Despite claims of being the fastest growing large economy, why has India still not fulfilled its potential? According to Ashok K Lahiri, an economist at heart and now politician by profession, “India and the Indians have made some progress in 75 years after Independence...But the shine from the story fades when India is compared with that of the East Asian Tigers and China.”

Chatting with businessline on his book India in Search of Glory: Political Calculus and Economy, published by Penguin Business, Lahiri said while progress looks good, it is not good enough.

“I will consider that “glory” has been attained only when we are the first or second largest economy in the world,” he said. Excerpts:


The book takes an expansive look at India’s political economy. There was a time when politics ruled economics, today the role seems to have reversed. Do you agree?

See, it depends on how you define politics. The crux of the book is actually what Anthony Downs said: “Politicians formulate policies to win elections, they don’t win elections to formulate policies”. So, in a democratic country you cannot blame politicians only for their policies, their policies reflect what people want. Part of the blame for faulty policies also rests with the people.

But the issue is whether politicians correctly perceive what the electorate want. Furthermore, has the electorate become more economically “rational”? Are they asking for things that will remove poverty on a durable basis and not only temporarily? For example, not roti, kapada, makan, but Bijli, Sadak, Paani. Direct welfare measures, in a country like ours, do help the poor, but how much emphasis should be put on direct welfare measures and how much on education, health and physical infrastructure for laying the foundation of durable growth and development is a critical judgment call.

I believe that Indians have changed with growing literacy, better health and connectivity. Also, they are less fragmented as people. So they are now asking for measures that will usher sustained growth and development and not only temporary relief from poverty and privation.


When you say fragmented do you refer to caste or religion?

Yes, but also in terms of language and ethnicity. Previously, you and I may have voted on the basis of our ethnicity, language, religion and such narrow considerations. Politics was often the politics of ethnicity, language, religion, and caste, and resulted in limited supply of public goods, such as education and health services. The social cleavages have not disappeared but are getting blurred, and you can see their manifestation in the relative decline of regional and caste-based parties, and formation of stable governments at the Union level with national parties in the lead. Now as the social cleavages are breaking down, the electorate is asking for more and efficient supply of public goods and services. In response, appropriate policies formulated by politicians is quickening the pace of development and poverty amelioration.

Politics ruled supreme for much of the period since independence. PV Narasimha Rao, for his Prime Ministership during the reform period of 1991-96, is considered as the country’s father of economic reforms. Yet, with corruption charges and political reasons, the Congress under his leadership lost the 1996 elections. Similarly, with changing composition of the coalitions, Prime Minister Atal Bihari Vajpayee, even with India Shining, lost the 2004 election. Nevertheless, to say previously politics ruled economics and today economics rules politics is only partly true. Politics still remains supreme but increasingly politics is motivated by economics. People do judge performance of parties.


You call the book ‘India in search of glory’ ... we are the fifth largest economy -- why then India is still searching for glory?

What do you mean by glory? Indeed, it is commendable that we are the fastest growing large economy in the world, and in eight years we have risen from the 10th largest economy in the world to the 5th largest. But, is fifth good enough? Remember now we may be the largest country in the world in terms of population. Furthermore, in the 15th or early 16th century we were one of the most prosperous countries in the world.

According to me, we would attain “glory” only when we are the first or second largest economy in the world, and our per capita income also catches up with that of the developed countries. For this glory, there is a lot to be done in terms of education, health and physical infrastructure, and per capita income.


You have also mentioned certain incidents in the book -- Babri Masjid, J&K issues. Do you think incidents like that still haunt our growth prospects?

You are right that these incidents do have an impact on the society. Unless we forget or learn to forgive, such incidents can have a lingering impact. Apart from causing loss of valuable lives and property, violent conflicts disrupt economic activity and cause hardship to the daily wage-earning poor. Furthermore, it deters investment by dampening confidence and increasing the risk of doing business.


Many of the UPA’s proposals have been rechristened under the current NDA regime...

When it comes to continuity, we are fortunate that successor governments have taken forward most of the promising schemes of incumbent governments — for example, VAT, GST, Fiscal Responsibility and Budget Management (FRBM), and Direct Benefit Transfer. Policy formulation and implementation are a continuous process. To abandon a good policy just because it was proposed by a previous government under a different political party would be preposterous.