Book Review | India’s growth dilemmas explored in ‘A World in Flux’ – Lifestyle News

By Madan Sabnavis

A World in Flux is a book of essays written by various experts in the economic field and put together by AK Bhattacharya and Amita Batra. As the title suggests, these essays are all about what should be India’s priorities in a world in a state of flux, especially post-Covid where there have been several political developments. The latest shock of tariffs, which affects potentially all countries, is not covered here as it is very recent, but other issues such as the world moving towards protectionism, climate change and economic policies required to move forward are included.

A Data-Driven Compass for the Policymakers

The book is also in honour of Shankar Acharya, who was former chief economic adviser with three finance ministers and also worked with the World Bank on the famous World Development Report. All the authors had either worked with Acharya, or developed a long friendship with him over the years. Acharya was also an integral part of designing and implementing the economic reforms package in the country in the Nineties. Almost all the views that have been put forward are aligned with Acharya’s thought process in his time, reflecting some remarkable foresight.

The book covers a variety of subjects such as trade, monetary policy, fiscal issues, agriculture, investment and so on. The essays are very academic and based on detailed data and research, which makes each writing a delight to read. Shorn of jargon and strong in content, the authors provide clarity on the path that should be taken by the government, which will find acceptance with the reader.

Sajjid Chinoy talks of the three imperatives for sustainable growth being the quantity and quality of employment, growth in exports and increasing public revenue and containing fiscal deficits. This is something that will resonate with policy makers. These concerns are very relevant as they succinctly capture the conundrums for India. Jobs have been created but the quality of jobs is not optimum, and do not provide the kind of income to generate demand required for keeping growth ticking. Similarly, the point on exports is also spoken of by Martin Wolf, who strongly puts forth the argument that no country can grow without exports being one of the engines. Therefore, taking the stance that India is a domestic economy that insulates us from global disturbances works to an extent but is not tenable if we are talking of high sustained growth in the years to come. In fact, this may be the right time to leverage the China plus one situation where India can step in and seize the opportunity.

Michael Patra’s essay on monetary policy challenges is another excellent piece written by someone who has been part of the process of implementing inflation targeting policy for many years. He shows how different our approach was compared with other countries in a time of crisis. First, liquidity easing was temporary which meant that rolling back was never a challenge as it was gently brought to normal. This is unlike other central banks which are still grappling with the issue of rolling back on quantitative easing used post-Lehman. Second, he also points out that by not lowering the policy rate to the levels done in the West (we had stopped at 4%), it was again easier to move up the ladder to a normal level. More importantly, he highlights how there is effective collaboration between the government and the central bank, making policy implementation smoother.

From Agriculture to Global Trade: A Wide-Angle View

AK Bhattacharya’s essay is quite direct in its critique of reforms. He captures all major reforms since 1991 till contemporary times, but highlights the importance of taking states along when it comes to furthering them. This can be contrasted with Patra’s view on the government and RBI being aligned which made policy formulation successful. The initial reforms are easier to implement, but when it comes to ticklish issues like farm laws or even land reforms, a majority government at the Centre still has to work with states to get them through. This is a major lesson learnt that has to be kept in mind. He also talks of success of the GST, attributing it mainly to the collaborative rather than unilateral approach of the government.

In a similar vein, Mahendra Dev writes on priorities for agriculture and argues for better coordination between the Centre and states, given that this field in the purview of the latter. While the nation has done well in terms of output, we do need reforms to improve total factor productivity with aggressive reforms in marketing. Subsidies can only help in the short run, but agriculture cannot sustain in this manner. Here he emphasises the greater use of technology, as well as investment, to elevate the overall quality of this sector. He goes a step further and recommends that MSP be replaced with direct benefit transfers so that there is better alignment with the market forces.

There are interesting essays by Radhika Kapoor on SMEs and their contribution to economic growth given the fact that they are highly labour-intensive. Rakesh Mohan writes on urbanisation and the challenges that lie here, especially in the area of how cities have to manage climate change. This is something that we can relate to as we see constant flooding in some of the metro cities as well as pollution in the capital.

At the global level, Ajay Chhibber discusses the relevance and role of multilateral institutions that were set up under Bretton Woods, while Shyam Saran picks up the issue of participating in China-led financial initiatives, given that it has made progress, though limited, when it comes to creating a parallel payments system in the regional context. At a broader level, Amita Batra talks of how the WTO stands with limited progress being made, as bilateral contracts have caught on along with preferential trade agreements among countries.

This book has an eclectic mix of both global and domestic subjects and offers the right blend of thoughts in a globalised setting that have to be considered when charting out the path of growth for the Indian economy. This will surely be a book on every policy maker’s shelf.

Madan Sabnavis is chief economist, Bank of Baroda.

Disclaimer: Views expressed are personal and do not reflect the official position or policy of FinancialExpress.com. Reproducing this content without permission is prohibited.

A World in Flux: India’s Economic Priorities

Edited by Amita Batra and AK Bhattacharya

Rupa Publications

Pp 448, Rs 795

_{Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.}