How to really wake the Indian tiger

India in the Era of Economic Reforms
September 29, 2000

The 21st century could be the Asian century. In Asia, India could be enormously influential. Yet a great deal of effort is required to give India the confidence that comes with economic progress. A generation was wasted because of dysfunctional policies, and the hope is that the reforms that have been in situ for almost a decade will lift the economy up by the bootstraps. Have they so far? Will they in the future? What issues need to be tackled next? These are the broad questions that this edited volume seeks to answer.

The chapters, mostly prepared for a Harvard University conference, cover several themes and differ widely in quality. The introductory chapter by Jeffrey Sachs, Ashutosh Varshney and Nirupam Bajpai will be useful for anyone seeking a bird's-eye view of India's reforms. The chapter by Montek Singh Ahluwalia, appraising the reforms, is simultaneously self-congratulatory and apologetic. Ahluwalia was finance secretary during the critical years and is full of praise for the improvement in economic parameters. Shortfalls are because of exogenous conditions. Yet, the Indian economy is one of the least competitive in the world. A chapter on fiscal reforms by Bajpai and Sachs is full of data but light on new knowledge. Conclusions echo those made by other, better-informed specialists. The book includes a conceptually strong chapter on the agriculture sector (Ashok Kotwal and Bharat Ramaswami), a very weak chapter on labour (Roberto Zagha), a marvellous, empirically strong chapter on the software, diamond and garment industries (Pankaj Ghemawat and Murali Patibandla), an ingeniously argued chapter on mass politics (Varshney) and an irrelevant chapter on regional politics (Myron Weiner). These chapters give the reader a much-needed broader view of the Indian political-economic space.

The book is a useful adjunct to our knowledge base of contemporary India. It is a book of the elite by the elite for the elite, to borrow a word that one of the editors (Varshney) uses often. Barring two chapters (Kotwal and Ramaswami, and Ghema-wat and Patibandla), scant attention is paid to micro and micro-micro-level issues. India's reforms have primarily been in industry, trade and investment policies. These are areas where changes can be carried out by a small group of technically knowledgeable persons. The process of undertaking reforms is really quite simple because policy changes can be made in a few proclamations. The questions that are not addressed are: how does one energise the mass that is the market? what are the steps involved in taking India's per capita gross domestic product from $400 to $40,000? Indians save a lot; but how can these savings be put to productive use? How is employment created in the organised sector?

Addressing these questions requires that attention be paid to the harder aspects of reforms, at the organisational and managerial levels. At the first level, whether organisations are in the private or state sector, issues of energising collective action and creating positive externalities are important. At the second level, issues of incentive design, performance monitoring and accountability are key. Sectorally, the health and education sectors cry out for attention. The output of these sectors has a direct impact on the wellbeing, capabilities and employability of individuals, who, with the right conditions, could earn the $40,000 a year that would spell the arrival of India in the global league table. Much hard work remains to be done. But it will be worth it.

Sumit K. Majumdar is professor of strategic management, Imperial College, London.

India in the Era of Economic Reforms

Editor - Jeffrey D. Sachs, Ashutosh Varshney and Nirupam Bajpal
ISBN - 0 19 564 8307 and 565 529
Publisher - Oxford University Press
Price - £19.50 and £10.99
Pages - 295

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