefully, the power, not to mention the elegance, of Stiglitz’s writing will rouse the profession here to separate the science from the ideology when it comes to economic ideas, so that my country can finally be placed on the road to the good society. 

The book is affordable but would have gained from a subject index.

Pulapre Balakrishnan is Honorary Visiting Professor, Centre for Development Studies, Thiruvananthapuram

Wayanad, the Political Economy of an Ecological Catastrophe

Instead of transitioning to the role of a regulator of economic activity in the highlands of Kerala, where much of the new activity got located, the state has ended-up being captured by private interests.

The devastating landslides in Wayanad, occurring in the early hours on July 30, may have come as a shock but it cannot be said that they came as a surprise. There have been warnings from all sides for long, but most importantly from India’s pre-eminent ecologist Madhav Gadgil who chaired a central government committee (henceforth, the Committee) set up in 2011 to study the ecological condition of the Western Ghats.

The report of this Committee had clearly highlighted the threat to human security of unchecked economic activity in the section of the ghats that fall within Kerala. It is a commentary on the state of democracy in what is supposedly India’s most educated state that it had no effect whatsoever.

Neither of the state’s main political coalitions, the United Democratic Front and the Left Democratic Front, which have both ruled the state since the report was submitted, have implemented the recommendations of the Committee. Now, the leader of the Congress-led opposition has spoken in its favour but given the party’s past record we cannot be certain as to how the party will act when they come to power.

Before coming to why Kerala’s political parties have been so cagey about its proposals, it  would be useful to recount what Madhav Gadgil has said about the Wayanad incident. He identified man-made factors as exacerbating, marking out mining, quarrying and building infrastructure for tourism, including “artificial lakes”.

Note that he has not left it all to climate change, even though he could not have been unaware of the extreme rainfall event. In fact, in an article in the print media he has called out “the bane of crony capitalism” as a factor underlying the destruction of natural capital of Wayanad.

How could a human tragedy of such magnitude have occurred in a state held out as a developmental model, one in which many socio-economic indicators are superior to the rest of the country? Surprising as it may seem, the reason for this is that democracy does not have deep enough roots in Kerala.

For close to half a century now, Kerala has been in the grip of a form of globalisation. The boom in the Arabian Gulf, led to a mass migration of manual labour to the region now referred to as ‘the Gulf Cooperation Council countries’. As Kerala had very little peasant agriculture, with most of the land being cultivated by owners using hired labour, the out-migration led to severe labour shortage.

Wages rose so much that agricultural activity became unprofitable. Initially land was left fallow but soon remittances bid up the price of land now demanded for housing so much that it made economic sense for erstwhile landholders to sell out to property developers. Once-agricultural land became real estate.

The alienation of agricultural land led to a decline in agricultural activity. This ended a the dependence on the powers of the earth that had nourished a reverence for nature, ensuring its inviolability. Kerala was now cut off from its moorings. As agricultural activity declined so did the web of dependence that had marked country life.

There no longer was the checks and balances that had shielded nature from abuse of the kind we now witness in the form of pasting the earth with concrete and the dumping of non bio-degradable waste in a pristine environment. Predatory capital, unaccountable to local needs, moved into the countryside with impunity. This took the forms of tourism, infrastructure mining and quarrying. There was only one force that had the authority to  stop this invasion, the state.

Instead of transitioning to the role of a regulator of economic activity in the highlands of Kerala, where much of the new activity got located, the state ended-up being captured by private interests. It is inconceivable that that so much economic activity that is a threat to the environment of the state could have emerged without the tacit agreement of the state.

The granting of permits for buildings and licences for quarrying are the sole prerogative of the state, and such activity could have been nipped in the bud, or at least regulated had the state wished it. Far from this having happened, though, there are allegations that the licences and permits have gone to those with access to political power. Further, there have been public claims made that governments of both the political formations of Kerala have attempted to exempt favoured private entities from the provisions of the state’s land reforms act with implications for size of holding and type of activity.

While these instances are not related to Wayanad as much as to elsewhere in Kerala, it does point to the weakness of the state vis-a-vis private activity impinging upon natural resource use. Apart from predatory capital that flows into non-agricultural activity, the state has also come into pressure from groups who, lured by the availability of cheap land, had migrated to the upper reaches of the western ghats in Wayanad from elsewhere in the state, settling down to farm.

Unlike the capitalists in mining and quarrying, who have remained invisible, this group have responded with a public opposition to even the suggestion of regulating economic activity. Supported by local politicians and religious leaders they too have a hold on the state. Wedged in between these two interest groups, the adivasis of Wayanad lead a precarious existence. Their condition has not improved with the economic boom and the demographic dynamics have left them politically disenfranchised. The land lost its age-old guardians.

After the recent landslides in Mundakkai and Chooralmala, Kerala has the opportunity to end the damage in the future. It only has to accept in toto the Committee’s Report. It is a road map incorporating a scientific approach to regulating the Nilgiris biosphere within which Wayanad is located. The report demarcates the terrain according to ecological vulnerability in the face of economic activity and indicates the activities that may be permitted by the state.

In an interview to the media Gadgil was at pains to clarify that it does not recommend the ending of all economic activity in the ghats, just hazardous ones. Thus, agricultural activity is permitted in all zones, only mining and quarrying is to be banned in the most eco-sensitive one. The report also recommends social audit, a powerful independent check if it is given a chance. All these recommendations are eminently sensible in their intent and entirely practical to implement.

Recently, the two political coalitions of Kerala, the UDF and the LDF, came together in the legislative assembly and expressed determination to end the problem of accumulating waste in the state. They now have the opportunity to re-enact this rare unity. A blueprint exists. They only have to accept the Gadgil Committee Report. But whether they will do so is the question.

Power and pelf are the lifeblood of politics, and political  parties must have good reason to pursue the public good. That reason can only be pressure from the people. If things are to change in Kerala there would have to be recognition that the present assault on nature is based on greed and heightens ecological insecurity.

The public must recognise the nexus between capital, the bureaucracy and the political class that maintains the current equilibrium. Finally, they must see that the adoption of the recommendations of the Gadgil report would be the main ingredients of a shift to a meaningful co-existence with nature. Only the Kerala public can ensure that science will trump the politics of private interest so that Wayanad can flourish.

Pulapre Balakrishnan is Honorary Visiting Professor, Centre for Development Studies, Thiruvananthapuram

K. Saradamoni Had Shown That it is Possible to Be a Feminist and Feel at Home in India

‘In Search of Answers: A Memoir’ presents the life and times of Saradamoni who navigated the world on her own steam and formed a wide network of associations, professional and personal. This was unusual among the women of her time.

‘Intrepid’ was the thought that very early on crossed my mind about the author of the book, In Search of Answers: A Memoir (Tulika Books, 2024), as I read it. Coming from a traditional home in a corner of India, K. Saradamoni travelled the world on her own steam and formed a wide network of associations professional and personal. This was unusual among the women of her time. More so, she gives the impression of having enjoyed doing so in a way that few women in India had been able to do, either due to a paucity of resources or the chains of patriarchy.

As I read on, I felt vindicated in my assessment of the author, for we are told that “intrepid” is the very term used by her doctoral supervisor when remarking upon her character. But individuals are also the product of their social milieu, and Saradamoni’s life was undoubtedly shaped by the times in which she lived. It is difficult today to imagine that there was a time in India when the equal rights of women were simply assumed, at least in certain circles.

