Tag: Globalization


The book starts with “Tryst with Destiny speech” given by the first Prime Minister of India J. L. Nehru from the ramparts of the red fort in August 1947. This was the time when India started a new journey towards nation-building and fulfilling the aspirations of million Indians. The authors mentioned this to reinforce the idea that the ‘goal of poverty’ elimination had always been the part of India’s national strategy.  The whole book gives a feel of strategy document which is divided into three parts: first is about debunking various myths related to economic growth and development of India, second talks about the Track I reforms that produce growth which has a direct impact on poverty and finally, third discusses the most important reforms in the areas of health care, education and guaranteed employment under the Track II reforms.

The authors of the book: Jagdish Bhagwati and Arvind Panagariya are the professor of economics at Columbia University. In fact, Panagariya is a protégé of Jagdish Bhagwati and he was recently appointed as the first Vice Chairman of NITI Aayog by the present BJP government. The authors of the book believe in the ideas of globalization, free trade, and especially full-fledged reforms.

In the first part of the book, the author has tried to debunk various myths- about early development strategy, inclusion of health and education, focus on redistribution to reduce poverty as compared to growth emphasising the point that the early development strategy also focussed on these goals. The authors challenged the myths about the reforms launched in 1991 and its impact on poverty reduction, farmer suicides, development of socially disadvantaged groups, the controversies surrounding poverty lines and vociferously the impact of trade and globalization on poor.

They have debunked the myth of increasing inequalities due to reforms launched in the country in 1991. The authors disapproved the “Kerala Model of Development” saying that it had a historical advantage in terms of literacy, health infrastructure, trade linkages and the dominance of the private sector. In fact, the author mentions the account of Robin Jeffrey (1992) who highlighted the key factors- matrilineal tradition, the role of various rulers, caste and religion-based groups and trade linkages with various countries which played an important role in growth and development of Kerala. The author lauded the “Gujarat Model of Development” and quashed the myth that despite high growth, Gujarat has performed poorly in health and education.

The Part II of the book talks about the Track I reform in the areas of Labor laws, Land acquisition, Infrastructure, Higher Education & Agricultural Market reforms which are aimed accelerating and sustaining growth. In fact, the recent Economic Surveys released by the Government of India discussed these critical issues which act as an impediment in the growth process. The current NDA government has launched various labor reforms like allowing fixed-term employment in all sectors, removing the arbitrary inspection system, providing EPF number portability, six-months maternity leaves to increase the female labor force participation rate, amending the apprentice law and child labor law etc. They focused on infrastructure development launching ‘Bharatmala Project’, ‘Sagarmala Project’, UDAN scheme, rural electrification, and road development. e-NAM(National Agriculture Market) and various other agricultural reforms launched to focus on doubling the farmers’ income. It has proposed the Higher Education Commission of India bill 2018 to abolish the UGC to provide more freedom and autonomy to various universities of India to reform the higher education system in India. However, according to me,  there is still a long way to go in the areas of labor reforms and land acquisition act which are still archaic and create hurdles in the ease of doing business in India.

Track II reforms discussed in Part III of the book are focussed on effective and inclusive redistribution process through providing guaranteeing employment, adult nutrition, and food security, reforming health care and universalizing elementary education. However, the authors’ main idea is that “growth will act as an instrument for poverty alleviation”. It will help in creating substantial economic resources to fund the redistribution goals. As per the author’s reasoning, “Track II reforms can stand only on the shoulders of Track I reforms; without the latter, the former cannot be financed. The whole viewpoint of authors of the book can be seen in terms of “trickle-down theory” which is labeled as “pull-up growth” strategy in the book. 

The authors completely disagree with the model of redistribution proposed by Amartya Sen and Jean Dreze because they think that it cannot be the answer to removing poverty in countries of India, Brazil, and China which has a huge population to cater. Under the Track II reforms, the author discussed the design of the redistribution programmes in terms of cash or kind transfers targeted or universal, public versus private provision, conditional versus unconditional transfers and recommends the strategy of policy mix consisting of targeted unconditional cash transfers for most needs, vouchers for elementary education and insurance for major illnesses with government covering the premiums.  In fact, the present government implemented the idea of Direct Cash Transfers (DBT) through the help of “JAM (Jan-Dhan Aadhar Mobile) trinity” for cooking gas subsidy transfers, scholarship reimbursement etc. However, targeting any cash transfers or kind transfers is a complex task in India because of lack of identification mechanism where Aadhar can play a major role.

