Sen Vs. Bhagwati
Both stalwarts have ignored the factor of governance
By Manohar Manoj
Comment and counter comment of two internationally recognized economists Amartya Sen and Jagdish Bhagwati recently occupied much amount of newspapers' space and time slot of TV media. Both were discussing Indian economy and its policy direction, But the arguments of both are not going in a linear direction rather crossing each other's views. What Nobel laureate and Bharat Ratna Prof. Sen(TOI interview dtd 28-7-13) and Prof Bhagwati and his associates have clarified in TOI article (by Arvind panigrahi, an associate of Prof. Jagdish Bhagwati) both had tried to prove one another wrong. What Prof. Sen tries to say that India has been consistently neglecting agenda of human development like universal elementary education and health and basic public amenities for all and because of this, according to Prof Sen, the growth rate of country has been suffering and vice versa.
On the contrary, Prof. Bhagwati tried to say that it is only the high growth rate regime that can act as panacea for all the persisting diseases of Indian economy.
What Prof. Bhagwati is trying to say that Indian economy before 1990s, never witnessed high growth rate, so it could not able to invest substantially in human development items like health and education. On the contrary Prof. Sen says that we neglected education and health, so we have less productivity, less GDP and so on. According to Prof. Bhagwati, unless the country has enough GDP, it is not able to invest sufficiently over the several items of human development.
So the conclusion is that, it took almost 60 yrs to the govt. of independent India to bring ‘Right to education’ (RTE) and it took 65 yrs. to bring ‘Right to food’ (RTF), both important ingredients of human development. But point to be noted here, during these period of time, govt. of India had no sufficient resources. It became possible only in high growth era of late 90's and 2000's, which enabled govt. to bring these two drastic measures, which was to be brought very earlier, what Prof. Sen opined.
Coming on the point of synthesis after following the thesis and antithesis of both of the renowned economists, we find that they both are viewing the economy in pure text book economics manner, they neither see and view it in a political economy way nor they view it in social economy way or above all I can say that they are not analyzing the state of Indian economy in total governance way. So here a situation has arised, where end has become start for some and start has become end for some. But to my mind, the experience of last 65 years of India as a nation shows us that policy of socialism and capitalism and mix of both were in a way learning phase for the country. The basic economic objective and social priority what country decided at the time of independence, those were tried to be solved through planned system of economy supported by the political system having parliamentary two tier and latter on through 3 tier of democracy, which were coined by late Jawahar lal Nehru. Here, public sector was granted a greater role, they shouldered the responsibility of making investment, production and distribution in all by the command authority constituted by govt.of India. In the course of time, govt. first tried to establish institutions of governance followed by several plans and schemes. These schemes have had holistic approach where we cannot say it were ignoring social issue like education and health. But at that time very much priority was given to heavy industrialization under the surveillance and existence of public sector. Even in the presence of socialist pattern of governance, no one can say private sector were ignored, rather they were not very capable, so various rule and regulation related to private sector were not made easier.
Till the 1960 even hard critique of Nehru era cannot say that the foundation of economy has any bigger point of faults. Though hardcore Gandhian followers used to say that Nehru regime must have given priority to rural and small industries in place of big industries, but unfortunately SSI sector were not the Nehru's preference. But this is not the concern of both Mr. Sen and Mr. Bhagwati.
However In 60s, the social priorities were tried to fulfill through steps like green revolution and bank nationalization etc. But ultimately it was found that our five year plans are only able to bring 3 to 5 percent growth rate. The distributional aspects were tried to fulfill through several schemes and programs entrusted with several state govts. The era of 1960 to 1980 in India was an era of bubbling socialist ideologies, where slogans had more meaning, rather than the actual delivery of welfare programs for the poor. What the country did at that time, it laid down the massive administrative structure, whether in civil governance or in legal administration or in defense set up. It consumed huge resources and rest of resources were divested with number of socio economic programs like community development schemes in Nehru era and 20 points socio-economic programs during Mrs. Gandhi rule. These all social welfare programs were conducted through bureaucracy, Here, there was no role for the market, barring the era of Janta rule under Morarji Desai(1977-79), when PDS system was scrapped and ultimately prices of sugar in the open market fallen in parity of its earlier PDS price. But more or less this was era of socialism and communism, where the market was seen as villain of development and welfare both. During the period between 80 to 90, Rajeev Gandhi and V P Sing gave some hint regarding the possibility of liberalized economy in some areas. In 1990s, when Narsimha rao came, country was witnessing various macro economic problems like huge shortage of foreign reserves, high current account deficit, shrinking growth rate and deteriorating climate of domestic and foreign investment in the country. Then NEP based on four pillars namely liberalization, marketisation, privatization and globalization was started.