In Search of Answers – A Memoir. Photo: amazon.in

The author does not speak of having had to wage any struggle within her family to pursue a life of her own or at the workplace to further her career as an academic at the prestigious Indian Statistical Institute (ISI). She is not being parochial when she implies that this may, at least in part, have had to do with the matrilineal milieu of Kerala, from which she had emerged, which granted women at least a modicum of autonomy. We need only read the biographies of some of her contemporaries, who had to leave for the United States to achieve freedom, to appreciate this.

Childhood

The memoir starts out with Saradamoni’s childhood in the environs of Kollam in the then-kingdom of Travancore. Life had been comfortable as her father was employed by the government. He was also an indulgent parent, introducing his children to the wonders of the world. The author speaks of her delight at encountering a tomato for the first time and the joys of receiving a mechanical toy. But Saradamoni’s hero is her mother who was to bring up her family of mostly girls after the death of her father. An empathy for this parent permeates the story.

Saradamoni was dutiful in looking after her mother till the very end, even if it held her back from pursuing her own interests. After university in Trivandrum (now Thiruvananthapuram) she goes to Madras (now Chennai) to pursue research in economics, a rare progression for women at the time. We read about life in the city, especially in the world of Mylapore, a cultural centre that had grown around the Kapaleeshwara temple.

Saradamoni displays both a remarkable ability to make the best of her circumstances and adjust to new cultures, something even more in evidence when she moves to Delhi later on in life. Sadly, however, we pick up little from the book about the political climate in the Madras State of the time. EVR Naicker, ‘Periyaar’ to his followers’, was active then but the politics of the Dravidian movement do not appear in the memoir. Nor is there later any reference to the agitation much later around the adoption of Hindi as the sole official language, and agitation that was to rock Madras state.

Also read: K. Saradamoni Leaves Behind Pioneering Work in Women’s and Dalit Studies

Though Saradamoni was living in Delhi at the time, as a southerner she is unlikely to not have noticed it. Before she moved in the early 1960s to Delhi, where she spent the rest of her professional life, Saradamoni worked for a brief spell in the Bureau of Statistics of the government of Kerala. She seems not to have enjoyed it much, except for her interactions with the noted statistician Ashok Rudra. It was Rudra who encouraged her to apply for a position at the ISI, then perhaps at the height of its glory as a research institution engaged in studies over a range far wider than statistics.

Academic journey

Saradamoni arrived in Delhi in the early 1960s and was to remain there till her retirement from service in the late eighties. It is here that she comes into her own. After a short initial stay at ISI, she was to leave for Paris to work on a Ph.D., with Louis Dumont, the distinguished French sociologist who authored a study of caste in India, Homo Hierarchichus.

Her dissertation on the formation of a “slave caste” of agricultural workers in Kerala was probably her most academic work. It also seems to have led to some changes in her area of interest. She slowly branched off to Women’s Studies, in which field she may be called a pioneer. Even though she uses the term she does not tell us what its core concern is or why there is a need to have a separate branch related to the study of women when economics is already one of the human sciences. Be that as it may, Saradamoni was to find much traction in this field, with seminars, conferences and international travel galore, most significant being a presence at the UN’s World Conference on Women held at Nairobi in 1985, at which both she and her daughter were delegates. Then there were international conferences on women in India which she organized herself.

Two observations she makes during her time at the ISI are noteworthy. Though the jacket cover speaks of her as an economist, she seems not to have worked much with the economists at ISI’s Planning Unit as the economics department was called. In 1968 she penned a note speaking of her frustration with academic economics. While the narrow focus of the economists of the ISI may well be true, her claims about economics are not.

I quote her saying: “For me, economics was vital, a medium through which I could serve the country and my people. But it has failed I am thoroughly disappointed especially after I came to Delhi. Where is the political economy today? Econometricians and mathematical economists and statisticians have come to the forefront. To them, models, equations and high-sounding words are more important. Man does not find a place anywhere in this picture.”

This is a caricature inviting a response. Econometrics and statistics are only methods of analysis of data, and are perfectly compatible with political economy, a political approach to the economy. In fact, these methods can be an important part of the toolkit of the grounded economist and aid the process of understanding how the economy works. (Full disclosure: I have skin in this game. I have used econometrics extensively in my work.)

P.C. Mahalanobis, the founder of the ISI, though a statistician himself, set no great store by mathematical methods. He has written that he thought of the use of mathematical models in planning as no more than “scaffolding, to be dismantled” as soon as the point they were meant to illustrate has been made. Then there is Amartya Sen, whose imaginative use of statistics showed that the number of women “missing’ due to the systematic neglect of their well-being ran into tens of millions.

Finally, in the seventies, there were to arise in India institutions that were to take an alternative approach to economics, among them being JNU, located in the neighbourhood of the ISI. The memoir shows no sign of its author engaging with these initiatives, though students from the economics department of ISI went on to do so.

The second of the experiences narrated by Saradamoni is of her leadership of the ISI Worker’s Organisation (ISIWO) which comprised both the academics and workers. Here she is justly proud of the role she played in ensuring campus housing for the lowest grade of workers, who coming from regions far from Delhi were hard put to find housing there on their low wages. However, she remains uncritical about the overall role the ISIWO had played at the institution in her time.

In particular, she remarks upon tensions between the ISIWO and C.R. Rao, already a globally recognised statistician. Finally, after an association spanning several decades, Rao left for the United States. There, in 2023, having crossed one hundred years he was awarded the International Prize in Statistics considered the equivalent of the Nobel Prize in the field. It is yet another instance of India’s failure to retain its foremost thinkers. Saradamoni does not seem to think of this particular incident as a tragedy.

What does not figure much in this memoir is the author’s intellectual engagement. We are left with no clues as to the work of hers that made an impact on the profession. Perhaps Saradamoni saw herself more as an activist than as an academic. In this role, her life does carry a message. She comes across as remarkably open-minded when navigating the many worlds she ventured into during her career. And, while doing so she seems never to have allowed her choices to be influenced by taboos of any kind, whether perpetrated by the conservative social order or self-consciously progressive social scientists.

She comes across as a free thinker, devoid of political correctness, when she shows an attachment to some common cultural practices in India. Though once close to the communist movement of Kerala through her husband, she was devoted to her larger family, visited places of pilgrimage and was vegetarian by choice though she was born into a social strata that was not. Given the last, however, it is surprising that she mentions being ambivalent about capital punishment. Above all, Saradamoni was clear-headed in her approach to caste.

Two instances may be noted. She brushes aside the criticism she faced for choosing a Brahmin, the eminent jurist V.R. Krishna Iyer, to write the foreword to her book. Secondly, she was not squeamish about seeing merit in the practice of matriliny, in her view a great boon for women, even though it was practiced only by a small section of Kerala society, one that in today’s public discourse would be termed ‘savarna’.

She saw it as ensuring that women did not have to ever leave their homes as opposed to women elsewhere in the country, who were “given away” in marriage, thus losing all entitlement to their ancestral home. She would concur, one might expect, with Margaret Mead’s pithy remark that “motherhood is biological while fatherhood is social convention”.

Through her life, Saradamoni had shown that it was possible to be a feminist and feel at home in India, and that to be progressive did not require jettisoning all things Indian. But her memoir also shows us what we have lost. She lived at a time when the Indian state was not just benign but confident, unlike today. India’s public institutions such as the ISI, where Saradamoni spent most of her working life, let a hundred flowers bloom.

Pulapre Balakrishnan is an Honorary Visiting Professor, the Centre for Development Studies, Thiruvananthapuram. 

Modi Has Failed Where Nehru Had Succeeded

What accounts for this differential record of Nehru and Modi with respect to economic growth?

