Subramanian Swamy has established himself as a personality with extreme views, which he is often able to defend with consummate ease. One may not tend to agree with him, but for sure he germinates ideas that may find acceptance when the time comes. Hence when one reads his book Reset, it is quite thought-provoking.
As the title suggests, he has an agenda for changing the economy that has slipped quite badly in the past few years. Such things have happened in the past, and the economy has been able to rebound due to its inherent strengths, or what the more fatalistic people call resilience. He starts off by taking us to the period 1870-1947 when British imperialism decimated the Indian economy as the Empire worked to exploit the colonies. Blaming the British for everything that went wrong is passé, and hence rarely do we have commentators dig through history. But Swamy does this with panache.
After much immiseration during the British rule, the country went through the yoke of socialism, as our leaders, according to the author, got the plot wrong and so we slipped to the clichéd Hindu rate of growth during this period, when the rather flawed Soviet model was pursued. While the Eighties saw some change at opening the economy, we had to be pushed to embrace reforms in the Nineties. It is here that he enlightens the readers that the entire reforms package was his creation and that while the nudge came from IMF, it was his plan that got accepted. Hence, contrary to what we hear of other political and economic stalwarts like Manmohan Singh and Yashwant Sinha being given the credit for reforms, Swamy claims that it was his idea in the first place. He mentions that he also got India a $2-billion IMF loan during the Chandrashekhar regime when he suggested to the then PM to allow US to refuel when combating Iraq over Kuwait.
This done, the author analyses a lot of data to compare the economy at different points of time during this period when the economy really grew. Reforms were about easing controls and shackles and replacing them with new structures. While one gets the feeling that Swamy is pro-markets and reforms, there is a lot of emphasis that he has placed on farming and the SMEs.
Fast forward to the present and Swamy does some straight talking. He calls Manmohan Singh an “accomplished economist but a marginal figure of no consequence in his own government”.
The UPA government, according to him, had some of the seniormost ministers “committing gigantic corruption”. He describes the present PM, Narendra Modi, as “not being a man of letters but having grip on microeconomics though not macroeconomics”. He admits Modi is very popular and honest and wants to do a good job, but writes that his “lack of academic background has made him dependent on his friends and ministers who never tell him the bitter truth”. He praises the PM for being a domineering person with no political competition. But the problem is with his advisers, who are “unelectable and have no clue about the economy”. He also takes a strike at the timid economists appointed by the PM to top posts with ‘huge perks’, who end up “telling him what he wants to hear”.
He says all this has resulted in two big blunders that have pushed the economy into the present mess. These are demonetisation and GST. Here he may find more supporters, as it is generally agreed that the former was not such a good move, while the timing of the second could have been better. He then brings in the more controversial former CEA’s research, put forward after the latter’s leaving the government, on GDP numbers and uses this to prove that the economy has slipped badly in the last few years. He has also used some work done by Rathin Roy to buttress his belief that the economy is in a bad shape.
Is there a solution? Yes, and his alternative script is novel and stunning. Abolish income tax so that people save more, which can be used to push up investment rates from the abysmally low figure today. Household savings have crashed, thanks to demonetisation and other warped policies. Bank deposits should give at least 9% (wonder how RBI, banks and companies will react). Next is to fix the currency to `50 to a dollar (coming from someone who claims to have brought in reforms, this is a surprising change in ideology). P-Notes need to be abolished to bring in $1-trillion black money (this number has lost its credibility, what with various numbers being spoken of but little coming out). And, last is a rather bizarre suggestion to print currency to finance infrastructure and keep aside any rules on fiscal side.
Therefore, he says India can match China and even challenge the US if we try hard. This may sound like a different kind of hubris when the book ends on such a note, considering that even today there is a feeling that all is well in the economy, and the World Bank and IMF data is used continuously to show that India is the fastest growing economy and that there can be nothing fundamentally wrong!
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