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India on the Growth Turnpike: Essays in Honour
of Vijay L. Kelkar THIS volume commemorates the conferring of the Skoch Challenger Lifetime Achievement Award-2010 on Dr Vijay L. Kelkar for his unique contributions to the Indian economy in general and his key role in the financial system reforms in particular.
The book has 12 essays contributed by eminent scholars who worked with Kelkar. Arvind Panagariya undertakes a detailed investigation of growth in different states of India to throw light on his hypothesis of India’s awaiting transition to a double-digit growth. He narrates an impressive story wherein growth momentum has now penetrated all larger states, which together account for 93 per cent of India’s population. Even some of the poorest states have shown highest growth rates during 2003-2009. Rajasthan, Orissa and Bihar (among bottom six states) grew at an annual rate of 9.4, 9.4 and 8.4 per cent, respectively. The bottom six states have together grown at a rate of 7.1 per cent during 2003-2009 as compared to 3.8 per cent during 1981-88 and 4.0 per cent during 1988-2003. Likewise, on poverty front, all states have seen the rate of poverty decline between 1993-94 and 2004-05, though the next survey on poverty is expected to throw light on the real effect on poverty of this accelerated economic growth. Nitin Desai classifies India’s economic growth after Independence into six categories, namely the foundation years (1951-65, 4.1%), the crisis years (1965-70, 3.0%), the turbulence years (1970-1980, 2.9%), the transitional years (1980-1991, 5.6%), the reform years (1991-2003, 5.5%) and the high growth years (2003-2009, 8.8%). He narrates that if this momentum sustains and if India realises a growth rate of nine per cent for 15 years, there would clearly be a massive improvement in living standards with per capita incomes tripling. Indira Rajaraman argues how standards beamed at developing countries, for what constitutes transparent functioning and accountability in the conduct of monetary and regulatory policy, carry some components that are diagnostically defective and unsuited to the economic structures and political economy pressures found in these countries. S.S. Tarapore emphasises the need for consistency in fiscal policy (changing definition of fiscal deficit, examining impact and reorientation of fiscal deficit, public sector disinvestment, repayment of government loans, urgency for fiscal correction), monetary policy and external sector policies for achieving sustainable growth. Arvind Subramanian points at the need to focus on self-insurance after the financial crisis, including revisiting macro-economic policy, exchange rate management and capital account convertibility. Shah and Patnaik illustrate the need for re-examining and carefully redesigning the legal and institutional framework for fiscal and monetary policy so that the extent of business cycle fluctuations is reduced. Surjit S. Bhalla examines the likely impact of the proposed new direct tax code and strongly feels the efficacy of Laffer curve, a preposition which states that tax revenues will increase with a decline in tax rates. K. C. Chakrabarty feels that there is an urgent requirement of fastening the process of financial inclusion, bringing rural and underserved areas into the mainstream. This would have a number of positive externalities, leading to overall increased growth, equitable distribution, grassroots innovations and entrepreneurship. Bhandari and Kale point
out the need for widespread use of electronic payments towards
financial inclusion while Hari Sankaran’s essay attempts to provide
a public-private partnership perspective and narrates how India will
require a more holistic, integrated and strategic approach for next
phase of infrastructure development. The book makes interesting
reading and can be useful to economists, social
scientists and policy makers.
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Kelkar
since long has been a strong votary of the radical fiscal reforms
including increase in user charges, privatisation of non-strategic
public sector enterprises, including banking sector, promotion of
transparency and good governance, reduction of both short-term and
long-term real interest rates, and the strengthening of independent
bodies such as SEBI, CERC, TRAI, etc., and treating their independence
equivalent to judiciary. He also advocated flexibility of labour
market, competition in product markets and service sector, reforms in
laws of bankruptcy, corporate control and financial markets, creation
of social safety nets, replacing product-based subsidies, including
food subsidies by food stamps, and education vouchers for meeting the
needs of socially disadvantaged and weaker sections of society.