The then Prime Minister, P.V. Narasimha Rao sprang a surprise by eliminating ‘aspects of deadening hand of controls’ and appointing Dr Manmohan Singh Finance Minister. Luckily, “Singh, a market-oriented economist, was able to tear a modest hole in the regimented economy,” and demonstrate that ‘a little economic freedom and competition can exert extraordinary leverage on economic growth’. The reforms initiated by Singh in 1991 are still unfolding, sees the octogenarian author. He is not too happy, though, that India’s tariffs are ‘double the average levels for South-East Asian countries, increasing the cost of materials used in production for export’.

Another point he rues is the status of property rights — that they are significantly undermined by the cost of enforcing a contract. A statistic cited, in this context, is the World Bank’s estimate — that it takes 425 to 1,165 days (depending on the state) to enforce a contract in Indian courts. “Nine-tenths of land in India is subject to disputes over ownership.” A major reason that most developing countries remain ‘developing’ and find it difficult to graduate to ‘developed’ is their low scores on property-rights enforcement, reads the former Fed chief’s big picture depiction.

The fate of ‘the three-fifths of the Indian workforce who toil inefficiently on farms’ hinges on a dramatic change, a major scrapping of the remaining parts of the licence raj, Greenspan urges.

Labour laws are job-destroying and costly, forcing ‘more than 40 per cent of employment in manufacturing’ in firms employing five to nine workers, he observes. “This compares with only 4 per cent in Korea. Productivity in these small Indian firms is 20 per cent or less of that of large firms…”

To Greenspan, India symbolises most powerfully both the productiveness of market capitalism and the stagnation of socialism. “India is fast becoming two entities: a rising kernel of world-class modernity within a historic culture that has been for the most part stagnating for generations.”

Distressing data about India that find mention in the 500-page-plus book are that two-fifths of the adult population is illiterate, more than 250 million live on less than $1 a day, half of homes have no electricity, a third of crops rot en route to the market, and more. “Prime Minister Singh is a highly reputable reform-oriented economist, but he does not have the authoritarian clout that enabled Deng Xiaoping to start China’s agricultural reform in 1978,” reads the report card Greenspan draws. He is hopeful the Indian democracy is up to this task.

“It needs only to focus on the urgent needs of India’s population. A very large dose of deregulation and competition can spread India’s IT revolution to the rest of the country.”

A critical ingredient in the growth model has to be FDI (foreign direct investment) embodying advanced technologies and attracted by laws (often newly drawn) protecting property rights, he notes.

Statist response to economic problems and unwillingness to fully embrace market forces cause the lag in FDI growth, he frets, and cites an example: “Faced with rising food inflation in early 2007, the response was not to allow rising prices to prompt an increase in supply, but to ban wheat exports for the rest of the year and suspend futures trading to ‘curb inflation’ — the very market forces the economy needs to break the stranglehold of bureaucracy.”

State-enforced property rights are the key growth-enhancing institution, declares the author. “For if those rights were not enforced, open trade and the huge benefits of competition and comparative advantage would be seriously and dramatically impeded.”

He laments that India has so much regulation of business activity that it significantly weakens the right to freely use and dispose of individual property, an essential measure of the degree of property-rights protection.

Technology knowledge gap between the developing and the developed countries may significantly narrow, expects Greenspan. “However, I find it difficult to foresee so marked a short-term change in China’s authoritarianism, India’s smothering bureaucracy, or Russia’s erratic enforcement of property rights.”

Quite worryingly, investor perception of such ‘political risk’ changes so slowly that it would likely be years following any fundamental and credible changes before such risks were largely excised from economic decision-making, instructs the author.

Indian software engineers helped the world rise to the Y2K challenge, compliments Greenspan. However, he thinks Americans ‘exaggeratedly viewed India as cutting a wide swathe through skilled US white-collar jobs’. India’s competitive incursion has been modest to small, especially in proportion to its 450 million workforce, he adds.

India’s rapidly growing IT sector is largely the result of home-grown software programmers and engineers, the author finds. “While Indian entrepreneurs are doing exceptionally well in high-tech service, they are doing less well with high-tech hardware, which suffers many of the shortcomings of Indian manufacturing overall.”

If India has to become the major player in the international arena, he suggests that we need to ‘build factories that entice a very large part of agricultural workers to urban enclaves to produce labour-intensive exports, the time-honoured path of the successful Asian Tigers and China’. In ‘The Delphic future’ Greenspan sees hope for India in discarding the Fabian socialism inherited from the UK, as done for ‘export-oriented, world-class high-tech services’.

For starters, Fabian socialists can be traced to the late nineteenth century. “The Fabian Society is a British socialist intellectual movement, whose purpose is to advance the socialist cause by gradualist and reformist, rather than revolutionary means,” informs Wikipedia.

The group’s name owes its origin to the ancient Roman general Fabius, who held off Hannibal’s invading army with a military strategy of attrition rather than all-out confrontation, explains Greenspan.

“Similarly, the Fabians aimed not to destroy capitalism but to constrain it. Government, they believed, should actively safeguard public welfare from the harsh competitiveness of the marketplace. They advocated protectionism in trade and the nationalisation of land…”

India may find it useful to follow the British, whose evolution seems to have melded the free-market notions of the Enlightenment with the sensibilities of the Fabians, postulates the author. The Enlightenment’s legacy of individual rights and economic freedom has unleashed billions of people to pursue the imperatives of their nature, reminds Greenspan, towards the end of the book. Progress is not automatic, however, he cautions. “It will demand future adaptations as yet unimaginable. But the frontier of hope that we all innately pursue will never close.”

Despite Indian politics leading the country in ‘a discouraging direction’, Greenspan identifies our salvation in the ‘twenty-first-century service enclave’, with its glitter ‘too evident to dismiss’. The nation is bound to be attracted by twenty-first-century ideas as well as twenty-first-century technology, he insists.

Though, as a developing economy, we may be growing faster than developed economies, the edge will fade unless we can supplement borrowed technology with ‘new insights and innovations’ from our scientists and high-tech engineers, counsels Greenspan. More important than economic growth is political certainty, he says. Useful insights, these are, despite the reservations that the Deputy Chairman, Planning Commission, Mr Montek Singh Ahluwalia recently voiced about the book before reading it.

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