As the elections approach, Narendra Modi strides across the political arena as if unchallenged. No other Prime Minister has exuded such brimming confidence in their public appearances, though some may believe that Indira Gandhi came quite close. Nehru, despite the adulation of his compatriots, mostly appeared weighed down by the responsibilities he had assumed and the restraint he had imposed upon his deportment. The understatedness, however, concealed  a gameplan. This was to quicken India’s moribund economy, an aspect missed by most of his biographers who have invariably devoted much of their attention to Nehru’s foreign policy ambitions and internal political preoccupations.

Actually, in their focus on the economy, Nehru and Modi share a common factor. Nehru’s speech to the Constituent Assembly on August 14 had declared that the goal of independence was to “build up” a “prosperous” country. At the same time, he did express caution in assuming that this was assured. Modi, ever confident of his capabilities, has tended to be more emphatic. He launched his election campaign of 2014 with the unambiguous promise “Achche din aanewale hai”. For the majority in India, better days can only mean economic betterment.

In effect, both Nehru and Modi emphasised the importance of economic growth, and staked their political career on the progress of the economy.

Nehru’s position is revealed in the following statement he made in parliament in May 1956: “The whole philosophy is to take advantage of every possible way of growth and not to do something which suits some doctrinaire theory or imagine we have grown because we have satisfied some text-book maxim of a hundred years ago.”

Modi, who prefers his delivery upfront, considered the maxim “minimum government, maximum governance” sufficient. It is interesting to spot a character similarity between these two otherwise ideologically opposed politicians. Firstly, they did not shy way from declaring publicly what they intended to deliver, and gave the people an idea of how they would achieve it. This is a far cry from the behaviour of most of India’s politicians today. We don’t really know what they stand for.

So how do the records of these two powerful prime ministers of India stack up with respect to economic growth? The recent announcement by the National Statistical Office of an advance estimate of GDP in 2023-24 gives us data for the full decade for which Modi has been prime minister. This yields a definite picture. Far from having accelerated after 2014, the rate of growth of the Indian economy has slowed since 2016. This need not  surprise. 2016 was the year of the demonetisation. Though only  a temporary shock, as the money  supply returned to its earlier level quite quickly, the shortage of currency could have triggered forces making for slower growth which feed-off of one another. The economy slowed for three successive years, and in 2020-21 it actually contracted. Not even the high growth rates post Covid have been sufficient to negate the impact of four years of progressively slowing growth. Everything points to the role of demonetisation in this as none of the exogenous drivers of growth, namely world demand, agricultural  growth or public investment slowed at the time. Whatever may be the reason, we now know that the economic policies of the Modi government have not delivered faster growth to date.

The picture with respect to economic growth in what may be termed the Nehru era, lasting till his death in 1964, is stark. With the implementation of policies to revive the economy, gathered under the rubric ‘planning’, India’s growth rate accelerated in the first half of the fifties and remained steady till 1964. In the annals of twentieth century growth the Nehru era was pathbreaking. While we have reliable data only for the last fifty years of the Raj, we know that the colonial era was a time of stagnant, if not declining, per capita income. This trend was decisively reversed in the fifties. Per capita income has not stagnated since then, though growth faltered for about a decade and  a half after the passing of Nehru. The transition in the fifties to a permanently higher growth path may be regarded as the ‘mother-of-all’ economic transitions in India’s recorded history.

What accounts for this differential record of Nehru and Modi with respect to economic growth? Above all, in the 1950s, Indian economic policy was guided by a definite strategy. This was to to try and energise an economy trapped at a low level of income via a big push to be provided through rising public investment. The reliance on public investment was entirely for practical reasons. It was believed that the private sector was unlikely to come up with the level of investment required to shock the economy into motion due to the long gestation period and high uncertainty involved. This strategy paid-off handsomely. As the Indian state invested, so did the private sector. Most would be surprised to know that during the Nehru era the expansion of the private sector’s investment exceeded that of the public sector. In the context, this should not surprise anyone, for, as public investment increases it generates demand, thus expanding the market to be had by the private sector. It is this mechanism that explains the ending of what is believed to be a period of about two centuries of stagnation in India.

Nehru succeeded where Modi failed because he had a strategy for growth. On the other hand, Modi’s advisors seemed to have encouraged him to think in terms of slogans – “minimum government”, for instance. The trouble is that the pursuit of minimum government can result in less of both public and private investment, as can be seen from the mechanism by which growth was achieved in the 1950s in India. It can also be seen in the fact that the private investment rate in India has barely budged since 2014, despite Modi’s avowedly business-friendly government. Having finally sensed the folly of being ideologically committed against a public presence in the economy. his government has used the last two budgets to unleash a blitzkrieg of infrastructure building before the ending of its term this coming May.

None of this is to even remotely suggest that the policies of the Nehru era were ideal. First, exports were ignored, which meant that there was no way of funding even the intermediate inputs and capital goods needed for the industrialisation drive, leave alone the defence equipment and crude oil. This showed up in the balance of payments crises that had plagued India in the fifties and sixties. Secondly, there was the momentous neglect of primary education, especially for women, which  slowed the adoption of technology and better practices more generally, in every sphere of life. Human development would not only have led to a much faster eradication of poverty in India, it was the very promise of Indian independence. Perhaps the planners imagined that it would come along in the wake of growth. It did not.

It is not as if growth should be the sole economic indicator we ought to be concerned with but it is a matter of history that both Nehru and Modi chose to locate it at the centre of their economic policy. This makes it a criterion by  which we may evaluate the difference they made to the economy in their time as prime ministers of India. Nehru quickened the economy in his time. Prime Minister Modi is yet to do so.

Pulapre Balakrishnan is an economist.

This piece was first published on The India Cable – a premium newsletter from The Wire & Galileo Ideas – and has been updated and republished here. To subscribe to The India Cable, click here.

Averting a $10-Trillion Dystopia

Pursue growth if you will but it would be naïve to not see that some of the things that matter from an economic point of view, such as employment, would not necessarily be served by it.

In 2019,  upon re-election, Prime Minister Narendra Modi proposed the target of US $ 5 trillion for India’s economy by 2024.

As the date approaches, it is clear that the goal is unlikely to be met. This has not, however, held back the enthusiastic.

News that sprung some months ago – of India having overtaken the United Kingdom to become the world’s fifth largest economy – seems only to have buoyed their spirit. Next, as 2022 drew to a close, the London based consultancy Centre for Economics and Business Research predicted that by 2037 India’s economy would reach US $ 10 trillion to become the world’s third largest.

Admiring projections of India’s economy originate in the west. The Chinese establishment is silent but it could not have escaped its attention that a larger economy for its neighbour would make it likely that military aggression will be repulsed in a way that it was not in 1962.

On the other hand, it is not surprising that India’s rise on the global stage attracts attention in the west.

First, there is an element of shock, if not awe, that a country once a byword for famine has risen phoenix-like from the debris of Europe’s colonialism.

Secondly, India is not only a relatively rare democracy in the east it is also the largest one, and the most populous country of the world. As all of the west’s countries are democracies, India is seen as a valuable political partner.

Also, India’s economic size makes it a potential market for the west’s goods and its fast growth is an investment opportunity for the surplus savings of the west. The west clearly has skin the game of growth in India. How should we in India view this shift in its perception?

The basis of the predictions of India’s Gross Domestic Product emerging from global think tanks is not public knowledge. Very likely they are no more than a projection into the future of recent trends. But let us for a moment assume that it will materialise, making India a US $ 10 trillion economy in 2037.

It may be that a vein of competitiveness is struck in some sector and India’s exports will grow even in a relatively stagnant global economy. Perhaps the animal spirits of private investors will be kindled by the mere announcement of optimistic projections. Both these outcomes will propel India’s economy, of course, but the million-dollar question remains, ‘What will be the character of this economy,’ which at US $ 10 trillion dollars will be thrice the size of India’s current GDP.

