A Central Banker's Vision

BOOK REVIEW

Book Title: Emerging India-Economics Politics & Reforms

Author: Bimal Jalan

Publisher: Penguin Viking, 2012

Price: Rs. 599/-

A Central Banker’s Vision

Every page of Bimal Jalan’s new book on the economy of a broadly reformist India underscores the vast potential of India. As a highly erudite central banker and top flight economist, Mr. Jalan’s narrative balances the accomplishments since the first tentative moves to unleash India’s economic destiny from its Socialist shackles. While this began in the mid-eighties and even earlier, the breathtaking possibilities waiting to be taken up even in 2012 are most compelling.

Whenever one reads a book of distinguished essays and speeches such as this, one is reminded of the extent to which independent India has erred on the side of caution if not inertia. And this, perhaps because it is very difficult for a political class weaned on the failed promise and rhetoric of Socialism to totally cast off its brain numbing effects. That policies based on the Socialist ethos delivered little beyond spiteful beggar-thy-rich stratagems and the stifling straightjacket of the infamous licence-permit Raj is now well accepted.

But today most parliamentarians are busy operating the leverages of coalition politics with its endless jockeying for narrow gain at the expense of the common weal.   Still, since policy must be made with the existent environment, India can only make progress by working within the bounds of coalition governments both at the Centre and quite often in the States as well. In addition, factionalism within parties is also part of the dynamic of democracy today as are the demands of regionalism.

Mr. Jalan covers a lot of ground in this compendium of various papers, speeches and essays and is consistently in favour of  liberalisation and reform. He rejects, quite unequivocally, the old and failed “command and control” policies copied from the Soviets. He also questions the efficacy of the elaborate five year plans in the absence of a dynamic “public delivery system” at the “Centre, state and district” levels.

Mr. Jalan plainly states: “Without strengthening the ability of  the government to do what it alone an do, and narrowing the focus of its activities to what matters most for the future development of the country-education, health, clean environment and a functioning infrastructure- India cannot adequately seize the opportunities that lie ahead.” He goes on to say, “No amount of macro-policy reforms by themselves will be sustainable or yield permanent results.”

This manifestation of government malfunction alluded to is evident to all, but while prescriptions on what can and should be done are plentiful if only in outline, he is unable to address the dilemma of narrow vested interest that define the success and tenor of implementation in this country. At best, India can take comfort in the trickle down effect of growth which tends to blunt the hungry competitiveness of disparate interests.

Mr. Jalan, as a former RBI Governor, is particularly refreshing in his comments on the future of central banking in India. He wants to see a further “strengthening of our prudential, provisioning and capitalisation norms” to “bring them in line with best international standards.” We may however, have to devise these for ourselves because the “international” ones have not exactly covered themselves with glory.

He also wants “maximum transparency, disclosure and accountability” and votes for “increase” in the “capitalisation” of banks “quite substantially”. This of course, cannot be faulted because our banking system is much too small to meet the requirements of high trajectory growth and development.

And he wants a legal system that delivers justice quickly as the present state of affairs is not “tenable,” but this, of course, calls for substantial legal reform.

Mr. Jalan is in favour of pragmatic action for managing currency and exchange rate fluctuations rather than the adoption of rigid policy stances either in terms of a complete  “free-float” or high levels of intervention. This too makes sense as it allows the Reserve Bank of India to react appropriately to varying situations, some far away from our own borders, on a case to case basis and over the medium term.

Mr. Jalan’s latest book has a broad-brush approach and a predominantly liberal stance, but since it is a collection of writings as opposed to a book in situ, it offers few detailed insights on the topics covered.

The problem with a discussion on India’s economy is that there are precious few items such as the IITs and IIMs, a clutch of core-sector industries, and a backbone such as the antiquated but yet impressive Indian Railways worth retaining from the past. For the rest, we have to look to a vision for the future which is a fresh construct arrived at by an inductive leap without the baggage of fear of exploitation or even that of progress. This is not such a book, but perhaps we can look forward to a path-breaking economic vision for the future when Mr. Jalan finds the time and inspiration to write it.

(807 words)

April 15^th 2012

Gautam Mukherjee

Published in The Sunday Pioneer on 22nd April 2012 as "Central banker's reformist vision" on the BOOKS page in the Agenda Section.Also online at www.dailypioneer.com and in The Pioneer ePaper.