So we can divide our country's economy into two era, first is the pre 91 era and second is the post 91era.
The pre 91 era was more or less entrusted with the principle of socialism, where despite having the lower rate of growth and all kind of leakages in various socio economic expenditure schemes, bureaucracy were relied upon at their best. While diagnosing the pre 91 era, we find that during that time poor were not benefitted in real terms, only they were covered with very big socialistic slogans. But since 1991, under the start of a new era, the injection of competition with the help of all round inflow of investment in the economy, the growth rate started to rise. After the completion of 2 decades since then, we have had unprecedented growth rate, which not only crossed 5 percent mark, but also approached 10 percent mark.
The high growth rate and rising income augmented tax proceeds of the governments also and finally it resulted in higher allocation for different socio economic programs.
So the pre 91 era which was filled with socialistic sloganism and bureaucratic anarchism, provided only emotional stimulus to the people. In fact there were no takers for the poor. Because on the one side there was inadequate growth rate, lesser spending over socio economic programs and also higher leakages through the burearcracy followed by under performance of country's public sector because of the absence of competition from the private sector. On the contrary, the post 91 era provided high growth followed with comparatively more prosperity for the metropolis-urban area and its inhabitants and ultimately its trickle down affect provided employment to the rural unskilled, semi skilled, skilled and professionals also. So, what we saw, the money order economy as well as remittances economy got arised in the country. So we can view during post 91 era, there was definite growth of employment opportunities in the non government and in non organized sector. Though this was not an ideal set up for the growth of rural or the informal sector of the country. It was the trickle down affect as well as it was the mass immigration of laborers class from supply area to the demand area, which brought this kind of development and ultimately it ensured some amount of purchasing power to their pockets. This situation was practically better than the less growth and corrupt bureaucratic era of pre 91. Talking about the post 91 era, the high growth situation augmented tax proceeds of the governments which enabled them to go for higher allocation for rural development and also over items of human development.
Before concluding the argument of both the economists it is very necessary to analyze the similarity and dissimilarity of both pre 1991 and post 1991 era. The dissimilarity was on the front of investment and growth rate because we had a low investment and lower growth rate in pre 91 era and high investment and high growth in post 91 era. But there is similarity in both the era, it is on the governance front. There were leakages, corruption and mismanagement in the whole set up of the government in pre 91 era and it was very much there in post 91 era also. Though the higher growth rate and bigger revenue generation of the government enable higher allocation in different social sector, but it was facing the same bureaucratic hurdles and corruption like pre 91 era. Only difference we witnessed in post 91 era, that was the market and competition oriented relief which reached to the common public. In a way market provided relief to the people in terms of less corruption, fair prices and better work delivery in post 91 era.
So the both the great economist see the economy in pure academic manner, that is why they are ignoring political and social factors related with the economy of the country. So they do not discuss the aspect of governance and issue of corruption. Their arguments centered around policies and priorities only. The experience of post 91 era clearly showed us neither the socialism nor the capitalism help the cause of economy; it is only the sensible and scientific governance with the help of market can solve every problem. We cannot say that fixing of priorities will solve the cause of human development. First we need adequate amount of resources along with clarity on policies for this.
The experience also showed us the smooth functioning of economy is also accompanied with continuous political reform along with constitutional remedy of identity politics and populist pattern of economy. These factors have created barricades on many occasions. At present our economy has become prey to those populist policies. In 2008 loan waiver and MNREGA schems aggravated fiscal problems and now the food security ordinance is going to laid down a very pathetic story for the economy. It is going to create another den of corruption, fiscal imbalances, duality in the food market, annihilation of agriculture profession etc.