Will size bring along the attributes that we would like to see in an economy or will it, in a worst case scenario, lead us to a dystopia induced by their absence?

People block the Jalandhar-Delhi National Highway to protest against Centre’s ‘Agnipath’ scheme, in Jalandhar, June 18, 2022. Photo: PTI

In particular, will the economic growth lead to employment opportunities for a growing population of youth and the social and physical infrastructure necessary for a good life or will it magnify the rising economic inequality and ecological insecurity?

None of these outcomes is inevitable but a creative economic management of the growth process would be necessary to bring about the positive ones and to avert those that are negative. A consideration of employment and ecological security is crucial.

India’s unemployment rate is estimated to be at a record high. This implies that the accelerating growth since the 1980s has not generated an equivalent growth in employment.

For the mass of the unemployed, concentrated in agriculture, employment opportunities will arise only when there is a demand for goods in the production of which they can participate. Clearly growth of the information technology sector, or even of exportable manufactures, will not be of much use here as this is a cohort with low education and skills. Increased demand for goods of mass consumption alone will lead to an expansion in the demand for these workers. For an expansion of this demand, arresting the price of food would be essential, as only that will low-income households with enough to demand more manufactured goods. There is no awareness of this whatsoever in the agricultural policies of either the Union government or the states.

It may be noted that the rise and persistence of the current inflation in India are related to the price of food and much less to that of imported commodities. So, India could well grow fast over the next decade and a half without generating sufficient employment. 

The role of public policy in employment creation is to exploit the link between education and employment. An educated workforce is more productive. Where this greater productivity leads to higher wages it creates demand for goods, drawing the unemployed into production.

While over time the percentage of the population with formal schooling in India has increased the quality of education has declined. The rise of EdTech, delivering instruction via information technology, is testimony to this. The need for even poor parents to provide expensive private tuition to their children points to the abject failure of the public schooling system in India to impart the contemporary equivalent of the basic necessities in education.

Also read: What Govts Can Do to Make the Most of EdTech

Money flowing into IT-enabled tuition is more money withheld from flowing into the consumption of manufactured goods, thus holding back the expansion of employment. Apart from making already employed workers more productive, education has the potential of creating the wherewithal for entrepreneurship.

The greater part of the Indian workforce is self-employed. But the self-employed require more than just education to ply their trade. They require the producer services they cannot generate by themselves. Ranging from electricity to waste disposal services these can be provided to scale only by the public sector. An highly efficient public sector would be needed to enable India’s self-employed to flourish rather than struggle to eke out a living, as most of them do today.

Only a concerted intervention can create the conditions for employment generation in India. However a perceptible shift in the stance of India’s political parties augurs poorly in this regard.

The national and regional parties have re-positioned themselves as benefactors of the population, visibly channeling funds to private bank accounts and less visibly underpricing public services. While historically a trademark of the regional parties, the Modi government has re-branded ‘development’ to mean income transfers to farmers and free food to a constituency much wider than the poor. This shrinks the fiscal space for health and education spending.

Of late this welfarism, defined by the public provision of private goods, has been combined with a public investment thrust focused on road building. The building of national highways has often involved riding rough-shod over local communities who have no say on whether a highway should be built cutting a swathe through the countryside, destroying agricultural land and bringing roaring traffic to where once there was the sound of water flowing. State governments have not been far behind when it comes to disastrous geo-engineering. Projects aimed at religious tourism have found favour with political formations as diverse as the Hindu nationalists in Uttarakhand and communists in Kerala. These are both states that have only recently witnessed landslides and flooding, causing great suffering to their people. There are also states that have set trillion dollar targets for their economy.

Pursue growth if you will but it would be naïve to not see that some of the things that matter from an economic point of view, such as employment, would not necessarily be served by it. Equally, recognise that growth can lead to a dystopia if public policy does not respect the imperatives of a science-informed democracy.

“Ill fares the land where wealth accumulates and men decay,” wrote the poet some two centuries ago.

Pulapre Balakrishnan teaches at Ashoka University, Sonipat, Haryana.

Book Review: More Paean, Less Economics

Gautam Chikermane’s ‘Reform Nation’ claims to be an economic history of India since independence. Actually, it’s a post-truth narrative about three decades of economic ‘reforms’ that ignores the history of growth, unencumbered by the need for evidence of outcomes.

This is a difficult book to review, not due to the complexity of the arguments but its very opposite. There are barely any arguments in it, just extravagant assertions of the kind that reminds one of Soviet-style agit-prop.

Gautam Chikermane’s book, Reform Nation: From the constraints of PV Narasimha Rao to the convictions of Narendra Modi, is a celebration of every single change in the economic policy regime in India since 1991. These the author terms “reforms”. So obvious to him is the potency of these reforms that he does not even consider it necessary to articulate his thoughts in a way that is comprehensible.

Take for instance the statement on the impact of what he terms “the information revolution”, presumably the change wrought by the progress of information technology (IT): “This has had mostly a positive impact on households comprising India. Convenience the currency of transactions, chip the medium of consumption, and digital the texture of money – the information revolution combined with expanded and wireless telecommunications networks has changed for the better our healthcare, education and direct benefit transfers” (pp. 253-54).

Gautam Chikermane
Reform Nation: From the constraints of PV Narasimha Rao to the convictions of Narendra Modi
HarperCollins, 2022

Even if one were to imagine that they have understood what is being asserted here, it would be an exaggeration to say that IT has improved health and education in India. The so-called IT revolution could hardly prevent the near total- collapse of the health system during the recent COVID 19 pandemic. In education, IT can indeed play an enabling role, though not yet the part played by the educator.

Moreover, there is the question of access. The lack of access of many Indians to the equipment necessary – such as computers and smart phones – to leverage the potential of IT that led to a loss of learning during the two-year-long closure of schools due to the pandemic, a feature documented in the latest Annual Status of Education Report (ASER) 2023, released by the NGO Pratham. It is this complete blanking out of the distributional aspect of growth and change in India that characterises this book. That the ‘nation’, as its title suggests, is robustly reforming, with everyone gaining equally from the ensuing prosperity, is the message of this book.

In the author’s words, “This book is a reference on (sic) India’s economic history since Independence.… It is a saga of independent India, viewed through the prism of economic policies” (p. xiv). On the occasion of India’s 75th anniversary, this is a worthwhile exercise to attempt alright. The question is whether the book does justice to the task it sets itself.

Early on, however, the reader is made aware that the author has no intention of doing this. Ignoring over four decades of history before 1991 he settles down to a narration of the policy changes – once again, the author’s definition of ‘reforms’ — since then. He states, “Although I began the book keeping as base the thirtieth anniversary of India’s economic reforms that began in 1991, eventually, it began to take me along on a course that seemed to be of its own choosing. But exploring three decades of reforms did provide an intellectual anchor around which to carve out ideas, study actions and examine outcomes” (p. xiv).

It may be said that the book develops very few ideas and contains next to no evidence on outcomes, whether for the period since 1991 that he celebrates in terms of India’s economic performance or for the period prior to that, which he excoriates. Instead of an economic evaluation, a rather simple criterion is used, namely whether a period has witnessed multiple changes in the policy regime, termed “reforms”.

Then the reader is told that the book provides a view that challenges some of the extant ideas: “For instance, it debunks the fake narratives that prime ministers Indira Gandhi and her son Rajiv Gandhi were reformers …” (p.xvii). But here it misses a trick. There is by now a vast literature on the economy in the late 1970s, which indicates that the economy began to accelerate then even though no major changes to the policy regime – what Chikermane would term ‘reforms’ — had taken place.

