Book Review | Policies that leverage behavioural economics can effect positive change

The myriad challenges notwithstanding, in its post-Independence history, the economy of India has seen improvements across many parameters — life expectancy, primary education, sanitation and healthcare, poverty reduction, and the rate of economic growth. The trajectory of progress, though sustained, has not been spectacular, so that in the eyes of most experts, its performance can be dubbed as “good but not good enough”, especially when compared to the East Asian Tigers and China. The glorious dreams of India are yet to be realised.  Why could the country not achieve more? To what extent has the politics of the government impeded economic progress, over time? What aspects of development need immediate attention? What possible futures can be imagined, at this juncture?

These and other associated questions form the kernel of India in Search of Glory: Political Calculus and Economy, the new book by Ashok K. Lahiri, academic, author and politician, a member of the West Bengal Legislative Assembly from Balurghat, also a member of the Fifteenth Finance Commission, and former chief economic adviser to the Government of India.

A Novel Perspective

There have been notable books about post-Independence India, but in them the narrative has been viewed almost exclusively through the prism or either politics or economics — seldom the two together. From Lahiri’s viewpoint, however, the calculus of politics in the course of the past seven decades in India and that of its economy are inextricably linked together. Formidable and meticulous in its research; deep, objective and rich in analytical detail; and wide-ranging in its criticism and conclusions — this scholarly and yet accessible tome is a compelling read.

Lahiri divides his narrative into three parts. Following an expository introduction, Part I deals with challenges confronting the newly independent country and the manner in which they were addressed during the Nehruvian period (1947-64). Part II focuses on the 27 years post-Nehru (1964–1991) when, with the transformation of society in the Nehruvian period, there was an upsurge in popular participation, a period when, rather than being led by the State, society started leading the State. The third and final Part concerns itself with the period from 1991 to 2019, when the balance between the State and society had been restored.

Across all three parts of the book, the abiding theme is how the politics of the day impacted the quantum, shape and pace of economic reforms and policies. In particular, the account shows how the tenor of the economic reforms and initiatives has undergone a shift, from being a top-down, unilateral government mandate to a more collaborative venture.

Unpeeling Popular Perceptions

One of the important tasks the book accomplishes is the systematic dismantling of various myths that tend to divide post-Independence history into neatly compartmentalised, monolithic, periods. Lahiri unpeels such perceptions to reveal the nuances. For instance, the entire Nehruvian period is seen as one where India followed a purely socialist model of development, as envisaged by Jawaharlal Nehru and executed by his chief architect, the renowned statistician, Prasanta Mahalonobis. The book shows how at different points, there were criticisms of this policy within the Congress high command and how the US deputed Chicago University economist and future Nobel laureate, Milton Friedman, to advise India on a less State-run, flexible economy, views that went unheeded.

Another case in point is the spate of corruption and scandal that have dogged real progress and undermined the reputation of successive governments. Debunking the received wisdom that corruption in India’s economic history is a relatively recent phenomenon, Lahiri points out several instances of corruption through the 1950s and 1960s.

In demonstrating that the specific journey of India’s economy has been a function of conscious decisions made by national leaders, as much as it is informed by geopolitics and international events, Lahiri clearly lays retrospective responsibility at the feet of previous governments.

Analytical Excursions

At various points in the book, Lahiri takes the reader on excursions. For the most part, these are bounded within separate boxes, allowing the reader to sidestep them, without losing the thread of the narrative. But there is a definite reason for their inclusion. The excursions come in two parts, the first being historical accounts of economic undertakings by the Indian government. To take an example, a century-long history of oil exploration in India, with at best meagre results, by itself, may be construed to be of purely academic interest. However, when pitted against the specific context of Middle East crises and international oil shortage shocks, leading to a devaluation of the Indian Rupee and heavy financial borrowing from organisations such as the IMF, one is able to analyze the situation in the new, sharper light of burdensome constraints, evanescing options and gnawing fiscal helplessness.

The second set of academic excursions takes the form of mathematical models and formulations, such as we are more accustomed to seeing in public policy papers and recommendations. A key example of this is the exposition of Esteban and Ray’s index of polarisation, and its special case extension by Montalvo and Reynal-Querol — which provide a summary measure of the intensity of the intra-group identification and inter-group alienation with all the known desirable and reasonable properties. There is a similar presentation with regard to fractionalisation within the polity. These enable the more academically-minded reader to connect economic initiatives and reforms to their underlying mathematical constructs, underscoring the importance of the latter while formulating policies.

But there is a certain pattern at work with regard to these formulations. This reviewer senses that it is no coincidence that the mathematical expositions focus distinctly on such measures as those of fractionalisation and polarisation. Both deal directly with issues that are human-centric, cultural or communal in origin, as opposed to the purely economic. Over and above government policies that leverage the exchange rate, interest rates or tax rates, for instance, Lahiri seems to be drawing our attention to the fact that an equally deep impact can be effected through initiatives relying on behavioural economics, to change beliefs, values, attitudes and habits of cohorts of the population.

The Path Ahead

One of the main conclusions that Lahiri arrives at is that perhaps nothing except an assimilative democracy could have worked in effectively dealing with the fissiparous tendencies that, like in many other large countries, cropped up in India. At the same time, in unpeeling the deeper issues underlying sluggish progress or setbacks, the book also underscores the quantum of work that remains to be done on these fronts, the roadmap for which has not been covered in this present volume. For instance, to return to the matter of reducing polarisation, Lahiri states: “The ways of reducing it, for example checking the criminalisation of politics, and improving the efficiency of the law-and-order machinery, particularly in urban areas most susceptible to religious riots, is beyond the scope of this book.”

If Lahiri is to pen an account that describes India’s Path To Glory, detailing how specific goals may be empirically achieved within a definite timeframe, that would make for a worthy companion volume.

India in Search of Glory: Political Calculus and Economy

By Ashok K. Lahiri

Penguin Business

pp. 712; Rs 1,499