In this book, Basu describes the art of economic policymaking, viewed through the lens of his two and a half years as CEA.
An Economist in the Real World
Publisher: Penguin Viking
Pages: 240; Price: Rs 599
One of the tallest intellectuals of India is Kaushik Basu who adorns the post of Vice-President of the World Bank and is the C Marks Professor of International Studies at Cornell University. Two Nobel Laureates in Economics have praised the book under review. Joseph Stiglitz declares that it is a beautifully written and engaging book that is a must-read for anyone interested in development of India. Amartya Sen described the book as wonderfully interesting book — the reader is at once entertained and amused as well as illuminated.
Dr. Samuel Johnson wrote of Oliver Goldsmith “Nothing did he touch that he did not leave unadorned.” Likewise there is no subject that Basu has handled that he does not expound with elegance, clarity and precision.
Manmohan Singh, the Prime Minister, picked up Basu and appointed him as Chief Economic Adviser to Government in 2009 and he held this post for two years and a half. This book is a result of his experience and is an account of the economy of contemporary India, ranging from the large macroeconomic questions to the granular microtheoretic ones — a book on Indian economy and the art of policy making, blending economic theory with personal experience. Effective economic policy-making requires awareness of the fact that economics lies at the intersection of politics and society.
Basu points out that over the last few years there has been a backlash against the excess of economic policy and a chorus of demand for better empirical work based on statistics and tough data. He notes that we have a strong data base with large research departments in treasuries, ministries, central banks and universities. However his five years in the policy world has convinced him that the bigger deficiency lies in the critical analysis and reasoning.
India is on a high-growth rate and the next five decades are likely to raise the nation to the platform of industrialized countries. The period from 1991 to 1993 represents a watershed in India’s economic development and a large part of the credit for this goes to Manmohan Singh. Basu delineates these developments and draws pointed attention to the colossal corruption since 2010.This is eating into the fabric of society. Basu believes that for India to return to an annual growth rate of 8.5 percent seems entirely feasible.
Basu tackles at considerable length the Emperor of Maladies—Inflation. The global economy being virtually a single economy the current predicament of different interest rates across nations creates a situation where interest rates are high in Gujarat and low in Bihar. There is a need to achieve a higher degree of coordination in policies pertaining to macroeconomic demand management among nations. Multi-lateral organizations have to work collectively to tackle problems such as inflation in emerging economies and stagnation and deflation in developed economies.
Basu is totally dedicated to the development of the poor and underprivileged. He has clear ideas on poverty and inequality. In a closely argued chapter on “Food and Poverty” Basu points out that though we have followed pro-poor policies since 1947 there is a high incidence of poverty. Around 249 million Indians are live below the poverty line. He analyses the National Food Security Act, 2013 under which India will spend over $ 4 billion a year and provide cheap food to 200 million people. He calls for a new food grains policy which will ensure that citizens enjoy the right to food and at the same time ensure that India’s fiscal system is able to withstand the expenditure. According to Basu the Government should maintain a buffer with the aim of using it to hold down prices during times of food shortage and it must make sure that the poor and vulnerable have access to food at all times.
Basu has strong views on corruption — which attracted some controversy. He was CEA at the peak of the Anna Hazare campaign against corruption. He expressed his view that “The act of giving bribe was legal and the act of taking a bribe was illegal.” According to the Prevention of Corruption Act, 1988 “Bribe taking and Bribe giving” are equally wrong. Basu was supported by Narayana Murthy of Infosys who publicly stated that it deserved serious consideration. Both Basu and Murthy faced severe criticism.
The book is replete with light anecdotes, has exhaustive notes and a long list of references of over twenty pages. It is a valuable introduction to the study of growth of India as also its development policies.