BOOK REVIEW
Road Map to Prosperity
M S Sriram
S
omething significant seems to be
happening in India. Or at least
there is a hope that this is the
moment to seize the day; the right time
for fundamental changes in how the
economy is being managed and how the
country could be led to a path towards
prosperity. Authors like Dreze and Sen
(2013) and Panagariya and Bhagwati
(2014) have proposed their own diagnoses
and fixes; Anirudh Krishna (2017) in his
book The Broken Ladder has talked
about the micro stories that are prevent-
ing inclusiveness in development and
has some macro policy measures. Jour-
nalist Mihir Sharma (2015) indicates that
if we do not restart the economy now,
we are losing a golden chance. A fellow
journalist Raghav Bahl (2012) compared
the two superpowers China and India to
the hare and the tortoise, to see where we
are headed, while T N Ninan (2016) had a
response book using the tortoise as a
metaphor and suggested how the tortoise
could turn around. Investment banker
Ruchir Sharma (2016) has been looking
at patterns of high growth economies
and retrofitting them into growth pre-
scriptions for India and other locations.
Old warhorses Rakesh Mohan (2017),
Bimal Jalan (2017) and Surjit Bhalla (2017)
have all come out with their own versions
Economic & Political Weekly EPW DECEMBER 22, 2018
India’s Long Road: The Search for Prosperity by
Vijay Joshi, Allen Lane, New Delhi: Oxford University Press,
2016; pp 421, `699.
of what takes India towards greatness.
All these books (and many more not
named here) published in the past 5–10
years seem to indicate something about
the Indian economy. A hope that there
would be some change; despair that it is
not happening fast enough; anticipation
that the political class will take some cou-
rageous decisions, and optimism that this
is the chance to reap the demographic
dividend that is waiting to be harvested.
The book by Vijay Joshi has to be locat-
ed in this context. The book has a wide
canvas and covers significant ground
both in terms of the historical aspects of
economic development of India as well
as the road map for the future. Unlike
many of the quick-fix books that put
solutions into silos of (i) encouraging in-
vestments, (ii) labour reforms, (iii) land
reforms, (iv) privatisation and pay the
necessary lip service to elements of in-
clusiveness, (v) education, (vi) healthcare,
and (vii) financial inclusion, this book
and its discussion of each of the elements
are deeply rooted in economic theory
and constantly interfacing with how
these discussions relate to the taxation
vol lIiI no 50
policy, inflation, monetary policy and
macro aspects of the economy. This
constant engagement with the larger
numbers, which are rooted in a larger
rigour and the easy flowing text, makes
the book not only interesting (but diffi-
cult) to read, but also very credible. In
one sense Joshi’s book is looking at all the
pieces of the jigsaw—both as an individ-
ual piece in the puzzle and also as how
that piece affects the complete picture—
and then also painting the complete
picture when the pieces of the jigsaw are
all in place. It is not too critical of the
past regime and appreciates the con-
straints therein, while simultaneously
pointing to policy loopholes. It is also
not too celebratory about the changes
that are happening right now. Clearly
there is little to celebrate, but Joshi also
identifies the lost opportunities and the
measures that could be taken to move in
the appropriate direction.
Reforms and Distortions
The book starts with a broad-brush review
of how the economy has performed post
independence, all the way up to 2016.
Benchmarking with other economies
that have been growing, the book ar-
gues that the current “business as usual”
approach does not help and in order to
be a nation that could be counted, the
country needs a consistent double-digit
growth for a fairly long period of time.
This can be achieved with some funda-
mental reforms. Unlike many of the books
listed above that broadly lean either
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BOOK REVIEW
towards the “growth achieves equity”
model (Panagariya and Bhagwati 2014;
M Sharma 2015) or equity and empow-
erment need to be achieved with a spe-
cific focus (Krishna 2017; Dreze and Sen
2013), Joshi does a good balancing act of
identifying the problem and suggesting
an appropriate road map while not tilting
excessively on either side. It is therefore
difficult to stereotype and critique him
from an ideological position. That is the
beauty and strength of the book (and its
weakness as we discuss later).