Consistent and regular reshuffling of policies and omitting all shackles of rule and regulation will bring good governance. It is a challenge not only for the politicians, bureaucrats, but also for the economists. Policy and programs have to be structured in such a way which can leave no scope for leakages, misappropriation and can generate optimum amount of economic as well as social welfare to the public.
Cost and output criteria should be always followed for all types of schemes whether of economic nature or social nature. It should have performance audit. The post 91 era shows us that the challenge of governances and regulatory authorities have not yet over. There are many areas, where regulatory authority like telecom is urgently needed. Because it is making losses of revenue to the government, it is not providing goods and services to the consumers at the reasonable prices; it is not attracting investment in sufficient manner.
I think, Prof. sen, who is worried about health and education, it actually need a regulatory authority because you cannot omit private institutions working in education and health field over nights. So only better option left with the govt., that is to bring regulatory authority for this. This kind of authority is needed in the field of electricity, petroleum, minerals, public transport, railways and roads. It has been seen no any regulatory authority other than TRAI and RBI able to perform their role in fair and competent manner. The regulatory authorities working in the field of electricity and roads have not proved themselves friendly to the consumers. So the real challenge is the governance. The factor of better governance will only adjudge the concern of both Mr. Sen and Mr. Bhagwati, whether it is to decide better policy and priorities in the area of human development or increasing the tune of investment in order to aggravate the growth pattern of the economy, both of them have ignored the factor of governance. Not to say, this factor was pertinent and prevalent in both the era of pre 91 and post 91.
In pre 91 era, the main focus was on distributional area which was helped by the pattern of induced growth with the public sector as a major player. In the pre 91 era the moderate rate of growth along with the corrupt bureaucracy never addressed the fundamental problems of the country in effective way. Whereas the post 91era witnessed high growth but on the distribution side it still had corrupt and inefficient bureaucracy, so it took the resort of trickled down affect in order to attacking poverty and etc.. But in post 91 era the only difference was that market forces and competition were allowed, which provided better and smooth result to the people. Now we conclude the points raised by the both economist, that who is right?
First of all we must understand that we cannot provide solution to any problems and issues through thinking in one way or two way, it need to be thought in all possible ways, because everything is attached with each other. p
Both stalwarts have ignored the factor of governance
By Manohar Manoj
Comment and counter comment of two internationally recognized economists Amartya Sen and Jagdish Bhagwati recently occupied much amount of newspapers' space and time slot of TV media. Both were discussing Indian economy and its policy direction, But the arguments of both are not going in a linear direction rather crossing each other's views. What Nobel laureate and Bharat Ratna Prof. Sen(TOI interview dtd 28-7-13) and Prof Bhagwati and his associates have clarified in TOI article (by Arvind panigrahi, an associate of Prof. Jagdish Bhagwati) both had tried to prove one another wrong. What Prof. Sen tries to say that India has been consistently neglecting agenda of human development like universal elementary education and health and basic public amenities for all and because of this, according to Prof Sen, the growth rate of country has been suffering and vice versa.
On the contrary, Prof. Bhagwati tried to say that it is only the high growth rate regime that can act as panacea for all the persisting diseases of Indian economy.
What Prof. Bhagwati is trying to say that Indian economy before 1990s, never witnessed high growth rate, so it could not able to invest substantially in human development items like health and education. On the contrary Prof. Sen says that we neglected education and health, so we have less productivity, less GDP and so on. According to Prof. Bhagwati, unless the country has enough GDP, it is not able to invest sufficiently over the several items of human development.
So the conclusion is that, it took almost 60 yrs to the govt. of independent India to bring ‘Right to education’ (RTE) and it took 65 yrs. to bring ‘Right to food’ (RTF), both important ingredients of human development. But point to be noted here, during these period of time, govt. of India had no sufficient resources. It became possible only in high growth era of late 90's and 2000's, which enabled govt. to bring these two drastic measures, which was to be brought very earlier, what Prof. Sen opined.
