RESET: Regaining India’s Economic Legacy by Subramanian SwamyMy rating: 4 of 5 stars
Introduction: There are few books that attempt to talk about Indian Economics and establish its links with the decisions made during the pre and post-independence era. Subramanian Swamy doesn’t shy away from recounting numerous key incidents during the course of history that had a long lasting impact on the Indian psyche and economic decision making. The following, I thought, are some of the key highlights of the book
1. Comparison between pre and post-independence India with China in aspects such as Per capita Income, Acreage, cop yields, irrigation,literacy etc using data to highlights similarity and differences is remarkable.Few have ever tried to juxtapose the two Asian giants together in a manner done by Swamy
2. Dismantling the so called Nehruvian Economic Model (Inspired by the Soviet Model of Rapid Industrialization: Proposed by PC Mahalanobis and originally create by Feldman).Most of the problems India has today are a direct consequences of the 5 year Economic Planning called Command Economy. State beliefs about squeezing the Agriculture to produce capital goods spelled doom on the Economy.The only good that came out of the Planning was that we got surplus in Agriculture(The so called Green Revolution the plan for which was proposed by Late Prime Minister Lal Bahadur Shastri)
3. Considering 1980-1990 as the worst time for India as it produced a precarious situation for us. It led to balance of payment crisis, depleted most of the foreign reserves (only few weeks were left before day 0), charred image in International Market of an uncompetitive economy and so on. Provided both Indira and Rajiv got majority in Parliament, it speaks volume about how erroneous the Soviet Planning model was
4. Post 1991 period where Liberalisation freed up avenues of growth for India. Structural changes in the policies related to cancellation of License Raj, easing up of State Control, Public Private partnership to name of few. All this accelerated growth and put India back on track. The main aim was to strengthen agriculture (which absorbs most of the workforce) and remove poverty altogether.For this to happen, it was proposed that the Indian economy grow at around 10% for the decade (1990-2000)
5. The reforms, though revolutionary, had made the political parties wary of the fact that it was against the popular sentiments. From the end of 90's till about early 2000's each government from Rao's to Atalji made conscious efforts to dilute the reforms. All the momentum that was gathered during Rao's term eventually fizzled out
6. Since the independence, India has always relied on Agriculture to push growth and absorb its surplus workforce. On the contrary,with each successive Plan, resource allocation to agriculture was reduced despite it being the top contributor to GDP. The resources were diverted to the Public sector which generated very little profit. The only thing that kept the Indian economy on its feed during the 80's and 90's is the Service Sector. It was second to only agriculture in contribution to GDP
7. Modi Years: Lessons learnt and Future Vision:The current economic situation is challenging on two fronts: Weak Private consumption and hurtling investment rate.All this started in 2014 but deteriorated during the demonetization and GST phases. Most impacted were the MSME and agriculture sectors.Lack of economic know how in the cabinet ministers mean a lot of swadeshi brandishing without concrete actions. The goals and the means to accomplish the 5 trillion economy were conspicuous by their absence from the recent Budget speech made by the Finance minister. The turnaround can still be achieved if we give enough incentives to increase household savings (increasing the fixed deposit rates) and ease out liquidity to the MSME. Also it is very important to sustain a GDP growth rate of 10% for the next decade if India has to eliminate poverty and unemployment and become a developed country
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