Skip to main content

Industry in India "barely growing", export growth 0%, whither moral anchors?

Prof Kaushik Basu (middle) with Kumaramangalam Birla, Errol D'Souza 
Counterview Desk
In a sharp critique of the Modi government, the Indian Institute of Management-Ahmedabad (IIM-A), one of world renowned economist Prof Kaushik Basu, who is Professor of Economics and Carl Marks Professor of International Studies at Cornell University, has told students at the IIM-A’s 54th Annual Convocation on March 16, 2019 that they have a “special responsibility” on their shoulders, “the responsibility to reject narrow sectarianism, uphold scientific thinking, openness to new ideas, and freedom of speech.”
Without naming Modi, Prof Basu regretted, under him professionalism and morality in managing the economy are taking backseat, leading to such decisions as demonetization and manipulation of economic growth data. In sharp contrast, he praised former Prime Minister Manmohan Singh for showing extraordinary degree of professionalism in revamping the economy in 1991.
Recalling his years of working as chief economic adviser under Dr Singh post-2009, Prof Basu -- flanked by IIM-A director Prof Errol D’Souza, and Kamaramangalam Birla, IIM-A chairman, who called him "one of India’s most illustrious economists" -- said, India was then known for its “quality and integrity of its statistical system” among World Bank circles as also top economists like Nobel laureate Angus Deaton – something it may lose now.

Excerpts:

