Author: Jagdish Bhagwati and Arvind Panagariya
Jagdish Bhagwati and Arvind Panagriya are well respected professors of Economics at Columbia University. They make a strong case for emerging countries to make growth their #1 priority. They conduct a detailed analysis of India’s past economic policies and conclude that the growth agenda of the 90s is what transformed India and built the strong economy that is in place today.
In the years following India’s independence, Nehru adopted some aspects of socialism. However, it became a lot more prominent under Indira Gandhi's reign (1966 - 1977). She nationalized insurance, oil companies, coal mines and reduced foreign investment to 40% or less in individual firms. She limited the size of urban land holdings and extended government control over imports and exports of all major products. The result of all these measures was that the economy took a nosedive and per capita income rose 0.3 % annually during her tenure. As recent as 1991, India’s fiscal deficit was close to 8.5% of the GDP and its foreign reserves were barely $1 Billion, which would only pay for a few weeks of imports.
In 1991, P. V. Narasimha Rao became the ninth Prime Minister of independent India and appointed Manmohan Singh, a renowned economist as the Finance Minister. Together, they got rid of import licensing and opened up the country to foreign investment. Tariffs were streamlined and reduced. Private entry into airlines, telecom, banking, automobiles, etc were allowed. Reservation of large number of products for exclusive manufacturing in India was eliminated. In other words, they implemented policies to open up the economy and converted India from a socialistic economy into a capitalistic one.
The book has plenty of anecdotes that underscore the author’s points, but is not very engaging. The book has loads of useful stats on India:
Jagdish Bhagwati and Arvind Panagriya are well respected professors of Economics at Columbia University. They make a strong case for emerging countries to make growth their #1 priority. They conduct a detailed analysis of India’s past economic policies and conclude that the growth agenda of the 90s is what transformed India and built the strong economy that is in place today.
In the years following India’s independence, Nehru adopted some aspects of socialism. However, it became a lot more prominent under Indira Gandhi's reign (1966 - 1977). She nationalized insurance, oil companies, coal mines and reduced foreign investment to 40% or less in individual firms. She limited the size of urban land holdings and extended government control over imports and exports of all major products. The result of all these measures was that the economy took a nosedive and per capita income rose 0.3 % annually during her tenure. As recent as 1991, India’s fiscal deficit was close to 8.5% of the GDP and its foreign reserves were barely $1 Billion, which would only pay for a few weeks of imports.
In 1991, P. V. Narasimha Rao became the ninth Prime Minister of independent India and appointed Manmohan Singh, a renowned economist as the Finance Minister. Together, they got rid of import licensing and opened up the country to foreign investment. Tariffs were streamlined and reduced. Private entry into airlines, telecom, banking, automobiles, etc were allowed. Reservation of large number of products for exclusive manufacturing in India was eliminated. In other words, they implemented policies to open up the economy and converted India from a socialistic economy into a capitalistic one.
The book has plenty of anecdotes that underscore the author’s points, but is not very engaging. The book has loads of useful stats on India:
- As of March 2013 India has 28 states and 9 union territories
- 25% of India's pop is SC/ST
- Between 2010 and 2025, India will add 131 million people between ages 20 - 49
- India is 1/4 of China’s per capita consumption of electricity. Even Vietnam has overtaken it by 60%
- 80% of the land holdings are less than 2 hectares and 60% are less than 1 hectare. In case you are wondering what the heck is a hectare, it is 2.47 acres.
- All farm output is first sold to government and then redistributed.
- There are 200+ labor laws between central and state governments.
- To open a medical college in India you need the approval of the IMC (Indian medical council ).
- Maharashtra and the 4 southern states have 57% of medical seats and 54% of the colleges.
- Bihar has one seat for 157000 people, Karnataka has 1 for 10800.
In summary, this book provides a comprehensive treatment of the post-indepence Indian Economy and should be ready by anyone wishing to learn more about the economic experiments that took place in India over the last 50+ years.
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