The $10 Trillion Dream Dented is a thought-provoking book on the state of the economy and future path by a bureaucrat who has worked with the government in probably one of the most important ministries—finance. Subhash Garg, who is a prolific economic commentator in the media today, presents a very balanced view of the economy, though at times is blunt when commenting on both performance and policy. Having worked in the government and overseen various activities, he quotes extensively from published data and shares several insights that could otherwise escape one’s attention.
The title is interesting because it has become quite common to talk of a 5 or 10 trillion economy with timelines being extended when not achieved. This is what Garg has picked up and analysed in great detail. He is critical of these numbers and targets. He is also not too convinced of the ‘developed country’ status, which is to be the final goal when India celebrates its century of independence in 2047. He uses data to show how the task is challenging given that past misses were mainly due to the requisite growth rates not being achieved. One important suggestion he makes in this context is that we need to have some intermediate goal posts when talking of the economy 10 years or 20 years down the line so that we know where we stand which helps for introspection. All his arguments are backed up by data and hence none of the conclusions are impressionistic.
There are some public policies on which he is candid, such as the Covid-induced lockdown. He is critical of the lockdown that affected enterprises, many of which have not recovered till date. This appears a fair point in the narrative because he also uses data to show that our growth has been pushed down to the extent that the incremental output added by USA and China in the last few years is higher than the absolute GDP of the country.
He does some number crunching as well as policy analysis of the two regimes of the incumbent government. He highlights major reforms implemented in the first regime of the government in the form of GST and IBC as impressive. However, the second tenure did not show the same intent or pace of reform. While the conclusion cannot be contested, the point is that there was a major disruption in the form of covid where it may have been difficult to push forward some reforms that were drastic. He, however, is all praise for the digital push, which has been quite transformational. Also, the fiscal correction of off-balance sheet items was a major correction that has made accounts more transparent and easier to interpret.
Purely from the point of view of how economists look at budgets, especially capex, Garg does some dicing of numbers that is enlightening. He explains some subtle nuances that are generally overlooked. He talks of how analysts need to take out loans given to states, for example from the central capex, so as to get the right number as the money would be spent by the states.
Quite cogently he highlights how some part of PSU investment has been shifted to the budget and hence ideally one should look at the combination of central government and PSU investment together. Quite revealingly, the overall number then gets moderated substantially. He also puts on the table the thought that all government expenditure only has a primary effect when it is spent and ends there as there are no secondary effects.
In a similar vein, Garg explores the PLI scheme in detail and concludes that it has not quite been successful if one looks at the actual amount disbursed by the government in the budgets to the 14-odd industries. He concludes that the PLI has hardly made any difference to Indian manufacturing, with the only exception of Apple, which shifted around 10% of its production to India. Otherwise both the Make in India campaign and PLI scheme have not really uplifted Indian manufacturing.
On the fiscal side he is quite critical of the budgetary deficits, though admittedly they rose mainly during the Covid period. There is hence an explanation here. His view is that there has been too much of centralisation from the point of view of the tax system where cess and surcharges have gone up, which is not shared with states. This he believes is against the spirit of federalism as it puts them at a disadvantage. This is also a view which has been voiced by some sections where it has been argued that all of them should be abolished and subsumed in the existing tax structures.
His narrative hence weaves all these pieces together to show the faultlines, so as to call them, which need to be covered to ensure that the growth goals are achieved. He does get too critical at times when he highlights through IMF and World Bank numbers on GDP that India may still be underperforming compared with other nations like Vietnam or Sri Lanka. This is why it is necessary to set intermediate goals so that there can be review along the way given that the Viksit Bharat goal is still two decades away.
If one gets a sense that Garg tends to get too critical, he compensates very well with his suggestions. This probably is the best part of the narrative, because often economists tend to critically analyse all developments but have less to say about solutions. Here the author covers almost 50 areas that need to be worked on where he provides answers to the questions. He is for less government in activity, which the private sector should be in, favouring large-scale privatisation, which also includes letting private players take over new financial institutions that have been set up. Similarly, keeping a track of the very poor and providing direct cash transfers is a sensible solution with intervention for the rest only when the vulnerable turn poor temporarily.
Such a thought process also supports removing shackles from agriculture and also doing away with the large-scale operations of the government through MSP. A sin tax of 24% on pollutants at every stage of production is another rather bold step that he suggests, though this can have an inflation impact as these costs tend to be offloaded on customers finally. There are similarly reforms spoken of for the tax system. Being part of the budget making process, Garg’s ideas do get more credence.
The $10 Trillion Dream Dented is a data-driven, well-researched book that should make policy makers and analysts think deeper. While applauding the achievements of the government, Garg does not hesitate to show the mirror when it is required. His solutions are cogent and to the point and would certainly spark a fresh round of discussion at the policy level. Students will be delighted as the book talks about the last decade through numbers, analysis and solutions—a true omnibus.
Book details:
The $10 Trillion Dream Dented: The State of the Indian Economy and Reforms in Modi 2.0 (2019-2024)
Subhash Chandra Garg
Penguin Random House
Pp 424, Rs 999
