Why Devesh Kapur and Arvind Subramanian’s ‘A Sixth of Humanity’ presents a flawed narrative of India’s development

The only genuine period of import substitution was the decade of the 1980, when India’s growth turned around”. This is so ridiculous even as caricature that one is left wondering if the authors speak in jest. Above all, it is wrong to view the period 1950-80 as united by steady growth. There was instead a growth cycle, with growth accelerating in the first decade and a half, declining for about a decade and then accelerating again in the late seventies.

The authors miss the first acceleration because they set their story’s start in the 1950s. Had they chosen the turn of the century — 1900 — they would have spotted the growth surge in the Nehru era, 1950-64. Growth had “turned around” almost three decades before it does in the authors’ account. As for the “poor” growth of their characterisation, the benchmark is the issue. Actually, in the Nehru era, per capita income grew 19 times faster than they did during the last years of the Raj, when it was virtually stagnant. Further, Angus Maddison’s data, which the authors cite approvingly, show also that India grew faster than China then.

China’s economy was to move ahead afterwards but firmly within a regime of planning, which the authors obsessively excoriate. While still on the topic of growth, in 1967, KN Raj observed that India and Pakistan had registered identical growth rates till then.

This suggests that both India, which had adopted an interventionist economic policy, and Pakistan, which relied on a largely market-oriented one, were yet recovering from centuries of colonial surplus extraction. So, they may not have been able to grow faster than they did in their early years. Finally, on “the throttling of the private sector”, it is worth noting that during 1950-64, private corporate investment grew faster than the public sector.

The Big Bad State may actually have aided this by expanding the market for the private sector’s goods by investing as much as it did. Apart from placing India permanently on a higher growth path, two other significant transformations took place during 1950-80. The share of industry rose, exactly as planned by the planners and the poverty rate began a secular decline in the late sixties, despite the fall in the growth rate.

The share of industry did not rise as much after the liberalising reforms of 1991. This explains the authors’ second puzzle. Much higher growth of manufacturing would have been needed for formal jobs to be created. This would have needed greater expansion of domestic demand or improved export competitiveness, which the largely macroeconomic reforms of 1991 could not deliver.

The economic policy of the Nehru era was hardly optimal but licensing may not have been its singular failing. That was the absence of a programme to end underdevelopment by spreading schooling and a health infrastructure. This ensured that growth in India would be lower and poverty more persistent than what it was to our east.

Kapur and Subramanian’s book is hobbled by the absence of a theoretical vision of growth; their framework of ‘State, society, nation and markets’ is simply not up to the task. The greater lacunae is that they provide no serious evaluation of economic performance under Modi, which would be considered de riguer in a narration of India’s development odyssey. By conjuring up a “growth phase”, 2010-20, straddling the tenures of UPA and NDA, they appear to be evading just that.

Application of state-of-the-art statistical methodology or even a mere eyeballing of the data, would detect a slowing of the economy from 2017. This has two implications. First, the economic policy adopted since 2014 has not raised the rate of growth of the Indian economy. Secondly, prima facie, the demonetisation of 2016 may have actually caused its reduction. The authors steer clear of engaging with this possibility.

Kapur and Subramanian bring some interesting economic and political snapshots of India to the table, such as the “welfarism” that now dominates the agendas of all political parties. However, the data float apart from a narrative that is flawed and found wanting.

We are reminded of Wittgenstein’s aphorism “Raisins may be the best part of a cake, but a bag of raisins is not better than a cake.”

The writer is honorary visiting professor, Centre for Development Studies, Thiruvananthapuram