Quintessentially Kaushik

For those who’ve missed Kaushik Basu’s wry humour over the years, as Delhi School of Economics professor and for years as Indian Express columnist (Economic Graffiti is a must-read compilation of those columns), a new Kaushik book can only be good news.

Though Basu’s writing is restricted to the introductory chapter, apart from commissioning and then editing these papers presented at “The Indian Economy Conference” at Cornell University in April 2002, readers won’t be disappointed since he combines wit with as many insights as can possibly be squeezed into a chapter of 24 pages without sounding frivolous.

So, while arguing that India has “remained stubbornly rooted to the tarmac” in the past as well, Basu gets his contributors to bring in (this is important for those who generally tend to read economic tomes in isolation) the impact of history and society on economic development.

“To say that the cause of a nation’s overall stagnation lies in its culture or its collective beliefs,” he says in a deadpan manner, “does not mean to deny the importance of its economic policy, just as the assertion that the spilled fuel on the floor caused the fire does not exonerate the smouldering cigarette stub thrown carelessly into it.” Barbara Harriss-White, development studies professor at Oxford, adds another memorable line when she says, “rubbish marks the boundary between domestic and public space”.

Like any compendium on India, this one too has the usual insights on the havoc being wreaked by rising fiscal deficits and falling tax-GDP ratios, indeed by the usual suspects like M Govinda Rao of the National Institute of Public Finance and Policy and Pranab Bardhan of Berkeley. But even for those who’ve heard them before, some important messages bear repeating. The biggest contributor to deficits, Bardhan reminds readers, are the state electricity boards (SEBs), which, over the years, have yielded a minus 17 per cent return over the years. According to Rao, while the fixed assets of SEBs are Rs 68,000 crore, they had a loss of Rs 23,000 crore in 1999-00—in states like Andhra, that year’s loss was greater than the value of the SEB’s capital stock! While the SEB losses added up to 1.2 per cent of GDP in 2000-01, the SEBs owed 1.9 per cent of GDP to central public sector units (PSUs). SEB losses, interestingly, are half of what all states spend on education and three times the spending on water supply.

Bardhan makes another interesting political-economy point, namely, that while the fiscal problem largely lies in the states (where 55 per cent of government expenditure happens, to cite Rao’s statistic), regional political parties are increasingly calling the shots at the Centre, and so ensure they get more breathing space though discretionary central transfers and other methods.

Last year, for instance, the National Democratic Alliance government allowed a World Bank loan to Andhra Pradesh to go through but blocked one to the Congress-run Karnataka on the specious grounds that while Andhra had met its fiscal targets, Karnataka hadn’t—for one, it wasn’t true, and second, since the Bank didn’t have a problem, why did the government?

The book’s USP, however, is that the economics notwithstanding, the social context is very important—the argument is not quite as radical as the Biblical quote of how it’s easier for a camel to pass through the eye of a needle than it is for a rich man to enter the gates of Heaven, but has traces of that.

Basu, the book’s editor, sets the tone by using the Battle of Plassey as an idiom for what’s happened, and happening, in the country. Siraj-ud Daula, Basu tells us, had 20 times more soldiers than Robert Clive had in 1757 and more than five times as much weaponry, but within hours of the battle’s start, the Indian army was in disarray.

If a nation, Kaushik concludes from this, does not have the organisational ability to combine different types of knowledge and harness this, it’s just not going anywhere. This broad comment subsumes issues raised by Nicholas Stern, amongst others, of how the economy cannot develop if red-tape and poor infrastructure prevent firms from growing—firms in poor investment-climate states have 44 per cent less value-added per worker as compared to good-climate states.

Abhijit Banerjee, economics professor at MIT, has a very interesting paper on the how traditional caste equations, the kind of land-tenure systems (zamindari or raiyatwari), and whether the areas were the erstwhile princely states play a big role in the provision of services like education and health even today.

Non-zamindari areas, for instance, have better education and health—they have 50 per cent more primary schools and 100 per cent more primary health centres. Areas with a large SC/ST population fare poorly (something which Madhya Pradesh’s ex-CM Digvijay Singh will vouch for) as do those with a large Muslim population, and so on.

The book has informative chapters on the IT revolution (one of them is written by Infosys’s Narayana Murthy), and Nirvikar Singh of the University of California at Santa Cruz talks of the use of e-governance as a means to deliver better citizen-services.

Renana Jhabvala has a warm story on how the Self-Employed Women’s Association of Ahmedabad has helped women cope with globalisation and changes that disenfranchise women most.

But how does this rapidly changing modern India jell with caste-based and other factors (like bankrupt states and poor governance) that inhibit development? Does one overcome the other, do schedule tribe areas never converge to the mean, as Banerjee says, or do they converge (as Surjit Bhalla claims they do in the case of education). Where India is 50 years from now will give you the answer.