Unlike the recent books that look at
1991–92 as a watershed year that started
the liberalisation process, Joshi breaks
up the historical piece into two parts:
from 1947 to 1980 and the post-1980 era.
This is an interesting take where he
identifies the origins of the reform pro-
cess after the failed Janata Parivar ex-
periment in governance. He discusses
the setbacks that the reform process suf-
fered during the V P Singh regime and
acknowledges the reform undertaken in
the Vajpayee era. A highlight is acknow-
ledging that the post-liberalisation era
led to a rise in inequality. Joshi pins down
24
the problem, identifying them as intra-
urban inequality and the urban–rural
income differential. Joshi indicates that
the intra-rural inequality has not in-
creased much. This is an interesting
insight and should lead to some interest-
ing policy prescriptions (p 29). The
argument made by Krishna and Bajpai
(2011) about how the distance from a
commercial hub leads to lower levels of
development resonates when Joshi makes
this argument. And, therefore, the role
of the state in this context needs to be
seen objectively. Unlike many who argue
for a minimalist state, Joshi argues for
the appropriate function of the state
recognising its role, but with significant
reform on how the state functions and
delivers its services (p 45).
What happens when there is liberali-
sation at the policy level (ease of entry
into business; foreign direct invest-
ments) but not a significant reform of
institutions (banking, dispute resolution
and bankruptcy)? Joshi identifies the
issues accurately and demonstrates how
the policy reform led to growth in invest-
ments and dynamism in the corporate
DECEMBER 22, 2018
sector, only to be stopped by the inabi-
lity to have the Schumpeterian creative
destruction largely because there was
ease of entry but no ease of liquidation
and exit. This has possibly led to the
corporate sector being concentrated
(and being fiercely competitive, but
only amongst a few), which collectively
moves towards a monopolistic tenden-
cy. This is similar to what was termed as
corporatism of the charters so wonder-
fully described by Phelps (2015). While
this leads to growth and initial efficiency,
it does not lead to sustained efficiency
and growth because of entry barriers to
the new innovators.
So, we have now identified that the
economy grew but there were distortions
in growth. There was also an increased
level of inequality largely in the urban
areas. This must be a result of some sort of
a distorted growth. Service sector’s contri-
bution to the growth was disproportionate
to employment generation. However, due
to the large level of informality of the
economy, unemployment actually man-
ifests itself as under-employment, and
with large sections of the population
vol lIiI no 50 EPW Economic & Political Weekly

having very low earnings. This is what
Joshi calls maldistribution of the work-
force (p 66). This problem is nowhere
near being addressed: “labour is India’s
most abundant resource but the organ-
ised sector, which should be the engine
of creating good jobs, has been heavily
biased against using it” (p 69). A part of
the issue rests in the way investments
are being made in productivity enhance-
ments based on technology, while another
part of rests on how to undertake labour
reforms that spur investments. How
does policy achieve the magic balance
between investor incentives and labour
rights of a stressed entity? Joshi has
some interesting insights on dealing
with the duality. He suggests a middle
path of granting extant rights to the
workers, but working out modern con-
tracts that are within the framework of a
reformed state and adequate compli-
ance with the market systems.
Insights and Inadequacies
The next sticky issue is about agricul-
ture, and flowing from that, the structur-
ing of subsidies. Agriculture as a sector
seems to be one area where the policy
has regressed in terms of public spend-
ing moving away from investment and
towards subsidies, thus crowding out in-
vestment. These subsidies are unsus-
tainable in the economic sense; they are
also turning out to be unsustainable
in the ecological sense with incentives
for over-exploitation of resources (for
example, electricity subsidies leading to
overdrawing of groundwater). The agri-
cultural subsidies need to be addressed.
What Joshi does not discuss is the dis-
tortion in terms of policy on agricultural
financing where the state has moved
away from institutional intervention
to transactional interventions by intro-
ducing interest subvention, waivers
which undermine the institutions that
serve the sector. In a later chapter on
safety nets, Joshi argues for a change in
the subsidy/safety net structure argu-
ing in favour of a universal basic income,
conditional cash transfer, employment
guarantee framework and removing all
the badly designed indirect subsidies.