Indeed, as Dani Rodrik and Arvind Subramanian have pointed out, in some ways the policy regime had turned more inward-looking and less market friendly at the time. Their proposed resolution of this seeming puzzle is that, tamed by her stint in the political wilderness, Indira Gandhi decided to turn “pro-business” upon her return.

No similar nuances for the author of this book, though! By ignoring the history of India prior to 1991 he fails to see that not all growth in India had involved liberalising reforms. Further, by ignoring the evidence of economic performance for the period after 1991, he fails to see that the reforms have not always succeeded in achieving the goals set. It is absolutely necessary to study the history of growth to understand how it comes about. In what remains of this review I shall demonstrate just this.

You know that you have encountered an attempt at post-truth history writing when you encounter a statement such as this:  “The economic decline of India can be traced back to the PM Jawaharlal Nehru, whose first policy vehicle ….. laid the policy foundations for the next forty-three years of keeping India poor” (p. xv). To borrow from the author’s own playlist, this is a “fake narrative”.  It is customary for most economists to juxtapose assertions with data, and that is how I propose to go about it.

Economic growth in India in the 20th century.

Two points relevant to the author’s assertion just stated can be made on the basis of the graph above. First, the economic policies of the Nehru era engineered a reversal of fortunes i.e., India ended colonial-era stagnation and ignited a growth process that picked up steadily. In particular, growth in India accelerated twice before the reforms of 1991. At least in terms of growth, then, the reforms were not unique.

Of course, this says nothing about poverty which, according to the author, was unaffected by the policies before 1991. The best work on the trend of poverty in India is by the late Martin Ravallion of the World Bank. He and his colleagues Gaurav Datt and Rinku Murgai  show the poverty rate fluctuating in the Nehru years and beginning to fall in the late 1960s, a time described as a “leftward lurch” to capture Indira Gandhi’s ideological posturing and associated policy moves, aimed mainly at the industrialists of the country. There is no puzzle in the trend identified for poverty.

The mid-1960s witnessed the initiation of the Green Revolution. As the greater part of the population was dependent on agriculture, the permanent rise in the rate of growth of agriculture that ensued, led to a reduction in the poverty rate, a process that gained traction in the 1980s. You may love to hate her, but this authoritarian politician presided over an economy in which growth accelerated and poverty declined without much liberalising reforms.

Gautam Chikermane.

While there was a strong case for course correction involving a rescinding of controls on industry at the end of the Nehru era, it is a travesty of truth to say that India’s economy underwent a decline in output and that poverty increased after 1947, only to revive and spread prosperity after 1991. Moreover, the author’s triumphant assertion that there is not a single constituency in India that has not seen its economic well-being rise over three decades of reform since 1991 is equally true of the three decades prior.

None of this is to suggest that the economic policy regime in India prior to 1991 was optimal, and, as I have stated above, liberalisation could have come earlier. The relevant question, though, is why per capita income in India has remained lower than in most parts of the Third World, and why poverty was not eliminated earlier.

The answer is not far to seek. If we are to learn anything from the East Asian experience, it would be the importance of human development, spurred by good health and education, for both growth and poverty reduction. When China began to grow faster after the reforms initiated by Deng Xiaoping in the late 1970s, it had far higher average levels of schooling than India did. This along with a higher level of public sector involvement in the economy of that country remains the case even today.

Everything suggests that just pursuing liberalising reforms, the exclusive focus of Chikermane’s book, will not take India’s economy closer to China’s in terms of per capita income, currently about three times that of ours. Just as there is no royal road to geometry, it is a pipe dream that India can simply “legislate the path to a $20,000 per capita income” (p. 249).

An indication of this is that, despite the frenetic ‘reforms’ of the Modi government celebrated by the author, the economy has not accelerated after 2014. Though the sub-title of his book, ‘From the constraints of PV Narasimha Rao to the convictions of Narendra Modi’, seeks to underpin the title Reform Nation, it is the case that the reforms under the former did lead to an acceleration in growth, even if was delayed by a decade as can be seen in the graph above.

The failure of Modinomics is that its confident assertions have not led to a rise in the private sector investment rate, belying the author’s verdict that the prime minister’s credentials as a strong reformer have  resulted in “giving conviction to capital itself” (p. 246). Going by its  investment record, India’s corporate sector appears unconvinced by this narrative.

In conclusion, the book does make an important point, however. Gautam Chikermane has got it right when he says that India is governed by what is virtually a colonial bureaucracy, the unaccountable and predatory conduct of which continues to impact economic activity negatively. I would add that it also contributes to a sense of insecurity Indians feel vis-à-vis the state in their own country. Chikermane’s observation that India criminalises unintended non-compliance by entrepreneurs may be extended to say that this can have a chilling effect on entrepreneurship, and, thus, on the expansion of the economy.

We may add to this the entire tangle of colonial–era laws that constrain political freedom and intimidate the citizen. While the author rightly laments the continuing influence of a colonial-style bureaucracy, he does not bother to explain why an avowedly nationalist government, the economic policies of which he admires, continues to use the sedition law, a colonial era legislation, against its political opponents. Narratives on India’s economy tend to overlook the economic and political consequences of a government machinery bequeathed to India by a foreign power that was intent on subjugating it.

Liberal economists, having internalised contemporary Anglo-American economics, seem to believe that India can be governed by tweaking the fiscal deficit while its home-grown Marxists are stuck with a framework developed for nineteenth century Europe which takes into account only capital and labour. Both miss the point that India’s political economy is a deadly mix of political parties, capitalists, rich farmers and the bureaucracy, all out to maximise their own returns, often in collusion with one another. At least, reading Chikermane gets you thinking about this.

Pulapre Balakrishnan teaches economics at Ashoka University.

India@75: Why Does Deprivation Still Exist to This Extent?

Is democracy about procedural routines such as elections and guidebooks such as written constitutions, or is it about the transformations wrought after its adoption as the form of government?

As the country waves flags and celebrates the 75th anniversary of India’s independence, it is also time to take stock. What did India’s founders and citizens dream of, how has India fared, what have been our challenges and successes?

The Wire’s reporters and contributors bring stories of the period, of the traumas but also the hopes of Indians, as seen in personal accounts, in culture, in the economy and in the sciences. How did the modern state of India come about, what does the flag represent? How did literature and cinema tackle the trauma of Partition?

Follow our coverage to get a rounded view of India@75.

Illustration: Pariplab Chakraborty

Excerpted with permission from India’s Economy From Nehru to Modi, published by Permanent Black in association with Ashoka University.

As I had pointed out, international comparison of economic development indicators is often met with the criticism that we could be comparing across political regimes. However, this is irrelevant in a comparison within India where the states are all under the umbrella of one governance system, namely political democracy. What we found in such a comparison is that a wide variation in human development exists. While at least some states appear to be inching towards the global standard of development in some dimensions, democracy in India coexists with low human development in states accounting for a large part of the country.

In a country as large as India is, some regional variation may be expected. However, the divergence can be considerable and has been long lasting, not having been erased in seventy-five years. As all states function under a common set of rules, there must be something unique to the states that differences of such magnitude persist into the twenty-first century. Why is it that democracy has not been able to eliminate basic deprivation in large parts of India?