Coming on the point of synthesis after following the thesis and antithesis of both of the renowned economists, we find that they both are viewing the economy in pure text book economics manner, they neither see and view it in a political economy way nor they view it in social economy way or above all I can say that they are not analyzing the state of Indian economy in total governance way. So here a situation has arised, where end has become start for some and start has become end for some. But to my mind, the experience of last 65 years of India as a nation shows us that policy of socialism and capitalism and mix of both were in a way learning phase for the country. The basic economic objective and social priority what country decided at the time of independence, those were tried to be solved through planned system of economy supported by the political system having parliamentary two tier and latter on through 3 tier of democracy, which were coined by late Jawahar lal Nehru. Here, public sector was granted a greater role, they shouldered the responsibility of making investment, production and distribution in all by the command authority constituted by govt.of India. In the course of time, govt. first tried to establish institutions of governance followed by several plans and schemes. These schemes have had holistic approach where we cannot say it were ignoring social issue like education and health. But at that time very much priority was given to heavy industrialization under the surveillance and existence of public sector. Even in the presence of socialist pattern of governance, no one can say private sector were ignored, rather they were not very capable, so various rule and regulation related to private sector were not made easier.
Till the 1960 even hard critique of Nehru era cannot say that the foundation of economy has any bigger point of faults. Though hardcore Gandhian followers used to say that Nehru regime must have given priority to rural and small industries in place of big industries, but unfortunately SSI sector were not the Nehru's preference. But this is not the concern of both Mr. Sen and Mr. Bhagwati.
However In 60s, the social priorities were tried to fulfill through steps like green revolution and bank nationalization etc. But ultimately it was found that our five year plans are only able to bring 3 to 5 percent growth rate. The distributional aspects were tried to fulfill through several schemes and programs entrusted with several state govts. The era of 1960 to 1980 in India was an era of bubbling socialist ideologies, where slogans had more meaning, rather than the actual delivery of welfare programs for the poor. What the country did at that time, it laid down the massive administrative structure, whether in civil governance or in legal administration or in defense set up. It consumed huge resources and rest of resources were divested with number of socio economic programs like community development schemes in Nehru era and 20 points socio-economic programs during Mrs. Gandhi rule. These all social welfare programs were conducted through bureaucracy, Here, there was no role for the market, barring the era of Janta rule under Morarji Desai(1977-79), when PDS system was scrapped and ultimately prices of sugar in the open market fallen in parity of its earlier PDS price. But more or less this was era of socialism and communism, where the market was seen as villain of development and welfare both. During the period between 80 to 90, Rajeev Gandhi and V P Sing gave some hint regarding the possibility of liberalized economy in some areas. In 1990s, when Narsimha rao came, country was witnessing various macro economic problems like huge shortage of foreign reserves, high current account deficit, shrinking growth rate and deteriorating climate of domestic and foreign investment in the country. Then NEP based on four pillars namely liberalization, marketisation, privatization and globalization was started.
So we can divide our country's economy into two era, first is the pre 91 era and second is the post 91era.
The pre 91 era was more or less entrusted with the principle of socialism, where despite having the lower rate of growth and all kind of leakages in various socio economic expenditure schemes, bureaucracy were relied upon at their best. While diagnosing the pre 91 era, we find that during that time poor were not benefitted in real terms, only they were covered with very big socialistic slogans. But since 1991, under the start of a new era, the injection of competition with the help of all round inflow of investment in the economy, the growth rate started to rise. After the completion of 2 decades since then, we have had unprecedented growth rate, which not only crossed 5 percent mark, but also approached 10 percent mark.
The high growth rate and rising income augmented tax proceeds of the governments also and finally it resulted in higher allocation for different socio economic programs.
So the pre 91 era which was filled with socialistic sloganism and bureaucratic anarchism, provided only emotional stimulus to the people. In fact there were no takers for the poor. Because on the one side there was inadequate growth rate, lesser spending over socio economic programs and also higher leakages through the burearcracy followed by under performance of country's public sector because of the absence of competition from the private sector. On the contrary, the post 91 era provided high growth followed with comparatively more prosperity for the metropolis-urban area and its inhabitants and ultimately its trickle down affect provided employment to the rural unskilled, semi skilled, skilled and professionals also. So, what we saw, the money order economy as well as remittances economy got arised in the country. So we can view during post 91 era, there was definite growth of employment opportunities in the non government and in non organized sector. Though this was not an ideal set up for the growth of rural or the informal sector of the country. It was the trickle down affect as well as it was the mass immigration of laborers class from supply area to the demand area, which brought this kind of development and ultimately it ensured some amount of purchasing power to their pockets. This situation was practically better than the less growth and corrupt bureaucratic era of pre 91. Talking about the post 91 era, the high growth situation augmented tax proceeds of the governments which enabled them to go for higher allocation for rural development and also over items of human development.