He is brilliant in this part as he demon-
strates how this could be achieved
Economic & Political Weekly EPW DECEMBER 22, 2018
while being revenue neutral, and being
more efficient.
Joshi pays the necessary lip service to
education and healthcare. While he ad-
vocates bringing traditional public health
to the fore, there are no significant insights
on how the system could be addressed
apart from listing the obvious priorities.
But all these reforms in the various
sectors have to be done keeping the re-
sources and the macroeconomic stability
in mind. While Joshi indicates that the
current partial reform model is not suf-
ficient and that we need some deep radi-
cal reforms, we do not find much of a
signpost on these radical reforms apart
from the usual arguments that have
been heard—better management of
public sector enterprises; disinvestment
and privatisation in non-core sectors;
deep fiscal adjustment that removes
market distortions and subsidies, and
provides incentives for productivity en-
hancement; taxation reforms like the
goods and services tax; liberalisation of
factor markets; investment in infrastruc-
ture; better dispute resolution mecha-
nisms; capital investments in agriculture
and environmental protection.
While we indicated the strength of the
book as not taking an ideological posi-
tion and looking at each fragment on its
merits, it is also a weakness when one
tries to integrate these fragments into a
cohesive and broad philosophical appr-
oach. There are fragmented and very in-
teresting insights that offer inputs for
structuring the policy and examining
balanced (and aggressive) growth. This
style of analysis of independent silos
which connects with the larger macro-
economic issues is good, but often the
silos talk to the node but not amongst
themselves. This is where the style of the
book is not particularly engaging. The
monotone of the author sounds like a
long-winded lecture where criticism is
interspersed with solutions, structural
issues get intermingled with thematic
issues, and tactical issues are discussed
in the same tone as major issues of radical
consequences. In the process some of the
very important insights get lost in the
tone of presentation. The book needed a
ruthless editor who should have asked
naïve and seemingly stupid questions in
vol lIiI no 50
BOOK REVIEW
each chapter. That would have enhanced
the readability of the book. What is good
is that the tables are all pushed to the
end of the chapter, making the reading
seamless and allowing the reader to look
at the numbers when needed.
The book is an important contribu-
tion to the current debate, but as argued
earlier, the strength of the book, that it
does not take a radical position unlike
M Sharma (2015), is its weakness too,
because it precludes a unified integrated
position. While there are smaller nuggets
of how reform could be undertaken and
there is a conversation on how to man-
age the economy, including inflation
targeting, monetary policy, approach to
taxation, institutional reform and struc-
turing of subsidies, and each of these are
very interesting insights, it does not add
up to a whole as a vision. It would have
been so much more desirable if there
was one overarching chapter that gave a
larger economic vision for India, putting
together all these diverse pieces. Possi-
bly that would have made the book
speak more eloquently.
M S Sriram (mssriram@protonmail.com)
is with the Centre for Public Policy, Indian
Institute of Management, Bengaluru.
References
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Race between China’s Hare and India’s Tortoise,
New Delhi: Penguin India.
Bhalla, Surjit (2017): The New Wealth of Nations,
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Dreze, Jean and Amartya Sen (2013): An Uncertain
Glory: India and Its Contradictions, New Delhi:
Allen Lane.
Jalan, Bimal (2017): India: Priorities for the Future,
New Delhi: Penguin Random House.
Krishna, Anirudh (2017): The Broken Ladder: The
Paradox and Potential of India’s One Billion,
New Delhi: Viking-Penguin.
Krishna, Anirudh and Devendra Bajpai (2011).
“Lineal Spread and Radial Dissipation: Experi-
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Economic & Political Weekly, pp 44–51.
Mohan, Rakesh (2017): India Transformed: 25 Years
of Economic Reforms, New Delhi: Penguin Ran-
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India’s Tryst with Destiny, New Delhi: Collins
Business.
Phelps, Edmund (2015): Mass Flourishing: How Grass-
roots Innovation Created Jobs, Challenge and
Change, New Jersey: Princeton University Press.
Sharma, Mihir (2015): ReStart: The Last Chance for
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Sharma, Ruchir (2016): The Rise and Fall of Nations:
Ten Rules of Change in the Post Crisis World,
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