A clue may be found in the disquisition on democracy by the sociologist Barrington Moore, who has studied the transition to democracy across the world. Moore sees the prior revolutions that took place in Europe and the United States as crucial in the transition to a democracy there. When it comes to India, he says: “. . . the nationalist movement did not take a revolutionary form, though civil disobedience forced the withdrawal of a weakened British Empire. The outcome of these forces was indeed political democracy, but a democracy that has not done a great deal toward modernizing India’s social structure. Hence famine still lurks in the background.” Strangely, when it came to India, Moore seems to have inverted his thesis to suggest that democracy can alter the social structure, presumably through parliamentary means.

Pulapre Balakrishnan
India’s Economy From Nehru to Modi: A Brief History
Permanent Black in association with Ashoka University, 2022

However, his general thesis, that a social transformation is essential for democracy to attain its potential, is useful in understanding the regional variation that we observe in India. Arguably, the regions of India that have seen the most development, including the elimination of illiteracy and extreme poverty, are regions that have witnessed social transformation that eliminated the old order. This is most pronounced in the case of Kerala, where as early as 1957 an elected communist government initiated a process of improvement of the conditions of life for the mass of the population. This mainly involved the spread of health and education, resulting in a social emancipation of the lower orders of its society. A significant event in this transformation was the land reforms initiated within weeks of the installation of the government. This led to the ending of landlordism and the associated suppression of the labouring classes. So the social structure was altered, awareness grew, and with it an unstated but recognisable demand for a better life. Competing political parties had no option but to respond with policies that enhanced human capabilities if they were to survive. Though the culmination of the social transformation in Kerala was the installation of a communist party, the transition was long. Having commenced in the late nineteenth century, it had involved a caste-reform movement that initiated social mobility, the work of Christian missionaries that spread literacy, and an enlightened public policy of the princes who had ruled a large part of what is now Kerala.

A transformation of a kind took place in Tamilnadu too, though its origin was a caste-based movement aimed at eliminating the hegemony of the Brahmins. However, it could come to power only by riding on ethnic nationalism fuelled by the attempt to impose Hindi as the sole official language of the country. Since then the “Dravidian movement” has had great political success and parties that draw inspiration from it have now been in power in the state for over half a century. As with the rise of the communists in Kerala, so too has the Dravidian movement left its imprint on society. Tamilnadu has achieved relatively good development indicators, though they are yet to reach the levels achieved in Kerala.

Also read: Indian Economy at 75: Much Progress But Lingering Doubts Over Development Model

No social change comparable to that in Kerala and Tamilnadu has taken place in the three other states in our sample in Table 5.3. Not even Zamindari abolition in UP and the land reforms of the Left Front in West Bengal seem to have achieved a similar success in the social sphere, necessary to bring about development in the sense that we use the term. These states have higher poverty and poorer social indicators than Kerala, the shortfall in women’s literacy being particularly noticeable. The case of Gujarat suggests that overall economic prosperity may be insufficient to bring about the expansion of freedoms of the population. We saw in Table 5.3 that though it is one of India’s richest states, it harbours significant poverty and its social indicators are not much better than the national average. A change in social structure that redistributes power appears to be essential to widespread development in a society, including the elimination of poverty.

Interestingly, in his final speech to the Constituent Assembly, Ambedkar had recognised the role of the social structure in perpetuating social and economic inequality when he pointed out that, in the India that was to come,

“In politics we will have equality and in social and economic life we will have inequality. In politics we will be recognising the principle of one man one vote and one vote one value. In our social and economic life, we shall, by reason of our social and economic structure, continue to deny the principle of one man one value. How long shall we continue to live this life of contradictions? How long shall we continue to deny equality in our social and economic life? If we continue to deny it for long, we will do so only by putting our political democracy in peril.”

Ambedkar was prescient in seeing that political democracy is no guarantor of the expansion of freedoms, an insight that is crucial to our understanding of the history of both democracy and development in India.

Quite often, when it is suggested that India’s democracy is diminished by the presence of deprivation on so large a scale, it is asserted that democracy is really a form of government by discussion, and expecting it to deliver human development is to see it merely as an instrumentality. An antidote to this line of argument is offered in Moore’s recounting of the history of democracy. He sees its development as “a long and certainly incomplete struggle” to do three related things: (1) to check arbitrary rulers, (2) to replace arbitrary rules with just and rational ones, and (3) to obtain a share for the underlying population in the making of rules. He sees the ending of monarchy, the efforts to establish the rule of law and the power of the legislature, and, later, use of the state as an engine of social change as the best known aspects of these three aims. The definition of democracy as “government by discussion”, attributed to Bagehot, may well reflect a consensus on how it was intended to function, but remains ahistorical, and leaves us blind to its potential to improve the conditions of life for the mass of the population, a matter of urgency in India.

Democracy in India has received worldwide attention, especially from observers based in Western democracies. The cynic might observe that the admiration has turned particularly vocal ever since India’s economy has billowed out. Some recent congratulatory reviews of India’s democracy emanating from overseas have been those by Mathews (2015), Shani (2017), and Desai (2017). These observers have generally marvelled at one or the other of two features of Indian democracy – such as that a country of such great diversity has held together. Others have remarked upon not only the successful conduct of elections but also the peaceful transition once they are completed, both quite remarkable in a poor country which till recently had very low levels of literacy.

Also read: India Has Come a Long Way Since 1947, But Much Still Needs to Be Done

Surprisingly, none of them has wondered why poverty is tolerated to such an extent in India’s democracy. It is understandable that some in India should feel elated by the praise but it should also leave us circumspect. Is democracy about procedural routines such as elections and guidebooks such as written constitutions, or is it about the transformations wrought after its adoption as the form of government? To paraphrase Moore, how much has democracy done for India? The evidence on human development in the country implies that the praise needs to be tempered. Significant deprivation exists in the country even after seventy-five years of its formation. This has not received as much attention, but it is high time it does. Few democracies have tolerated so much deprivation for so long. The substantial divergence in the progress of human development across the country implies that it is possible to eliminate its worst forms through public policy. I conclude by asking to what extent India’s impressive Constitution can advance this outcome.

The Restless Pravasi Liberal Must Gaze Inwards and Not at the Mother Country Alone

A closer examination of Arvind Subramanian’s claim that India’s liberals have jettisoned principles.

In a recent op-ed published in the Washington Post, Arvind Subramanian has berated India’s liberals for not upholding principle. He has chosen four incidents to make his case. These are the Russian invasion of Ukraine, the hijab controversy in Karnataka, the film The Kashmir Files, and the US-led sanctions on Russia following the invasion. According to him, in all these instances, liberals in India have not stood up for principle in a way that they would have been expected to.

As these cases differ in their significance, I don’t treat them equally. I prefer to go by the broad headings under which they fall, namely, democratic norms in international relations and majoritarian politics in India.

But first, who is a liberal? It is commonly understood that liberals are tolerant of viewpoints other than their own. Liberals also champion the rights of individuals vis-a-vis the state, though they would differ on how far this can be taken. 

Actually, the Russian invasion of Ukraine need not be of concern to liberals alone, for even conservatives believe in the rule of law and the sovereignty of countries. Contrary to Subramanian’s suggestion, in India, we have had individuals from both sides condemn it. Subramanian Swamy has written more than once to this effect in The Hindu. I have myself written on the issue in the same space. These articles are not just a peacenik’s view of the world but criticise India’s stand on Ukraine, as exemplified by abstention on the resolutions in the UN’s Security Council and the General Assembly. I have argued that by not standing up for the principle of national sovereignty India’s stature has been diminished. But well before this, Deepanshu Mohan, an economist of the O.P. Jindal University, had condemned the Russian invasion and called for India to adopt a principled foreign policy. Subsequently, his university convened a seminar to discuss the war. There, alternative points of view were presented, some supporting India’s stand in the UN while many opposed it. This is what an open society is about, and it confirms that a commitment to liberal values is alive in India.

