Vijay Kelkar - In Service of the Republic: The Art and Science of Economic Policy

India has come into middle income, with a $3 trillion economy. We had a great surge of growth from 1991 to 2011, drawing on a new intellectual framework of policy that was built from 1977 onwards. For the first time in Indias history, there was a substantial decline in the number and the share of those in poverty.

The period after 2011 has seen a retreat from the optimism of 19912011. This is a cause for great concern. We have a finite window of opportunity with a young workforce. We must get rich before we get old.

We need to change course and obtain the sustained economic growth through which we will utilize our workforce, which will get us to the edges of the advanced economies in thirty years. We must do this in order to transform the lives of hundreds of millions of people, to meet our tryst with destiny. We must do this to stave off the social stress that will come from a large mass of people who are not working. For these reasons, the great question of the age is: Why did the reforms introduced from 1977 onwards deliver success during 19912011, but falter thereafter?

What is to be done? In this book, we try to tell a story about why we underperformed, and how to get back on the growth turnpike. Intensification of the 19772011 strategies will not suffice: what is required is rethinking the foundations. While we have got to a $3 trillion economy, we are lagging on creating the institutional frameworks of an ambitious middle-income emerging economy.

Economic policy operates at the intersection of economics and politics. The ideal policy pathways must be worked out on blackboards, but then the conflicts of democratic politics are played out and determine the policy choices in the real world. Hence, our analysis draws as much on the timeless themes of building the republic as it does on public economics. In India, the modernization of the political system and the economy is taking place at the same timeand feeding into each other. In this process, economic policy strategy must serve the larger objective of building the republic. The foundations of liberal democracythe principles of debate, dispersion of power, the rule of law and curtailing executive discretionare integral to solving the difficulties of economic policy that afflict India today.

There is science in a core of economics and politics. These are the areas where the analytical foundations and empirical evidence are strong. And then, beyond that, there is a large class of questions where we have opinions and insights, but the scientific foundations are lacking. This is where the policy thinkers and practitioners have to form judgements in each situation that may diverge from each other, and feel their way into the world through intuition and experience. This is the art of public policy. We take on the left-brain and the right-brain aspects.

We care about the ideas and we care about translating them into action. Some parts of the book are more analytical and conceptual, while others are more practical and directly link to action.

When the rubber hits the road, there are tangible policy questions in each area, such as oil exploration or inflation targeting. There are many fascinating areas of work in progress, all across the Indian landscape, where there is the slow boring of hard boards of policy reform. While we draw on examples from many domains, this is not a handbook of policy papers. We offer general insights that are valuable across diverse fields.

We live in an age of social media. The degradation of norms of discourse and the lowering of technical bars in the policy discourse have harmed the ability of liberal democracies to find politically stable compromises. Our attempt in this book is to help recover common ground, to find a shared intellectual framework and vocabulary that a lot of us may be able to agree upon. Towards this objective, we have stuck to what we hope is the relatively non-controversial terrain. This has involved downplaying issues of ethical preferences and income redistribution.

Put together, we are sixty years in this field, and have been talking about the grand questions for the last twenty years. The genesis of this book lies in Shekhar Shahs invitation to Vijay Kelkar to deliver the C.D. Deshmukh memorial lecture, at the National Council for Applied Economic Research (NCAER), on 27 January 2017. The enthusiastic feedback from that lecture led to the idea that an extended version of this would be an interesting book. We hope it will be thought-provoking and trigger many exciting conversations.