This book came into limelight after the whole Sen-Bhagwati debate started around 2013-2014. At the same time, Amartya Sen, the Nobel Prize winner in Economics and recipient of Bharat Ratna and Jean Dreze book, “An Uncertain Glory: India and its Contradictions” published. Amartya Sen has given the ‘idea of capability-based approach’ to human development and he argues that ‘redistribution as a strategy’ will help in the elimination of poverty. In fact, he proposes the participatory growth and broad-based development model where rights are given to the people and there is freedom and agency for the people to bring about development for them. That is why Amartya Sen praises the “Kerala Experience of development” where all the social indicators are equal to the developed countries of the world. They also emphasize and compare India’s growth story to Bangladesh which has improved the social indicators in less time duration than India. Women have played an important role in improving the social indicators of Bangladesh because of the increasing employment of women in labor-intensive manufacturing sectors like apparel, textiles etc. It also indicates that providing agency to women creates a conducive climate for improving all the social indicators not only for the present generations but also future generations.

In fact, Bhagwati and Panagariya have not even discussed the gender issues in their book which is the biggest criticism of their whole strategy of growth. India being a patriarchal society has a very low labor force participation rate which needs to be improved to make the growth more inclusive and broad-based. Another criticism of the whole strategy proposed in the book is that there should not be any dependence of Track II reforms on Track I reforms as the author consistently pitched that Track II reforms will be implemented with the help of resources generated from Track I reforms. What will happen when the Indian economy is not growing at all in a doomsday scenario? In that case, the Government of India should work on both the fronts stimulating the growth process as well as creating a sustainable and humane mechanism to support and redistribute the resources to the poorest sections of the society. However, the model proposed by Sen in terms of State-led development has not resulted in substantial achievements before India has turned towards the strategy of liberalization, privatization, and globalization.

On the face of it, choosing one strategy among the two is not the option but choosing the better strategy for the overall and inclusive development of the country will be the right option. There is no option to go back and adopt the state-led development and there is a danger in leaving everything for market forces to do. The pitfalls from both the approaches are very much visible all over the world where state-led development is almost abandoned by countries around the world and pure market fundamentalism has led to the severe crisis and unrest even in the developed world.

Therefore, India should find a “middle-path” propounded by the Gautam Buddha whereby India takes the help of globalization to unleash the animal spirit of market forces to create growth and development. Along with creating a mechanism of participatory development where every individual of the country develop its capabilities to achieve the goal of sustainable development because development is not a singular concept of infrastructure, economic growth, poverty reduction, education, and health but it is a multi-dimensional concept where there is a substantial change not only in material and physical aspects but also change in social structures, popular attitudes, and national institutions.

Review of the book Breakout Nations by Ruchir Sharma


The economics has become the vehicle of growth, prosperity, and development of countries in the world in the era of globalization. In fact, the question here is why we are more worried about economic growth, economic development, and prosperity? What is the need to talk about emerging nations? Why should we care about “Breakout Nations”? And why will some countries be emerging as breakout nations, some will be frontier countries[i] and some will remain insignificant with respect to economic growth and development.

Ruchir Sharma, an investment banker and keen watcher of economic happenings around the world in this book takes us on a journey where he picks the countries who will be the next economic miracles of the world. Finding reasons, causes and set formulas for economic growth and subsequent economic development of the nations was a never-ending quest by the authors of various milieus because everyone wants to step up the ladder of the success of economic growth.

The author discusses his experiences and nuances of more than twenty countries in 280 pages of this book with stimulating details incorporating the flavor of colloquial language and examples. The most important argument of the author is that we need to understand and analyze the emerging markets as ‘individual nations’ and he is wary of the ‘idea of emerging nations as a group’. In this context, he is skeptical of the sustainability of the BRICS[ii] group because the countries have competing political interests and there are stark differences between these countries in terms of commodity importers (India and China) and commodity exporters (Russia and Brazil).

The author is more interested in studying the individual countries by traveling to those places and trying to understand, “whether the political regime gets the connection between good economics and good politics” than commenting as academicians without getting the feel of the ground reality. In the whole book, the author has come out with various “Rules of the Road” to recognize the potentiality of the real breakout nations.

The author also gives his insights regarding the great debate of the impact of the political system and institutions on the economic growth and development. In fact, his latest book, The Rise, and Fall of Nations: Ten Rules of Change in the Post-crisis world is a further development of the same idea where he tries to give ten rules which need to be considered to evaluate the rise and fall of the nations. He rubbishes the idea that political system or the institutions are responsible for growth and development of the economy and their subsequent achievement of prosperity and remaining poor. “It’s’ not the type of the system that matters, it is the stability of the system and, even more important, whether the leaders running it understand the basics of economic reform”, says Ruchir.

He compares the country of China which has surpassed all the growth expectation and emerged as the successful example of command-and-control capitalism with the economy of Vietnam, which is not growing despite being a command economy. As per the author, any particular system has an only fifty-fifty chance on its economic growth and successes. In this context, he criticizes the grand theories on the ground of their emphasis on one factor in terms of institutions, geography, or culture to explain the rise and fall of the nations. He also finds faults in their building of narratives with historical facts as well as giving long-term predictions about these countries as a foolish approach. In fact, the book “Why Nations Fail: The Origins of Power, Prosperity, and Poverty” [iii]by the authors Acemoglu and Robinson provide a comprehensive analysis of various hypothesis for the rise and fall of nations. In this book, they argue that the “institutions”- political as well as economical act as deciding factor in the growth and development of any country. However, Sharma does not agree with this hypothesis and focuses more on the role of political leadership which is responsible for steering the economy towards growth and prosperity and also towards disaster if they don’t get the basics right.

