Explained Books: Second coming of India’s economic might

There are 14 chapters in the book, but they are, on purpose, not written in chronological order. Baru starts by explaining the different strands of economic thinking that drove our freedom fighters. This is important because independent India’s initial economic outlook was heavily influenced by these thoughts. The two grand ideas at the time of independence were the preservation and promotion of gram swaraj or cottage and village industry, and small-scale industry, and the push towards large-scale and modern industrialisation that mimicked the Soviet model.

The script started going awry during the 1960s and 1970s when wars with China and Pakistan, failed monsoons and political upheavals made the economy more insular. Government regulation and control became more pervasive, and undermined the growth of Indian enterprise. Although India started making some changes to open up the economy and move away from “bureaucratic socialism” in the 1980s, it took a severe Balance of Payments crisis to force India to reset its economic policy framework. The reforms of 1991 were the turning point for India’s economy and, justifiably, Baru devotes a full chapter detailing the changes and how they came about.

Since then, the Indian economy has gone from strength to strength. “Over the 30 years from 1950 to 1980, India’s gross domestic product (GDP) or national income, grew at an annual average of 3.5 per cent; and in the following two decades, 1980-2000, it grew at 5.5 per cent… (Between) 2000 and 2015, the economy grew at an annual average of 7.5 per cent, with the so-called ‘golden years of growth’, 2003-2008, recording close to 9 per cent growth,” writes Baru.

The rapid strides mean that today, in terms of purchasing power parity, India is the world’s third-largest economy behind the United States and China. In US dollar terms, it is now the world’s sixth-largest economy, behind the US, China, Japan, Germany and the United Kingdom.

Yet, as India enters the 75th year of Independence, it still carries grave concerns about poverty, unemployment, inflation and loss of global competitiveness. Baru makes an effort to include the most recent policy choices such as the Make in India programme, demonetisation, and the Production Linked Incentives scheme.

Baru clearly states that this book is aimed at the post-millennial generation — someone who is reaching adulthood as India crosses 75 years of age. Overall, this is an easy, non-technical relook at the pulls and pressures that defined India’s economic record as an independent country.

Explained Books appears every Saturday. It summarises the core argument of an important work of non-fiction.