I have, over the years, become convinced that reasoning is the most under-utilized of human faculties. Read some of the discussions and commentary on social media, and listen to television debates, and you will wonder where reason has vanished. This is a telling commentary on education and explains why we make so many policy mistakes.
Within economics game theory illustrates the power of good reasoning. One important axiom of game theory asserts: It is not good enough to be rational yourself. You must recognize that others are likely to be rational too and take that into account.
Policy mistakes, such as the demonetization, which has hurt India’s growth, would not have occurred if there were policymakers that paid heed to this simple axiom. For every policy, you have to anticipate how ordinary individuals and also bureaucrats will respond. That is the key to designing successful policy mechanisms.
How good, professional reasoning is critical for good policymaking is illustrated well with India’s foreign exchange reserve story. For more than 20 years, till 1991, India’s foreign exchange reserves used to be roughly 5 billion dollars. The years 1991 to 1993 India saw some of the most far-reaching and well-designed reforms ever undertaken.
Those were the reforms that changed India’s growth story. One of the policy changes pertains to foreign exchange reserves. For a long time, the government’s belief was that since we have so little foreign exchange, we must not let people take foreign exchange out of the country. What this missed out on was not realizing that if you don’t allow people to take foreign exchange out, they will not bring foreign exchange in.
This logic led to the conclusion that you have to make it easier for people to take foreign exchange out of the country to increase the amount of foreign exchange in the country. This was part of the policy reform package of 1991-93. The benefit was magical. The foreign exchange reserve which used to be roughly 5 billion dollars for 20 years, rose in the next 20 years to nearly 300 billion dollars. It was professionalism with fine reasoning that led to this huge success.
Traditional economics talks a lot about profit-motive and individual rationality. What is often forgotten but is actually as important for a society’s long run success is morality. Morals and trust provide the nuts and bolts of society. Without those you can get short run success but not long-run development.
In 2009, when I was Chairman of Cornell’s Department of Economics, and taking a vacation in India, I got an unexpected phone call from the Prime Minister’s office. The caller, a Joint Secretary, quickly got to the point. Dr Manmohan Singh wanted to know if I would consider being the Chief Economic Adviser to his government.
The following day, after I met Dr Manmohan Singh and had a wonderful meeting, I made a vow. I told myself that, since my life till then had been one of pure indulgence, that of the joys of research, if I were to wean myself away from that, I must do so with only one purpose, that of serving society. That is what I tried to do during the 7 years I worked as a policymaker – 3 years with the Indian Government and 4 with the World Bank. Looking back, I feel better.
In the rough and tumble of everyday life, in trying to be successful at any cost, many people push aside all morality. We see this among politicians, who try to win elections at all cost; we see this among business persons, who try to earn more profit at all cost. This is the cause of many of society’s woes. Indeed, for long-run success of a society, it is essential to have these moral anchors.
Let me briefly turn to India’s economy to illustrate some of these arguments. There are unmistakable signs of India’s economy slowing down over the last few years. The latest data on industrial growth, pertaining to January 2019, shows that India’s industry is barely growing, with the growth rate down to 1.7%.In the year 2017-18 India’s exports were a little less than what the country exported in 2013-14, which means virtually 0% growth in exports on average for 4 years, which has rarely happened in the past.
What is happening to overall growth? The official data shows that GDP growth in the last quarter has gone down. And there are analysts, such as Arun Kumar, in Caravan magazine, arguing that growth is even lower because the unorganized sector for which we do not have proper data shows signs of a massive slowdown.
Further, the agricultural sector is in recession, and the farmers feel neglected. The most worrying is the jobs situation. If you put together all the piecemeal data coming in, it is clear that our workers are suffering greatly, with unemployment rate at over 7%, according to the Center for Monitoring the Indian Economy, and youth unemployment at 16%, as per a study by Azim Premji University. It is unfortunate that data on unemployment are being held back.
The concern about this, expressed recently by 108 leading economists, is a genuine concern. When I was Chief Economist of the World Bank, it was always good to see that India stood out, not just among emerging economies but all countries, for the quality and integrity of its statistical system.
The Nobel prize-winner, Angus Deaton, in an article with Valerie Kozel in 2005, gave India tribute for its pioneering statistical work. He mentioned how India’s “NSSO surveys, pioneered by Mahalanobis in the 1940s and 1950s, were the world’s first … household surveys to apply the principles of random sampling.” We must take care not to damage this reputation. None of all this is necessary. India’s fundamentals are strong and we should be doing much better.
The two reasons why this is happening are a shortage of professionalism and a disproportionate focus on big businesses and their interests. The first pertains to reason and the second to morals. Professionalism means policymaking based on data and reasoning. The economy is too complex to be handled by hunch and gut feeling. Passion is important but you cannot have exports booming, jobs being created by passion alone. Expertise and professionalism are critical.
Make no mistake. Business and enterprise are important. Big business is also a fact of today’s world and technology. But in trying to nurture business and enterprise we must not neglect the poor and the unorganized sector. India is still largely an agricultural nation and it is sad to see this major sector suffering.
India’s is a remarkable history. Around the time that we got independence, several nations – in Asia, in Africa, in the Americas – also gained independence. Many of these nations wanted to be open and democratic. It is an amazing fact of history that the only new nation from that time that has managed to hold on to democracy, secularism, and free speech, for all this time, is India.
We were lucky to have open-minded founding fathers, like Gandhi and Nehru, and thinkers with global humanity, like Tagore. They had their own struggles but in the end they strove to build a nation that was open to all religions, all races and tried to banish divisions of caste and gender.
Did India do right by holding on to democracy, secularism, free speech and quality higher education so early? I do not have a definite answer. But I do know that nations like the United States by holding onto these qualities did phenomenally well in the long-run. In the early 20th century, Argentina and United States stood neck to neck in terms of economic status.
My point is simple, whether or not the early investment in democracy, secularism, free speech and higher education was right, having made these investments, we must not fall into the trap of narrow-minded group identities, and begin to imitate nations that do not value these qualities, and make ourselves in the image of those nations.
On February 8, 1994, on the occasion of receiving the Indira Gandhi Prize, Vaclav Havel, Czechoslovakia’s great revolutionary and, later, president, spoke about his admiration for India and its founding fathers. And how India’s victory “was a great victory for the ideas of nonviolence, tolerance, coexistence, and understanding.”
He went on say, “I am convinced that the creation of multicultural civilization I have talked about, the creation of conditions based on mutual respect and tolerance of different cultures … will always find one of the important sources of its vitality in Gandhi’s work.”
India commands a huge global respect for its polity of openness and tolerance. There are forces at work in the country that want to destroy this and make us in the image of failed nations.
---
To eead full speech click HERE

Comments

TRENDING

Mallika Sarabhai releases speech she was 'not allowed' to give at NID Convocation on Feb 7

Counterview Desk
The National Institute of Design (NID) in Ahmedabad, a Ministry of Commerce and Industry body, landed itself in controversy following its decision to put off its 40th convocation ceremony, where noted danseuse Mallika Sarabhai was invited as chief guest. The ceremony was scheduled to be held on February 7.

