This is a depressing book. Period. It is not completely the fault of Bhagwati and Panagariya, the growth story itself is quite bleak. There is no doubt that for continuous improvement in well being of Indian citizens, we need our economy's growth rate to stay strong. While we have done many investments in this direction, they still remains inadequate and there is need for many more structural changes in the economy. It is a gloomy picture all and all.
The book is divided into three parts. Part I: Debunking the myths on economic growth in India. Part II: Challenges for faster and broader growth, i.e. Track 1 reforms. Part III: Policy for more effective and inclusive redistribution, Track 2 reforms. Part I highlights mistakes in the various statistics reported in press to spread "incomplete truths" aka "lies" about economic growth. For example, the effect of growth on health outcomes is measured more accurately by "change" in infant morality and not by "levels" of infant mortality. But in the authors' drive to hammer these points into the minds of readers, they tend to be judgmental of work of other economists as well as exhibit a lack of empathy towards to existing deplorable levels of human development indicators which is disturbing.
I agree with the authors' point that an economy can develop only by creating incentives for good outcomes and rewarding agents who achieve these. Obviously, this can not be achieved in a socialist structure, where free riding is rampant. Only in a more capital-oriented economy, where personal gains are valued, agents (be it industrialists, health workers, teachers or politicians) can be driven to get to these good outcomes. In Part II of the book, the authors describe how poor labor laws in India, weak land acquisition norms and ineffective rules in higher education deter agents to contribute to India's growth.
These are valid points. But equally compelling is the question that for how long should the poor and the unhealthy wait before the benefits of growth reach them? The authors believe that growth alone, by itself, can cure developmental problems in India. I disagree. Growth can not solve the divisions stemming from caste system or gender discrimination which adversely affect human capital accumulation and segment the labor market. Nor are the bottom residents of the societal pyramid supposed to wait with bated breadth as the gains of economic growth slowly trickle to them. In a globalized world, the gains from economic growth may even flow out of the national borders, to say Swiss bank accounts. Redistribution policies need to be accompanied with policies which boost economic growth. Yes, there are massive implementation problems in track 2 reforms, the leakages are huge. To correct this problems, the authors recommend targeted cash transfers as the medium for re-distributive programs.
The authors hold the Gujarat developmental path in high regard. Gujarat indeed has witnessed some terrific improvements in its economic status as well as in some of the development indicators. In my opinion, the Gujarat economic policy was not radically different from that of say Kerala or Karnataka or Punjab. In Gujarat, the policies were implemented well. As Congress rightfully shouts, the Modi government's policies were mostly chalked out in the Manmohan era, the current government is just doing a good job of making it work.
I recommend reading the book for the policy recommendations in the Parts II and III. The authors have already spoken of these ideas in numerous forums and the book is a good compilation. Given finite government budget, the authors prescribe spending more of it on growth enhancing reforms as opposed to developmental programs. Well, if I were the Prime Minister would I do so? May be.
I agree with the authors' point that an economy can develop only by creating incentives for good outcomes and rewarding agents who achieve these. Obviously, this can not be achieved in a socialist structure, where free riding is rampant. Only in a more capital-oriented economy, where personal gains are valued, agents (be it industrialists, health workers, teachers or politicians) can be driven to get to these good outcomes. In Part II of the book, the authors describe how poor labor laws in India, weak land acquisition norms and ineffective rules in higher education deter agents to contribute to India's growth.
These are valid points. But equally compelling is the question that for how long should the poor and the unhealthy wait before the benefits of growth reach them? The authors believe that growth alone, by itself, can cure developmental problems in India. I disagree. Growth can not solve the divisions stemming from caste system or gender discrimination which adversely affect human capital accumulation and segment the labor market. Nor are the bottom residents of the societal pyramid supposed to wait with bated breadth as the gains of economic growth slowly trickle to them. In a globalized world, the gains from economic growth may even flow out of the national borders, to say Swiss bank accounts. Redistribution policies need to be accompanied with policies which boost economic growth. Yes, there are massive implementation problems in track 2 reforms, the leakages are huge. To correct this problems, the authors recommend targeted cash transfers as the medium for re-distributive programs.
The authors hold the Gujarat developmental path in high regard. Gujarat indeed has witnessed some terrific improvements in its economic status as well as in some of the development indicators. In my opinion, the Gujarat economic policy was not radically different from that of say Kerala or Karnataka or Punjab. In Gujarat, the policies were implemented well. As Congress rightfully shouts, the Modi government's policies were mostly chalked out in the Manmohan era, the current government is just doing a good job of making it work.
I recommend reading the book for the policy recommendations in the Parts II and III. The authors have already spoken of these ideas in numerous forums and the book is a good compilation. Given finite government budget, the authors prescribe spending more of it on growth enhancing reforms as opposed to developmental programs. Well, if I were the Prime Minister would I do so? May be.