Monday, April 30, 2012

 On The Turnpike  by TCA Srinivasa-Raghavan; Published by Academic Foundation ; Pages 101; Price Rs 1500/-

                                       TCA Srinivasa-Raghavan is a well-known analyst whose columns have adorned several financial dalies. He had a role to play in Third volume of R B I History. The book under review is a “Coffee-Table book" brought out by the Finance Ministry on the occasion of the Indian Economic Service completing fifty years.One must say the Ministry of Finance has put no restraint on the author.

                                           The members of the I E S  have displayed professionalism, commitment to duty and intellectual incisiveness. They have ably translated abstract intellectual and theoretical ideas into practical policy alternatives.

                                            The  I E S was founded in 1961, at a time when India was attempting to enhance the development process and attain self-reliance. The service brought economic theory  closer  to practice.

                                          Dr.Bimal Jalan poses two problems for the I E S. One is to ensure delivery of services like the public distribution system, water availability, provision of electricity. Health services, etc. The second one is why India’s Human Development Index is among the lowest despite a growth of 8 to 9 per cent. He recommends I E S  for the states. 

                                             The book begins with the text of the note prepared by the  Secretariat seeking Cabinet approval to the constitution of an Economic and Statistical Services. The dissenting views of Prof.P.C.Mahanalobis is also covered. We learn why the two Services were not combined.

                                 Analysing budgets,the years  1947-1957 are accurately described as “The Age of Innocence”—when we had fiscal rectitude and  balanced budgets. The Finance Ministers were Shanmukham Chetty, John Mathai and C.D.Deshmukh.The next decade transformed India into a laboratory of economic experiments. The showcase was held up to the world with pride. The successor to Deshmukh was  T T Krishnamachari—TTK—acerbic, arrogant and brilliant. He was the father of the Industrial Policy Resolution of 1956, the founder of Development Financial Institutions such as IDBI and ICICI. A colourful description is given of  TTK’s guru  Nicholas Kaldor—a fiscal Robinhood strongly believing in redistribution. TTK was his Friar Tuck. Kaldor proposed Capital Gains Tax, Wealth Tax, Gift Tax and Expenditure Tax. TTK's budget created a storm of protest and he had to quit—thanks also to LIC  and  Mundhra.

                                          The next six budgets were presented by Morarji Desai—an able consolidator, rationalist and administrator.He reclassified the Budget making it a premier document adopting clear presentational methods. The early sixties saw India suffer ignominious defeat at the hands of the Chinese and the economy was in disarray. TTK  staged a come-back and tried to set the economy on a course which would encourage investment, raise savings, solve the balance of payments problem and in general restore confidence by reducing the rigours of brutal taxation.

                            In a space of twenty years India lost two Prime Ministers, fought two wars and grappled with a major drought.We had a 'Crisis Incarnate'.It was a 'Lost Decade'.Then came Indira Gandhi and a new dawn.

                                Historically the next defining period was 1970-1979.Morarji raised overall level of taxation, tightened import controls. The foundation was laid of the 'Quota-permit control Raj'. Indira who presented the budget used it as an instrument of politics. From 1970-1974 the economy turned sharply left. Indira set the tone as she presented the 1970 budget.

                The fiscal crisis of 1973--1974 acted as a damper on the redistribution zeal  of government. Y.B.Chavan presented a mini-budget aimed at eliminating inflation,cutting expenditure by direct and indirect means. The budgets of the emergency years revealed caution and good housekeeping. By 1979 thanks to high oil prices and inflation the good work of the previous five years was undone.

                     During the period 1980-1990 government pursued growth through heavy deficit financing ignoring structural reforms, By 1981 a huge loan was obtained from the I M F  which led to some stability.

                   The budget of Pranab Mukherjee--1982-1983 accelerated the pace of import substitution, increased exports and enlarged remittance facilities.Rajiv Gandhi gave impetus to growth, cut taxes, liberalised imports and eased rigours of industrial licensing. The huge drought of 1987 madeIndia to go in for large imports. India was obliged to mortgage its gold to the Bank of England and impose severe import  restrictions.

                                         The gradualist pace of reforms changed the rate of growth from 4 percent before the 1980s to 8 percent since 2004. Dr.Manmohan Singh devalued the rupee in two slabs of 16 and 6 per cent, slashed export subsidies and almost abolished industrial licensing. His liberalisation of trade and investment, financial sector reforms, privatisation made a real impact on the economy.The 2008 global financial crisis had no impact on India.

                                 This is an outstanding work both visually and intellectually. We have exquisite portraits in black and white--sure to evoke nostalgia in all of us. TCA Srinivas-Raghavan's capsule history is an achievement by itself. His racy chatty style adds to the charm of this remarkable volume.



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