Nehru's long economic shadow

This magisterial review of modern India's economic history by a celebrated international trade economist, earlier chair of the NITI Aayog and currently the chair of India's 16th Finance Commission was written during the pensive days of Covid-19 and is dedicated to the author's brother — an eminent Indian neurologist — who sadly passed on then.

- SANJ EBI AH LUWALIA

It is refreshingly free of dry technicalities. Instead, a lively, albeit heavily annotated, style, transports readers into the minds of politicians, business leaders and intellectuals, reading in their actions the reasons India remains export pessimistic, trapped in high capital investment projects and negligent towards trade and agriculture as growth drivers and employment generators.

India suffered economically from a widespread, persistent faith in the Indian variety of "socialism." It ignored our comparative advantage in light manufacturing and agriculture based on cheap labour, land availability, existing business smarts and worker skills. The focus post-independence, on heavy industry was ruinous for GDP growth and employment, embedded inefficient, large public enterprises, killed the then flourishing private exports via export controls to benefit domestic consumers, while import controls and taxes on consumer products inflated domestic prices, generating exorbitant profits for producers. In tea exports we vacated space in the US and European markets to Sri Lankan and African exporters, in cotton textiles to Japan and in jute to Pakistan.

Second-guessing the market via a planned heavy industry-focused economy generated inefficiencies via bureaucratic procedures and low technical skills in the implementation of clunky industrial and trade policy and bred a private sector specialised in managing the Licence Raj but low on business innovation and thriving on the inefficient performance and high price benchmarks generated by the vast public sector.