India’s growth below official rate: Raghuram Rajan in new book
“We must admit the possibility that we haven’t even been growing at the official rate,” write Raghuram Rajan and Rohit Lamba in their new book, Breaking the Mould, releasing on December 7 by Penguin Random House. The writers caution that lack of good data “may be making us overly complacent about the accumulating dangers of the current policy path we are on”, as they point out that only large firms are profiting, while small and informal firms are doing relatively poorly, and “only the former are quoted on the stock market, which offers a misleading picture of the broader economy”.
Claiming that India’s most reform-oriented budgets came from coalition governments in the 1990s, the authors write that decisions taken in haste without consensus and driven by a single individual have often led to disasters, citing the overnight bank nationalisations in 1969, declaration of the Emergency in 1975, demonetisation of large currency notes in November 2016 and the sudden lockdown announced in March 2020.
“What unites these bad decisions? It is the leadership’s desire to project boldness and decisiveness; an unwillingness to take expert opinion into account or to persuade opponents who may have valid suggestions. Because the decision is sudden, it is also accompanied by little preparation. Such actions may have much more damaging and long-lasting effects on our citizenry than incremental decisions taken by a weaker, but consensus-driven, leadership,” they write.
On building world-class companies with global scale, they write that it should not be at the cost of “favouring them over other domestic companies, or by shutting out global competitors, or by asking global competitors to sign up to joint ventures with the government’s favourite industrialists,” arguing that consumers will have to pay a price just to fatten the profits of our largest industrialists companies built with favour or subsidies might not be competitive in the long run.
They argue that “the jobs situation right now is abysmal, the lower middle class is hanging on by its fingernails, growth is becoming more unequal and female labour force participation is stagnant at a low number. Yet quarterly growth numbers are settling down between 5 and 6 per cent. One explanation is that our current growth is largely jobless, which means we need far more growth to create the necessary employment, or else the demographic divided will evaporate in front of our eyes.”
They write that another possibility is that India’s growth and GDP have been overestimated since 2013, when the method of estimating GDP was changed. “…growth in important indicators like imports, exports, credit, tax revenues and profits slowed considerably in the latter period relative to the former period, while GDP growth miraculously stayed strong. A government survey suggests that household consumption growth collapsed, but that survey has not been released publicly,” they write.
“Most people get just about enough through free food grain and transfers to get by. But to keep them from focusing on their plight, we need distractions. Divisive issues of culture and religion are a major source of distraction, accentuated by social media and cheap data on our mobiles,” they write.
Source:financialexpress.com