The challenge for policy makers in India is how to be creative about our own problems given our strengths.
Pulapre Balakrishnan has written a very readable and insightful version of the story of India’s growth and development since independence from British colonial rule. Although this story has been told many times, The Indian Economy from Nehru to Modi: A Brief History, Balakrishnan brings coherence and freshness to his narrative. The book manages to convey relatively complex economic ideas in an accessible language and provides data to support all the arguments.
He brings many years of experience in in-depth analysis of macroeconomic trends to his version of India’s post-independence economic history. The story is divided into four parts: the Nehruvian period, the period from the mid-1960s to the late 1980s (which he calls the “pivotal years”), the early post-reforms period, and the most recent period. covering the Modi years. But the book is certainly not simply a chronicle of historical facts about India’s economy. A macroeconomic framework holds the account together and there are many theoretical ideas.
A particularly refreshing aspect of the book is that it tries to steer clear of the well-worn ideological battles that have been waged between what economist Joseph Schumpeter has called “pre-analytical visions” – the ideological apparatus that shapes our thinking before embarking on any empirical or theoretical analysis. If it is impossible to free oneself completely from it, good scholarship consists in being self-reflective on one’s own pre-analytical vision. The author of this volume complains of the lack of this quality in Indian economists, observing aggressively that “an ideological predilection for the workings of the economy has been a constant among Indian economists, reducing their effectiveness in finding solutions “.
The challenge for policymakers in India is how to be creative about our own problems given our strengths, and not be, in Balakrishnan’s words, “derived” or slaves to fads coming from the rich countries. (like the infamous budget deficit target of 3% of GDP). This requires not only knowledge of Indian economic reality, but also the courage to think independently. The present volume is an excellent example of the latter, where arguments from both the supply and demand sides are brought in as needed, and where care is taken not to demonize either the private or the public sector. , but rather to reflect on the role of each.
Public and private partnership
For example, when discussing the role of the green revolution in lifting India out of the crisis of the mid-1960s, Balakrishnan alludes to the importance of adopting a demand-side perspective. He notes that the growth of agriculture has supported the growth of the whole economy. Although the prices of agricultural products did not fall relative to those of non-agricultural products, there was still a stimulating effect on growth which operated through the demand channel by increasing farmers’ incomes, enabling them to increase their consumption and investment spending.
Balakrishnan’s focus on demand also leads him to draw our attention to an important link between income distribution and jobless growth. Drawing on the work on inequality in India by Thomas Piketty and his colleagues, he notes that the wealthy are more likely to spend on high-end services than on basic manufactured goods, while it is the latter whose production creates more jobs. Thus, an increase in inequality can reduce the demand for manufactured goods, thereby reducing job creation.
For those interested in the performance of the economy in the Modi years, the penultimate chapter (“Momentum Lost”) explains why the economy faltered and what the links are to the policies of the UPA years.
In closing, I note that students will benefit immensely from reading this text and I would recommend college professors who teach courses on Indian economics to include it in their curriculum.
The Indian Economy from Nehru to Modi: A Brief History; Pulapre Balakrishnan, Permanent Black in Association with Ashoka University, ₹895.
The examiner teaches economics at Azim Premji University.