Before concluding the argument of both the economists it is very necessary to analyze the similarity and dissimilarity of both pre 1991 and post 1991 era. The dissimilarity was on the front of investment and growth rate because we had a low investment and lower growth rate in pre 91 era and high investment and high growth in post 91 era. But there is similarity in both the era, it is on the governance front. There were leakages, corruption and mismanagement in the whole set up of the government in pre 91 era and it was very much there in post 91 era also. Though the higher growth rate and bigger revenue generation of the government enable higher allocation in different social sector, but it was facing the same bureaucratic hurdles and corruption like pre 91 era. Only difference we witnessed in post 91 era, that was the market and competition oriented relief which reached to the common public. In a way market provided relief to the people in terms of less corruption, fair prices and better work delivery in post 91 era.
So the both the great economist see the economy in pure academic manner, that is why they are ignoring political and social factors related with the economy of the country. So they do not discuss the aspect of governance and issue of corruption. Their arguments centered around policies and priorities only. The experience of post 91 era clearly showed us neither the socialism nor the capitalism help the cause of economy; it is only the sensible and scientific governance with the help of market can solve every problem. We cannot say that fixing of priorities will solve the cause of human development. First we need adequate amount of resources along with clarity on policies for this.
The experience also showed us the smooth functioning of economy is also accompanied with continuous political reform along with constitutional remedy of identity politics and populist pattern of economy. These factors have created barricades on many occasions. At present our economy has become prey to those populist policies. In 2008 loan waiver and MNREGA schems aggravated fiscal problems and now the food security ordinance is going to laid down a very pathetic story for the economy. It is going to create another den of corruption, fiscal imbalances, duality in the food market, annihilation of agriculture profession etc.
Consistent and regular reshuffling of policies and omitting all shackles of rule and regulation will bring good governance. It is a challenge not only for the politicians, bureaucrats, but also for the economists. Policy and programs have to be structured in such a way which can leave no scope for leakages, misappropriation and can generate optimum amount of economic as well as social welfare to the public.
Cost and output criteria should be always followed for all types of schemes whether of economic nature or social nature. It should have performance audit. The post 91 era shows us that the challenge of governances and regulatory authorities have not yet over. There are many areas, where regulatory authority like telecom is urgently needed. Because it is making losses of revenue to the government, it is not providing goods and services to the consumers at the reasonable prices; it is not attracting investment in sufficient manner.
I think, Prof. sen, who is worried about health and education, it actually need a regulatory authority because you cannot omit private institutions working in education and health field over nights. So only better option left with the govt., that is to bring regulatory authority for this. This kind of authority is needed in the field of electricity, petroleum, minerals, public transport, railways and roads. It has been seen no any regulatory authority other than TRAI and RBI able to perform their role in fair and competent manner. The regulatory authorities working in the field of electricity and roads have not proved themselves friendly to the consumers. So the real challenge is the governance. The factor of better governance will only adjudge the concern of both Mr. Sen and Mr. Bhagwati, whether it is to decide better policy and priorities in the area of human development or increasing the tune of investment in order to aggravate the growth pattern of the economy, both of them have ignored the factor of governance. Not to say, this factor was pertinent and prevalent in both the era of pre 91 and post 91.
In pre 91 era, the main focus was on distributional area which was helped by the pattern of induced growth with the public sector as a major player. In the pre 91 era the moderate rate of growth along with the corrupt bureaucracy never addressed the fundamental problems of the country in effective way. Whereas the post 91era witnessed high growth but on the distribution side it still had corrupt and inefficient bureaucracy, so it took the resort of trickled down affect in order to attacking poverty and etc.. But in post 91 era the only difference was that market forces and competition were allowed, which provided better and smooth result to the people. Now we conclude the points raised by the both economist, that who is right?
First of all we must understand that we cannot provide solution to any problems and issues through thinking in one way or two way, it need to be thought in all possible ways, because everything is attached with each other. p
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