Majoritarian politics that serve to isolate the minority have been a feature of India for some years now. The break-up of the state of Jammu and Kashmir, the Citizenship Amendment Act and the exclusive use of Hindi by the Union government are all instances of it. These moves by the Indian state have been accompanied by acts of violence in the name of cow protection against Muslims in northern India in Narendra Modi’s first term. India’s liberals have through their writing protested this. Again, I have myself. Liberals have also taken to the streets. There exists television footage of the country’s leading liberal intellectual being pushed into a Black Maria during a protest in Bengaluru. Now, how can it be said that India’s liberals have jettisoned principles?

Students during a protest against police violence on students and the Citizenship Amendment Act, in Bengaluru on December 17, 2019. Photo: PTI/Shailendra Bhojak

As a violation of citizenship rights, the ban on the hijab in government schools in Karnataka, which Subramanian has mentioned, is not on a par with those mentioned above. Moreover, it is not obvious what a liberal position on this would be. While it would hold fast to the principle that secularism would require that institutions of the state be scrupulously even-handed between religions, it is unlikely to champion the hijab as a symbol of the freedom of expression, especially when the case for it is made on religious grounds. Be that as it may, the hijab ban in Karnataka has been publicly criticised by many in India, including by conservatives who think that it goes against the idea of “Indian secularism”, a construction that has allowed political parties to interpret secularism as they please, leading to the entrenchment of some of the most conservative forces in the country. On the other hand, the plan to ban Muslim traders from Hindu temples in Karnataka is on a different level altogether from the hijab controversy and deserves to be condemned as communal without reserve.

Also Read: The Contradictions in the Anti-Muslim Tirade in Karnataka

Gaze inwards

Buried in the claim that India’s liberals have thrown in the towel is the suggestion that the pravasi (diaspora) liberal is most active in speaking truth to power in their adopted countries. While in the debate on Ukraine many in India have roundly criticised our foreign policy as unprincipled and self-serving, it is worth asking how many Indian liberals based in the United States (US) criticised America’s shameful flight from Afghanistan less a year ago. The US had invaded the country illegally, claiming that Osama bin Laden was in hiding there. Afghanistan was bombed and then occupied even after Laden was found in Pakistan. Then an exhausted US settled with its sworn enemy, the Taliban, and scooted as the British did after two centuries in India, leaving a country to burn. Leaving a country in ruins may not violate a legal principle but it is a despicable act, nevertheless.

The US has resolutely followed its interests and not any discernible principle in international politics. It has in recent history actively supported dictatorships that have shown scant regard for human rights. This seems to have escaped Indian liberals residing in the US. Their gaze, it seems, is for the mother country alone, well after they have decamped. 

However, it is as economic advisers to India that the pravasi liberals’ self-proclaimed principles have been most at variance with their practice. Ever since 1991, they have travelled to India to dispense a variant of the Washington Consensus, a view on economic management forged in the US in the early 1990s. Its defining feature is the claim that maintaining “macroeconomic discipline” is sufficient as economic policy. Though ten actions were identified, small budget deficits and low inflation take pride of place in this approach. Notably absent is a developmental agenda. Neither poverty nor inequality figure and government intervention of any sort is frowned upon.

The Washington Consensus has been the template for economic policy in India since 1991 but more so since 2014 when Narendra Modi took office. For a substantial part of this period, economic policy advisers were self-consciously liberal pravasi Indians. But, from inflation targeting to fiscal consolidation and corporate tax cuts, the policies they were advocating would in their adopted country be considered to the right of the political spectrum.

On the other hand, India’s liberals have consistently argued against these policies, and their prognosis has turned out to be right. Even before the pandemic struck, growth had turned below and inflation and unemployment above their respective levels in 2013. Embarrassingly for a nationalist regime, the Modi government has simply borrowed an economic management paradigm from the West, which many pravasi liberals have obligingly propagated.

Prime Minister Narendra Modi is received by junior finance minister Jayant Sinha and the chief economic adviser Arvind Subramanian at the Delhi Economics Conclave 2015, in New Delhi, November 06, 2015. Photo: Prime Minister’s Office, GODL-India

Even more than their lack of success in juicing up the economy, it is their willingness to work with a right-wing party that these so-called liberals should reflect upon. They condemn majoritarian politics and express a commitment to anti-trust economics but chose to overlook Modi’s record as the chief minister of Gujarat on these counts when they decided to work for him. When opportunity ends at the Centre they move to the states, to work for regional parties with illiberal values.     

The restlessness of the Indian liberal in the west stems from a recognition that they matter for little in the power structure of the land they have migrated to. At the same time, exactly as it is the most recent convert who is the most zealous, they feel a need to distance themselves from the mother country. Ceaseless in their striving to find fault with it, they often end up biting off more than they can chew. 

Pulapre Balakrishnan teaches at Ashoka University, Sonipat.

Maharashtra’s Poor COVID Experience Is Reflection of Half a Century of Identity Politics

When ethnicity or religion is the touchstone of politics, a society loses its capacity to think clearly about its future  – let alone make provision for a secure one.

While the recent news from Delhi is spectacular and disturbing – especially hospital deaths due to lack of oxygen – a quieter crisis has been brewing in the state of Maharashtra for much longer.

For about a year now, we have been reading of hospitals there not admitting patients suspected of COVID-19, dead bodies piling up in the wards, shortage of the remdesivir drug, inadequate cremation facilities and, again, non-availability of oxygen. News has come from Mumbai, Nashik, Nagpur and Ahmednagar, among other cities, indicating that the problem is widespread and not just confined to the metropolis. Above all it speaks of the extraordinary hardship being endured by the people of the state.

Everything suggests that Maharashtra should not have had the experience that it has. While it does have high density regions, such as Mumbai and Pune, leaving it more vulnerable to contagion compared to more rural states, it possesses industrial muscle and has a history of entrepreneurship. Clearly there is something at work ensuring that these are not leveraged in a socially constructive way.

Political competition helps…

Along with private entrepreneurship, present in economic activities ranging from the utilities to manufacturing, Mumbai’s history is closely tied to the public spiritedness of its wealthy who have, starting in the 19th century, given it hospitals, libraries and many other public facilities. That some of this has not entirely evaporated may be seen in the House of Tatas announcing that it plans to import 24 cryogenic containers through special chartered flights to meet the current oxygen shortage.

But private initiative for public causes has generally declined in the city since independence. The reasons are no doubt complex but it may be related, at least in part, to the dominating position assumed by party politics all over India since 1947, which due to its proximity to the state, has edged out all private initiative from the public sphere. In Mumbai, in particular, party politics has been noxious, sapping vitality from the dynamic and cosmopolitan culture of Bombay.

A health worker in PPE collects a sample swab from a woman during a rapid antigen testing campaign for the coronavirus disease, at a platform in Mumbai, March 17, 2021. Photo: Reuters/Francis Mascarenhas/File photo

…If welfare commitments prevail

Political competition can play a positive role in promoting the well-being of a population. For instance, the rise of the European welfare state is the result of the competition between the social democratic and conservative forces of that continent, with the former having won. Today, even when the conservatives rule, they dare not dismantle the welfare state, as it holds a special place in the minds of Europeans.

The main instance is that of the UK under Margaret Thatcher, who won four consecutive polls and changed the face of Britain in many ways, but this did not extend to the National Health Service, the envy of even richer countries. In India, democracy never gave rise to a national party with a strong social democratic commitment. The Congress may have been high on rhetoric but any imaginings that it may have nurtured towards the creation of a welfare state floundered at the altar of the personal ambitions of its managers.