Modi, Shah 'forget': Gandhi’s first Satyagraha was against citizenship law of South Africa

By Nachiketa Desai*
Hindu fanatic Nathuram Godse assassinated Mahatma Gandhi once on January 30, 1948 but his followers raising the war cry of ‘Jai Sriram’ are killing the Mahatma every day. In his home state of Gujarat, Gandhiji was killed a thousand times in 2002 when over 2,000 Muslims were butchered, their women raped, homes and shops plundered and set on fire and even unborn babies ripped out of the wombs of their mothers.

As corona virus 'travels' to rural areas, NGO begins training tribals, marginalised women

By Souparno Chatterjee*
The World Health Organization (WHO) has declared corona virus a pandemic. Originating from Wuhan in China, it has traversed the entire globe, almost, and claimed more than 16,000 lives already. That’s largely the urban population. In India, despite all the preparedness and war-like promptness to safeguard against the pandemic, several lives have been lost , and hundreds of individuals have tested positive.

Rani Laxmi Bai, Tatya Tope 'martyred' by East India Company, Scindia's forefathers

By Our Representative
In an email alert to Counterview, well-known political scientist Shamsul Islam has said that was “shameful for any political party in democratic India to keep children of Sindhias in their flock” given their role during the First War of Indian Independence (1857). In a direct commentary on Madhya Pradesh Congress leader Jyotiraditya Scindia moving over to BJP, Prof Islam has quote from a British gazetteer to prove his point.

COVID-19: Dalit rights bodies regret, no relief plan yet for SCs, STs, marginalized

By Our Representative
In a letter to Prime Minister Narendra Modi, the National Dalit Watch-National Campaign on Dalit Human Rights, endorsed* by several other Dalit rights organizations, have insisted, the Government of India should particular care of the scheduled castes and tribes, trans folks, persons with disabilities and the women and children from these communities, while fighting against COVID-19 pandemic.

Big 'danger' of NPR: A babu can tag anyone as doubtful citizen, Jharkhand meet told

' By Our Representative
People in large numbers from across Jharkhand gathered at the Raj Bhawan in Ranchi to demand that the Hemant Soren government reject National Population Register (NPR) and stop all NPR-related activities. The people’s organisations which participated in the dharna under the banner of the Jharkhand Janadhikar Mahasabha (JMM) resolved to intensify their struggle, insisting, NPR is not a Hindu-Muslim issue but is essentially anti-poor.

Coronavirus scare ‘pushing’ people from Northeast India into more hardship

By Rishiraj Sinha, Biswanath Sinha*
“No one is born hating another person because of the colour of his skin, or his background or his religion. People learn to hate, and if they can learn to hate, they can be taught to love, for love comes more naturally to the human heart than its opposite.” – Nelson Mandela
***

Gujarat govt plan to 'banish' Gandhian activist anti-democratic, unconstitutional

By Rohit Prajapati*
The current Central and Gujarat governments, and their bureaucracy, have been and are still unable to answer and address the concerns raised, with facts, figures, and constitutional provisions, regarding the terror of tourism in the name of the Statue of Unity and tourism projects surrounding it.

Haridwar Swamis lead Khudai Khidmatgar peace march in Delhi 'riot affected' areas

By Our Representative
A Khudai Kidmatgar team, which visited the riot-affected regions along with Swami Shivanand Saraswati and Swami Punyanand, has insisted that India's true heritage is the lesson of ‘vasudhaiv kutumbakam', and it is the responsibility of all to carry froward this legacy. Originally founded by Khan Abdul Ghaffar Khan in 1930, also known as Frontier Gandhi, Khudai Khidmatgar is claimed to have been revived by young Gandhian activist Faisal Khan in 2011.