In this book, Sharma starts with China, India, Brazil, Mexico, Russia, going to Eastern Europe, talking about Czech Republic, Poland, Hungary, coming to Turkey for which he is bullish, shifting towards South-East Asian countries, Indonesia, Malaysia, and turning towards the African continent with billion opportunities and finally talking about gold-medalist countries of South Korea and Taiwan. He also gives an interesting perspective that breakout nations can also emerge in the Western world in the USA, Germany, Spain, and Ireland.

The whole narrative of the author is based on his personal travel experiences to these countries and anecdotal evidence but if we compare in general the views given by the author are very much similar to the book “Why Nations Fail”. This book says that institutions matter but Sharma says, “No, Individual leaders who are at the helm matter”. There is a question: Who came first: Institutions or Individuals? Individuals are part of the institutions or they are the one who created, sustaining and influencing the system of institutions. Both the books talk about Mexico, Russia, North Korea countries in a negative perspective because of their institutions and leaders respectively. In all the countries discussed by the author, he names the different leaders of the respective countries to emphasize their role in the economic growth and development.

In fact, if we deeply introspect, institutions as well as the leaders who are the decision makers both responsible for the growth, development, prosperity as well as bringing doom and poverty for any nations of the world. It is very complex and humanly impossible to factor all the causes and reasons behind the rise and fall of nations. In fact, many things are at play at the same time. It is a full bucket of things which will turn the nations towards prosperity as well as poverty.

Regarding his criticism of the BRICS grouping, now there is enough evidence to refute his proposition. For instance, these countries have announced “New Development Bank”[iv] in 2012 and other institutions which are going to challenge the erstwhile Bretton Woods System[v]. BRICS grouping led by China and India will emerge as a formidable force[vi] in the world in recent years. Though the countries of the group have different potentials, they can also find common grounds to collaborate with each other in the coming future.

This book was written in 2011 when there was lot of chaos in the Middle East due to ‘Arab Spring’[vii], In India, the India Against Corruption[vii] movement led by Anna Hazare was going on in the wake of spate of scams in the UPA II government, emergence of Turkey as a successful Muslim model for growth etc. Similarly, there were various other developments in other parts of the world. These things have influenced the writer in creating his perspective.

The author paints a bleak picture of China because of its heavy debt, increasing labor costs, and overcapacity in the infrastructure sector. He is also not bullish about India. In the last seven years, many things have changed in India. The new government came into power at Centre and they brought various radical and forward-looking changes to create a conducive climate for growth and development. So, we can’t judge the country just by looking the few days experiences and few years performances.

It is very complex and unimaginable to predict various economic parameters for any country and especially for a diverse country like India with a subcontinental dimension and federal structure where the states are also acting dynamically to attract investment in the spirit of cooperative and competitive federalism. However, he looks Turkey under the leadership of Recep Tayyip Erdogan[ix] as a breakout nation and a role model for the Muslim countries in the Middle East. However, in just seven years, things have changed much in Turkey after the emergence of ISIS[x] and the last year coup[xi] in Turkey. In fact, author himself agrees that it is very difficult to forecast for the future growth in these complex societies and these days things are changing very fast, which cannot be ignored in the context of providing an explanation for the future economic growth in various countries of the world.

However, the author conveys the economic concepts, nuances, and intricacies of the investment and forecasting in a very easy-going story-line to make his points that the nations need to be studied and analyzed on an individual basis and there should not be any grand narratives and club different states into same groups. The book was interesting in terms of knowing smallest details of various countries in terms of high charges of hotel rooms in Brazil as compared to the USA etc. and how they can be related to their economic fundamentals and future growth story.

[i] https://en.wikipedia.org/wiki/Frontier_markets

[ii] https://en.wikipedia.org/wiki/BRICS

[iii] https://ritambharachaitanya.wordpress.com/2017/05/02/review-of-the-book-why-nations-fail/

[iv] http://www.ndb.int/

[v] https://www.thebalance.com/bretton-woods-system-and-1944-agreement-3306133

[vi] http://www.indrastra.com/2017/06/PAPER-The-Emerging-Role-of-BRICS-in-the-Changing-World-Order-003-06-2017-0054.html

[vii] https://www.sourcewatch.org/index.php/Arab_Spring

[vii] http://www.indiaagainstcorruption.info/

[ix] https://www.theguardian.com/world/recep-tayyip-erdogan

[x] https://www.nytimes.com/topic/organization/islamic-state

[xi] http://www.aljazeera.com/news/2016/12/turkey-failed-coup-attempt-161217032345594.html