Earlier this week, barely days after Narendra Modi led the BJP to a stunning re-election triumph and the new Ministry took charge, a trickle of official data confirmed the bad economic news that everyone but the government had known about for months.

Indicatively, GDP growth had slumped to a five-year low, and unemployment was at a multi-decade high; much else about the macroeconomic fundamentals was just plain awful. The engines of the economy were manifestly sputtering. Something, clearly, had to be done.

Even in these few days since, reams of newsprint have been expended in giving policy prescriptions to the Modi 2.0 government. However, as happens in matters like these, many of these recommendations have their roots in a partisan agenda, or are impossibly idealistic, and for those reasons stand little chance of gaining sufficient traction, even in an administration that is open to taking counsel from commentators.

The book under review also leans in the direction of giving policy prescriptions to the government, but — it’s fair to say — its recommendations are not tainted by considerations of partisanship. The origins of this effort date back to October 2018, when the country wasn’t yet preoccupied with the general elections, which concluded just last fortnight. At that time, a group of 13 economists came together with the stated intention of drawing up an economic agenda that, in their estimation, needed to be addressed urgently.

These practitioners of the “dismal science” have varying specialisations and interests: some of them are based in India, and others are videshis . One thing that unites them is that they are all closely engaged in, and are concerned about, India’s development. And as they state in their foreword, they “do not belong to any party, nor are we from the government.” Given that their analysis of the Indian situation is “non-partisan”, and that their views stretch across the spectrum from the Right to the Left, their wish is that their analysis “will help spur debate” on the country’s developmental priorities.

In the breadth of its scope, the book is pretty expansive, reflecting the specialisations of the economists. Former RBI Governor Raghuram Rajan holds forth on the reforms needed in the banking space; Gita Gopinath, the Director of Research at the IMF, details the problems in stimulating exports. The other contributor-specialists have astute observations on the specific problems in, and the reform action needed, in the financial sector; addressing the agrarian distress; generating sufficient jobs; overcoming the energy crisis; averting a health crisis; leveraging infrastructure to power economic growth; and even addressing welfare, women’s participation in the economy, and the environmental crisis that is already upon us.

The nature of the prescriptions may be specific to the industry, but at the core of the philosophical exertions of these economists is the felt need to rethink and to reimagine the role of government. Government capacity, as the experts make abundantly clear, is limited. “We need to target it better while trying to enhance it. Stability in government policy is important so that our farmers and firms can plan better, and markets can play a more effective role,” the Afterword says, by way of encapsulation of the varied ideas.

Privatisation, no panacea

What’s refreshing about the specific policy prescriptions is that they avoid, for the most part, shibboleths associated with schools of economic philosophy. Writing about the problems in, and the possibilities of, the banking sector, Rajan points to the fact that while public sector banks undoubtedly have been weighed down disproportionately by the non-performing loans (NPAs) crisis, similar “difficulties in even some private banks suggest that ‘simple’ solutions like privatizing all public sector banks may be no panacea.” Instead, he reasons, there is a case for experimenting by privatising one or two mid-sized PSU banks, reducing the government stake below 50 per cent for a couple of others, while working on governance reforms for the rest. “Rather than continuing a never-ending theoretical debate, we will then actually have some evidence to go on,” writes Rajan.

Banking reforms, he observes, should tackle four broad areas: reviving stalled projects after restructuring debt; improving governance and management at PSU banks; de-risking banking by encouraging risk transfers to non-banks and the market; and reducing the number and weight of government mandates for banks, particularly PSU banks.

In his estimation, although the Insolvency and Bankruptcy Code has much to commend, the process of cleaning up bad loans cannot be left entirely to the National Company Law Tribunal, for the simple reason that it will be overwhelmed if every stressed firm or project is referred to it. Instead, he reasons, we need a functional out-of-court restructuring process, so that the vast majority of cases are restructured out of bankruptcy — with the NCLT acting as a court of last resort if no agreement is possible.

One of the more common-sense suggestions from Rajan — which, however, will likely not gain enough traction, for obvious reasons — is that all political parties should agree that loan waivers to farmers should be avoided in the national interest. Instead, writes Neelkanth Mishra, Indian Economist for Credit Suisse, what the government should focus on to ease the agrarian distress is to open up markets for farmers, break up cartels, middlemen, and monopolies at local wholesale markets, and prioritise agri exports.

Similar middle-of-the-road suggestions are proffered in the infrastructure space (don’t abandon public private partnerships; instead, increase government sector capacity to manage these partnerships); in respect of land acquisition for projects (rely on auctions; find innovative ways of compensating farmers, for example, by giving them a share of the finished project or a plot in the township being planned; digitise land records); the energy sector (break up the State Electricity Boards’ monopoly; introduce variable tariffs depending upon the time of day that the power is used; create a domestic ecosystem for solar cell and battery production); the education sector (reform the Right to Education so that private schools can be supported and focus on educational outcomes; introduce universal pre-school, perhaps through anganwadi childcare centres; set up a national mission to ensure that every child can read, write and do simple maths by the time they finish Class Three); the healthcare sector (recognise informal providers of primary healthcare; crack down on mis-prescriptions of antibiotics and steroids; carry out public health campaigns to raise awareness about over-medication and the need for immunisation); and even on welfare measures (drastically reduce the number of schemes; move beyond cash-vs-kind debate and focus instead on beneficiary preference).

In short, what the economy needs now in terms of policy action is abundantly clear, and this book encapsulates all the best ideas succinctly. What the economy really needs now is a manifestation of political will to carry through with the many well-considered, thought-through policy prescriptions.


Abhijit Banerjee is the Ford Foundation International Professor of Economics at MIT; Gita Gopinath is Economic Counsellor and Director of Research at the IMF; Raghuram Rajan is Katherine Dusak Miller Distinguished Service Professor of Finance at University of Chicago Booth School of Business; and Mihir S Sharma is Senior Fellow at the Observer Research Foundation and the head of its Economy and Growth Programme.