But when ‘outsiders’ are the enemy…

Some parts of India always had incipient local aspirations that were not aligned with the national aspirations of the Congress. Two prominent instances were the Dravidian movement in erstwhile Madras and the Shiv Sena in Maharashtra. The Dravidian movement combined the aim of dislodging the primacy of the upper castes in government with challenging what they saw as an attempt of the Aryan north to subjugate the Dravidian south, notably though the imposition of Hindi. The Shiv Sena was not motivated by either of these aims. Its programme was constituted by ethnic and communal politics pure and simple, first to rid Bombay of south Indians and secondly to disempower its Muslims.

While it has taken the party a long time to come to power, it has succeeded in reducing much of what goes for politics in Maharashtra for the past half century to some form of adjustment to its identity politics platform. Naturally, the project of building a society that caters to the well-being of the population went out the window. Public goods, of which the public health system is a prominent example, stood little chance of finding a place in the programme of the Shiv Sena. If ‘outsiders’ are the enemy of the people, then you don’t want to create an infrastructure that will serve them, right? Of course, why the electorate in a democracy chooses a government that does not provide basic public goods remains to be answered.

So, where has a half-century of identity politics orchestrated by the Shiv Sena left Maharashtra? Certainly not in a position to stop the progress of COVID-19, to which it was anyway prone due to the presence of high-density urban conurbations, notably Mumbai. My ongoing work with Sreenath Namboodhiry on the inter-state variation of COVID-19 in India over the past year shows that mortality is inversely correlated with health expenditure.

… Everyone suffers

To be precise, greater public expenditure on health as a share of state gross domestic product (GDP) is associated with a lower mortality rate (measured in three different ways). The Maharashtra experience is true to this pattern. It was the Indian state with the lowest figure for this indicator in 2018-19, with public health expenditure at less that 0.5% of its income (GDP). Of all states, it had on March 31 recorded the highest number of deaths and the highest case fatality rate. Only one other state had recorded a greater number of deaths per million population. The outcome of starving the public health system is reflected in the available infrastructure.

Only three Indian states out of 28 have less allopathic doctors per person than Maharashtra; only eight states have less beds per person and only two have less hospitals per person. It is not as if Maharashtra is poor; there are 21 Indian states that had lower per capita income. When we take all this into account, it is no longer surprising that the state has experienced the health disaster that it has.

Of course it would be naïve to think that expenditure will take care of everything. The oxygen shortages, the absent staff to move dead bodies out of wards, the fire in a hospital at Palghar on April 23 and, in the midst of the shortage, the leaking oxygen tank as patients died due to lack of the very substance at Nashik, all point to administrative incompetence of the highest order.

Maharashtra’s experience with COVID-19 reflects the deadly consequences of identity politics for the “well-being” of a people. When ethnicity is the touchstone of politics, a society loses its capacity to think clearly about its future  – let alone make provision for a secure one.

This experience must trouble us as it may not be confined to one state of India any longer. Only till yesterday, as it were, the party governing Maharashtra today was in a coalition with the Bharatiya Janata Party, which governs India. These two formations share almost everything in common. Substituting ‘religion’ for ‘ethnicity’, we would worry about the future of an India in which identity politics is spread like a virus by political parties.

Pulapre Balakrishnan is professor of economics at Ashoka University, Sonipat, Haryana. 

With inputs from Sreenath Namboodhiry.

A Lesson for India in Joe Biden’s Economic Gambit

The US government’s two COVID-19 recovery packages combine to 25% of the country’s GDP in 2019. 

For most Indians, pairing US President Joe Biden and their country is likely to lead their thoughts to the meeting of the members of the Quadrilateral Security Dialogue (Quad) which took place last week. There is, however, another connection between the two; one, arguably, of greater and immediate importance.

This is the relevance for India of Biden’s first act since assuming office as the president of the United States. Economists across the world watched in shock and awe as he stewarded an economic relief bill amounting to $1.9 trillion through Congress a little before the Quad met. The sheer scale of the provision is appreciated when we recognise that this is close to 9% of US GDP in 2019, the pre-pandemic year. It comes on top of the stimulus of $3.5 trillion undertaken by the Trump administration. These two packages combine to 25% of the country’s GDP in 2019.

This is not just an unprecedented stimulus, it is an economic intervention on a gigantic scale. It included cash transfer to a very large number of households, extension of unemployment benefit payments for six months, an allocation to state and local governments to spend as appropriate in the current situation and payment for vaccine distribution. The vision underlying this grand outlay is contained in Biden’s quotation that the bill will rebuild “the backbone of this country”. It reflects a deep understanding of how the US had been scarred by the pandemic, the suffering it has caused and the crucial role of the state in taking the country out of the morass by engineering a recovery. Also, it represents the leveraging of economic ideas for the public purpose.

Watch: India’s K-Shaped Economic Recovery Is a Matter of Grave Concern

By comparison with the US government response to COVID-19, what we have seen in India so far is depressing for its small-mindedness. The latest issue of ‘The Fiscal Monitor’ published by the IMF shows additional public expenditure by the central government up to December 31 in response to COVID-19 amounting to 3.1% of GDP. The counterpart figure for the US is 16.7%. Of this, the spending on health was a mere 0.2% for India and 2.3% for the US. (We know that mortality from COVID-19 across the states of India is quite strongly related to health spending.)

The Biden stimulus came after one of $3.5 trillion had taken place. In India, the vehicle for the second round of spending was the recent budget. While it has been lauded by industry for its clarity and the boldness with which it has approached the sacred cow of the public sector by speaking of privatisation, it had in it neither a measure to alleviate short-term hardship nor a serious plan for recovery. How can there be one if at a time of acute demand shortage the budgeted increase in expenditure of the Central government is less than 1%? And, when the budgeted increase in expenditure of the Central government and public enterprises combined is actually negative?

There can be two interpretations of why the government has provided such a tepid response to the once-in a-century external shock that COVID-19 was. The first is that it is in the grip of an economic ideology that discourages active government intervention. The ideology was ejected as part of the Keynesian Revolution in economics only to come through the backdoor in a United States that has a strong anti-government constituency.

The heyday of this view was in the 1990s after the collapse of the Soviet Union. It would receive its come-uppance during the North Atlantic Financial Crisis of 2008 when US banks, having  engaged in malfeasance, dragged its economy to the precipice. The US government had to resort to the principles of Keynesian economics to pull it back. Within the economics profession there is now a fair consensus that the Great Recession did not morph into another Great Depression only due to timely government intervention. There has, in the West, harking back to the laissez-faire worldview of the 18th century, always been a strong pushback to any kind of government intervention.

Also read: As the Rich Receive State Patronage, Modi Has Left the Poor to Be ‘Atmanirbhar’

The Indian government, despite its nationalist credentials, appears to be strongly influenced by this worldview. On the other hand American politicians, whether Democrat or Republican, are willing to see economic ideas for what they are, as our servants rather than our masters. It is only a slavish attachment to the laissez faire principle that can lead a government to maintain expenditure during a collapse in output as we saw in the most recent budget. Or when the urban unemployment rate rose to 21% during the lockdown quarter, having been less that 10% before.

The second interpretation of the inaction of the Government of India to the suffering of a population experiencing fatigue, dejection and despair about the future is that it simply does not care. In his opening remarks at the meeting of the Quad, Prime Minister Narendra Modi spoke of the “shared democratic values” between the US, Japan, Australia and India. As democracy is the coming together of people so that they can flourish, Indians hope that he will take a leaf out of Biden’s book on the economy.

Pulapre Balakrishnan is professor of economics at Ashoka University, Sonipat, Haryana.