June 1, 1998
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Old
Whine, New Bottle Despite compelling data, economist Gupta is over-critical of liberalisation. By Jairam Ramesh POST-REFORM INDIA: EMERGING TRENDS
With this background, it comes as no surprise that Gupta has produced a data-rich and equation-intensive book on the progress, achievements and shortcomings of the 1991 reforms. He is detailed on progress, niggardly on achievements and profuse on shortcomings. Gupta discusses the evolution of GDP, changes in the financial sector, developments in the external sector and, most important, the impact of reforms on social sectors. The treatment is clinical and cold-blooded -- and all data-based. In some cases, the data is as of 1997-98, in some areas it stops at 1995-96, while in the case of the social sectors it does not go beyond 1993-94. This is not Gupta's fault but a reflection of the delays with which key data comes out of the governmental system. The major step-up in social sector investment -- particularly in rural development -- took place in 1994-95 and 1995-96. The effects of this have not been captured in the book. Gupta's conclusions are familiar. The external economy has done well. GDP is on a higher growth path, although the stability of this growth is now being disputed. Savings rates have gone up. Exports boomed initially but are tapering off. Private capital flows have increased. Forex reserves are comfortable, although strangely Gupta does not touch upon the management of external debt. This is one of the successes since 1991, specially in relation to what has happened in east Asia over the past year. Next he says social sector investments have declined in real terms particularly in the poorer states. Regional disparities are widening and poverty is not falling. Some of Gupta's conclusions are totally at variance with those of other distinguished economists, equally adept at data-bashing. Subasish Gangopadhyay has used NSS data to show that poverty ratios, though still high, are actually declining. The Dandavate Planning Commission prevented him from publishing his report since it went against prevailing theology that reforms are anti-poor. Similarly, on Gupta's contention that investment in agriculture has fallen, other economists have often pointed out this may be the result of following a narrow definition of what constitutes investment. Gupta identifies 1991-92 as a cut-off year. Everything before that is pre-reform and everything after that is post-reform. Can reforms be celebrated or condemned on such a simple-minded, mechanical approach? Gupta writes likes an economist. Consider his main policy recommendation: "The growth and production processes have to be made indigenous, endogenous and sustainable and at the same time integrated with the technology frontier of the global system." This is among the less obtuse gobbledegook. Indeed, while this book is a treasure of data and data analysis (for Rs 300 you can't do better), on policy prescriptions it falls woefully short. It only mouths the obvious ones, that reforms must produce maximum benefits for the community with the minimum hardship. Amen.
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Shyama Gupta, a well-known econometrician, is a
meticulous data-basher. He has just laid down office as director and chief executive of
the Indian Council for Research on International Economic Relations (ICRIER). He has been
associated with the Central Statistical Organisation and National Sample Survey (NSS)
Organisation. These two bodies are the source of most of the data on the Indian economy. 
