Economists
endorse Bhagwati line for UPA
The Financial Express, January 13, 2011 |
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The annual
tete-a-tete of finance minister Pranab Mukherjee with
economists ahead of presenting the annual budget has got
dwarfed this time by a huge debate that’s sprung up on the
Internet among some of the global top economists tracking
the India story.
The motion: Does
India’s growth story need to make a pause to push social
equity? More loosely, it is the Jagdish Bhagwati versus
Amartya Sen line, though economists like Kaushik Basu say
the distinction is not that sharp. Framed in whichever way,
the dominant point of view emerging from the to-and-fro is
that Indian policy makers should not do anything to upset
the growth engine they are riding.
They have a point.
The UPA government has already rolled back several
multi-billion dollar investment projects citing environment,
land and tribal rights issues while others like the urban
renewal missions are facing question marks. Some members of
the ruling Congress party including cabinet ministers have
said the reforms for pushing growth are increasing social
inequality.
An indication of
where this could lead is the recently finalised check-list
the National Advisory Council, chaired by Sonia Gandhi has
lined up for 2011. “Displacement of both tribals and non
tribals (for setting up industry) is an issue but the former
needs a special reference because that is where all the
land, mineral and forest wealth is”, said NC Saxena, member
of National Advisory Council.
Yet, as Bhagwati
says, focussing on growth matters for India as it “pulls the
poor into gainful employment and also provides the revenues
with which one can finance direct programmes on health and
education, which I called Stage 2 reforms.”
The names involved
in the Internet debate are formidable, including Arvind
Panagariya of Columbia University, Sumit Majumdar,
University of Texas, Indira Rajaraman, NIPFP, Abhijit
Banerjee of MIT and Martin Wolf of Financial Times. For the
UPA government, buffeted by competing interest groups, this
could act as the most decisive line of support to move on
with growth-enhancing policies. The debate is sort of
just-in-time as the government has to set in place policies
that will run through for at least three years or more
(unless there are mid-term elections), setting the tone for
the most crucial decade for India.
It was spurred by
Bhagwati’s lecture in the central hall of Parliament to the
MPs, explaining his thesis that only reforms, and therefore
growth, can produce the necessary funds for the state to
invest in health and education.
His position, he
has explained in the course of this debate, contrasts that
of Amartya Sen, who has argued that the primary focus of the
State should be on sectors like these instead of worrying
too much about growth. The Internet forum was facilitated by
CUTS International, one of India's leading think-tanks on
trade and development.
Commenting on the
differences, chief economic advisor to the finance ministry,
Kaushik Basu told FE: “I believe that the differences
between Sen and Bhagwati are less substantive than what is
popularly made out to be. On a variety of important policy
matters, they use different languages but say very similar
things. My only worry is that even on this Sen and Bhagwati
will agree that I am wrong.”
But Bhagwati, in
his characteristic style, is more forthright. On the issue
of sequencing reforms, something the UPA government is
struggling with now, he says: “The true scandal is that
people who continue to condemn the reforms that can help are
the true scandal. But...in Economics, there is no
accountability for the consequences of your advice! And that
is particularly so in an ascriptive society like India: the
eminent are revered and rewarded, not condemned, despite the
harm they cause.”
BLOGTALK
* One way to think about this question is that governments
will in any case continue to do a bunch of stuff, driven by
their own compulsions, some of which promote growth while
others probably retard it. — Abhijit Banerjee
* Obviously,
higher incomes are a necessary condition for better
state-funded welfare, better jobs and so forth. This is
simply not debatable. Indeed, only in India, do serious
intellectuals dream of debating these issues. — Martin
Wolf
* Even if the
maintained hypothesis is that the government has limited
capacity, the answer is not that reasonable people could
choose to focus on different areas of policy but that
reforms should still proceed on as many fronts as possible
but take forms that make minimal demands on the government
for their execution. — Arvind Panagariya
* The real
revolution India needs is in efficiency and productivity,
whether in government sector or private sector activities. —
Sumit Majumdar
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