India’s Long Road by Vijay Joshi ; Published by Penguin –Allen Lane   ; Pages 421   ; Price Rs.699/-

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The quondam Governor of R B I, Dr.Bimal Jalan has called this book “..truly extraordinary. A comprehensive and in-depth survey of India’s long-term potential and what needs to be done to achieve it.” The author  Vijay Joshi is  Emeritus Professor at the University of Oxford. He was  Officer on Special Duty in India’s Ministry of Finance, the Director of J. P. Morgan’s Indian Investment Trust, an adviser to the Governor of the Reserve Bank of India, and a consultant to international organizations including the World Bank and the OECD.

According to him “ Since around 1980 and especially after the economic reforms of 1991, India has been among the fastest growing countries of the world…There is now a tendency to think of India  as an ‘Uncaged tiger’ that will leap ahead to overtake both the  U S A and China.

After this euphoria, he points out that the background of its success is fragile. An ambitious goal for the country would be to become a prosperous country by 2040. If India were to maintain 7 per cent a year per capita growth till 2040, it would mean India will become a high  income country.

Joshi  argues that the foundations of rapid, durable and inclusive economic growth in India are distinctly shaky. He presents  a deep  analysis of the country’s recent faltering performance, set against the backdrop of its political economy and charts the course it should follow to achieve widely shared prosperity.

For India to realize its huge potential, the relation among the state, the market and the private sector must be deliberately recast. Enhanced  liberalization is essential. The State must undertake  efficiently several  core tasks that is rightly theirs. He recommends a  model  that incorporates  a fiscally affordable scheme that provides a regular ‘basic income’ for all citizens that would result in banishing extreme  poverty.

  Joshi writes about  low total factor productivity levels,  besides usual factors such as labour and capital. He argues for  inclusive growth and is critical of what has happened so far in this area, blaming state failure in finding a solution in giving free power, food, money and water, and never working seriously on improving the quality of education and health, the two essentials for any sustainable development model. 

According to the economist  India will be hard put to  achieve high quality and enduring per capita 8 per cent growth for the next 3 or 4 decades in   case “business as usual” approach is followed. Radical reforms alone on the lines recommended  by Joshi can put fire in the belly of the economy.  He does emphasise  that superfast growth phases are typically quite short.

He is highly critical of  PSUs, which have been   a major burden for the exchequer. While we have reduced the number of families dependent on agriculture, we have not made it resilient or created an alternative that is long-lasting, resulting in  lopsided structures.

Joshi  has highlighted  seven areas requiring  reforms .

First is macro-economic stability. Inflation has come down and we appear to be on the right path. According to him  the R B I should follow a ‘managed float of the rupee’ and not let it appreciate, as it affects exports. He analyses efforts  to improve  investment in terms of  business and  links it with  NPAs and how it has affected  flow of funds. He is critical of the progress made in the area of  fiscal reforms. There have been benefits of low oil prices that have been leveraged well by the government. However, the subsidy levels have not been lowered. Fertiliser and food subsidies have not been lowered--- courage has not been shown in lowering the quantum. In the areas of markets, ownership and regulation he is critical of  the government on the PSU front and has  pointed out that progress is lagging in infrastructure, environment and agriculture. He approves what  government has done on the external side as also  for FDI. He is for more  liberalisation. The sixth reform is in the area of social development.  Aadhaar and cash transfers have been successful. A lot remains to  be done in education and health. The last reform pertains to the State where corruption has to be addressed to make doing business easier. 

Manmohan Singh  took few steps on the lines of the recommendations in the book. For instance  the rupee was allowed to rise again above its real effective exchange rate between 2010 and 2013. The Goods and Services Tax legislation to make India one market could not be passed. There was no reform of state electricity boards (SEBs) or distortionary subsidies. No substantive steps were taken to dismantle the monopolies engendered by the Agricultural Produce Marketing Committees. Land acquisition legislation became even more complicated .

Overall, the Mody government’s economic performance has been mixed at best. It has successfully stabilized the economy and moved firmly in the direction of inflation targeting. But it has not been able to reignite private investment in the face of the inherited debt overhang, and thereby return the economy to rapid growth.

The book has two valuable appendices on ‘Inflation Targeting’ and  ‘Estimate of the Cost of Providing a ‘Basic Income’. A 20 page bibliography will prove very useful for the readers  for further studies.

 P.P.Ramachandran.

30 / 10 / 2016