What The Economy Needs Now | BOok Review Financial Express May 26 2019

This is important because several solutions take decades to work out, and a start made in the right direction has to be appreciated.

Maybe a piece by Jean Drèze on these issues would have made this compilation complete.

It would always be compelling to pick up a book that goes with the title, What the economy needs now, especially if one sees the names of distinguished people as editors. Further, when one reads the views of top economists like Sajid Chinoy, Neelkanth Mishra, Eswar Prasad, Pranjul Bhandari, etc, the interest gets heightened. The book is a collection of 14 ideas on various economic issues that are spelt out in detail followed by solutions at the end in a succinct manner.
There are chapters on infrastructure, budgets, health, education, farming, education and so on. As economists, the writers are spot on in explaining the issues and then providing solutions. There is nothing amiss here, and even if at some stage one feels the issues are well known, they are well articulated in these 224 pages. The book is a good way of understanding contemporary economic issues of the country.

However, a problem with economists as a rule is that they tend to get theoretical, which means that what they say makes sense, but it is not in sync with the political economy. Therefore, arguing for removal of certain populist programmes sounds right, but it is not feasible, which makes the book feel more like a textbook.
What could have been added by the editors is a section on what all steps have been taken by the government on these issues, because a lot of the solutions advocated, like cash transfers or infra development, have actually been taken on by the NDA government with some modicum of success and could have been highlighted. This is important because several solutions take decades to work out, and a start made in the right direction has to be appreciated.

Being written by economists who have independently put in their thoughts also means differing views on subjects. There is one piece which talks of government programmes not being pushed through in the banking sector, which will have its share of votaries. However, there is another that argues for special credit dispensation for SMEs as they are the backbone of the economy. If a policy maker were to consider this, it would be a hard choice to make given the strong arguments on both sides. The reader, however, has the liberty to choose the lever that suits her thinking.

There is an interesting solution on land reforms that is probably novel, as it has not been spoken of in the discourse on the subject so far. This pertains to auctioning of land, which is a good idea considering even two contiguous pieces of land in a village will be different in terms of access, fertility, infrastructure, etc. Getting hold of the right price for land is a challenge and allowing everyone to have their own price is much like what happens in the share market. Theoretically alluring, this would, however, not work for land as the buyer cannot wait for all prices to be acceptable. Therefore, such an approach will be hard to implement.

A theme that reoccurs throughout the book is the development of the corporate bond market, which actually is well known considering that RBI and SEBI have done everything to allow for all possibilities. This has not been acknowledged by at least five authors who have spoken about this market. After all, the government and regulator can enable a market but cannot force participants to buy and sell such paper as there are different considerations for them. Provident funds cannot buy lower rated paper and take on more risk as they are custodians of the money of the members. Hence these are places where the proposals sound very general and may not add to the practical set of solutions.

The same holds for channeling of savings, where the authors have not spoken of increasing domestic savings, which are actually falling, but focused more on government borrowing, which has been the chief cause of crowding out of the private sector. This misses the fact that given the state of the public sector banks, the excess SLR held is a blessing for these entities.

Similarly, it can be expected that when it comes to government finances, everyone has their view of how the government should spend the money without looking at the political economy aspect. The point economists as advisers or critics forget is that the two are interlinked and asking governments to stop spending money on what they think is improper is analogous to asking the US to bomb North Korea to prevent a futuristic nuclear disaster! The fact is that when government policies are formed (for which some of these writers could have been a part of the process at some stage), all these factors are known but are overridden by the compulsions of political governance. Hence if a political party comes to power promising doles, it has to be honoured and the suggestion of an economist should ideally be how best to make this effective.

Two things need mention about this book. The first is that a book on economics does not have chapters on poverty or employment (though there is one on women in the workforce). This is a major lacuna in the treatise as these are major issue afflicting the economy and also cause a substantial diversion of resources from the budget for social upkeep. Also given that employment has been the most controversial issue in the last year, a view of a critic would have been useful. This is what probably leads to the second observation, that most of the economists writing in the book have a foreign background (including multilateral institutions, foreign universities, investment banks, etc.) and there are only two authors who have a domestic background. Maybe a piece by Jean Drèze on these issues would have made this compilation complete.

This book is an excellent compilation for students, as well as those working in companies, and aggregates divergent views in all media discourses in one place. Will it be of use to the policy maker? Probably a shoulder shrug here as those in power are certainly aware of these constraints and their challenge is to make the best of what they have given these boundaries. An exclusive view by Mihir Sharma, who has edited this book, would have provided further embellishment to this collection.