Provocateur’s Remedy

Dhiraj Nayyar is chief economist, Vedanta Ltd, and the author of Modi and Markets: Arguments for Transformation
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A journalist employs black comedy to highlight all that is wrong with India’s economy
Restart: The Last Chance for the Indian Economy | Mihir S Sharma | Random House India | Pages 362 | Rs 599
How do you write a book on India’s dismal economy using the incomprehensible analytical tools of the dismal science of economics and still make it enjoyable, particularly for a lay reader? Ask Mihir Swarup Sharma. Though I have a small quibble with the title; it is seriously misleading and tells you little of the black comedy that unfolds over the 300-odd pages of this book. This is not your run-of-the-mill, prescriptive economic policy book, of the kind Bimal Jalan or YV Reddy might write. It may disappoint those looking for a scholarly discourse, but it should please those—even scholars—who want a brutally honest, hold-no-punches assessment of all that is structurally wrong with India’s economy.

Those who read Sharma’s columns in Business Standard will be familiar with his contrarian, acerbic, irreverent and often bilious views of the world around him. This is characteristic of his book, too. But couched within it are some crucial insights most mainstream commentators may stop short of revealing. Take, for instance, Sharma’s assessment of the 1991 liberalisation. He does repeat the oft-made argument that Manmohan Singh’s reforms were hardly strategic, mostly reactive. That meant that there was no clear pathway laid out to take reforms to a logical conclusion. India is still trapped in his legacy. But the more interesting point is how1991’s reforms effectively killed manufacturing and de-industrialised India. Reform was piecemeal. It opened Indian manufacturing up to global competition without easing domestic constraints on business, whether imposed by labour laws, land laws or other antiquated red-tape measures (The Lime Register is Sharma’s favourite example). The consequences were devastating, particularly if you believe that manufacturing is the only sector that can absorb the hundreds of millions of under-employed Indians in agriculture— a necessary step if India is to emerge from being just an emerging economy.

The other big point of departure from mainstream discourse in this book is its sharp critique of India’s private sector, which Sharma blames as much as an incompetent and corrupt state machinery for India’s woes. It is possible to disagree with the critique—and I do in parts. After all, if the state creates a regulatory environment that makes it impossible to do business transparently, business is forced to find ways to beat the system. That said, it is necessary to criticise the Vijay Mallyas of Indian capitalism or even the Ranbaxys of India Inc, which through their misdeeds create a loss of trust. Sharma is critical of the Indian practice of ‘jugaad’—usually hailed as a positive trait— which he doesn’t believe is innovation but a way of cutting corners (like Ranbaxy).

What about solutions? It’s always easy to criticise all that is wrong but tough to suggest constructive ways to fix it. This is perhaps the most orthodox part of Sharma’s book. He says that India has no choice or a better option than to trust democracy and prices, a euphemism for free markets; a conventional right-of-centre political economy. While I agree with that broad prescription, I must admit I expected something more radical from Sharma. He could have explored in greater depth the contradictions that arise when democracy and free markets have to co-exist. In India’s noisy democracy, ’trust prices’ is not a message politicians are willing to make explicit. Why? Is it because India’s democracy leans to the left-of-centre? Or is it just politicians misreading the people?

On the revival of manufacturing, now a priority under Prime Minister Narendra Modi’s ‘Make in India’ pledge, does Sharma really believe that all that is needed is free market reforms of land, labour and capital markets? Does he not believe that some degree of ‘protection’ from competition (particularly from China) may be needed for a brief period? While Sharma leans towards the centre or centre-left in politics (he is more sympathetic to the UPA and appreciative of its record in office, particularly on delivering growth and tackling poverty while being critical-yet-hopeful of Modi), he studiously sticks to the orthodox centre-right in his economic policy. I only wish he had been more contrarian with his prescriptions. I was looking for something to disagree with, or to be persuaded by something dramatically original.

Restart is an intelligent, provocative and entertaining read. It doesn’t take itself too seriously. Of course, if India’s economy is to make the most of its last chance, all its stakeholders could begin by acknowledging our awful reality, as Sharma does.

(Dhiraj Nayyar is a ‘Bloomberg View’ columnist and editor of Surviving the Storm: India and the Global Financial Crisis)