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Reset: Regaining India’s Economic Legacy – Subramanian Swamy

by Venky

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One of the most mercurial, vitriolic and eccentric politicians going about his craft today has to be Subramanian Swamy. An economist, statistician and polymath who now essays his tenure as a nominated Member of Parliament in Rajya Sabha (representing the BJP), Mr. Swamy was a member of the Planning Commission of India and also a Cabinet Minister in the erstwhile Chandra Shekhar government. In his recent book, “Reset – Regaining India’s Economic Legacy, Mr. Swamy takes a hard as nails approach to assessing the past and present trajectory of the Indian economy, analyses in a scathingly unbiased fashion the woes permeating it before proceeding to offer a slew of solutions ranging from the ‘doable’ to the didactic. Unsparing in both polemic and prose, “Reset” in a nutshell is a damning indictment of virtually every Government to have assumed the reins of power since the onset of India’s Independence.

Famously – and derisively – bandied as “Santa Claus” once, by former Prime Minister Mrs. Indira Gandhi, for suggesting a radical departure from the socialistic plank of economics, Swamy leaves no one in doubt about the repulsion he nurses for the former Soviet Union influenced model of economic planning with which India had an inextricable obsession during the Nehruvian era. To quote him, “this USSR-inspired economic strategy was foisted on the Indian people in the ’50s by Nehru—surprisingly without much debate. This was not the strategy that Mahatma Gandhi or Sardar Patel had advocated during the freedom struggle. The author of this strategy, namely Nehru, wanted the Soviet model adopted for reasons connected with his friendship with Lord and Edwina Mountbatten, but paradoxically, this Left ideology suited the interests of two powerful vested groups within our country: the feudal comprador class and the Left-inspired Indian intellectuals called the ‘Kim Philby’ group.”

In “Reset”, Mr. Swamy examines the trajectory taken by the Indian economy over a period of 150 years from 1870 to 2019. He further splits this review period of a century and a half into three distinct segments, namely the British Imperialism (1870 – 1947); the Soviet inspired command economy model (1950-90) and finally the period of economic reforms (1991 – 2019). In so far as the period between 1870 – 1947 is concerned, Swamy rails over the atrocities committed by the marauding colonisers and alleges that resources amounting to a jaw dropping number of $71 trillion were siphoned off by the British. He further expounds upon the pernicious zamindari system that heartlessly exacted every single penny from hapless farmers to fill British coffers. This section of the book makes for some tepid reading, more so because the topic of colonial loot has been extensively covered in other notable works such as Shashi Tharoor’s Inglorious Empire.

In so far as the centralized planning based on the command and control economy is concerned, Swamy reserves his uncontained displeasure and diatribe for the Governments of Jawaharlal Nehru and Indira Gandhi. In the process of dismantling the very logic underlying the adoption of Central Planning, Mr. Swamy makes some incredible allegations. “The grafting of this model on Indian planning was done by a physicist-turned-statistician who had little or no formal education in Economics—Professor P.C. Mahalanobis, founder of the Indian Statistical Institute (ISI), Calcutta. Mahalanobis, a confirmed Left intellectual, had plagiarized a Soviet growth model of the 1920s authored by Grigory Feldman, and introduced it into Indian planning without acknowledging the original authorship. For years, Feldman’s model was passed off in India as ‘Mahalanobis’ Growth Model’, till Massachusetts Institute of Technology (MIT) Economics Professor Evsey Domar discovered his plagiarism from his book Essays in the Theory of Economic Growth, and laid it bare.

In highlighting the inadequacies of the “Commanding Heights” instituted by the post-independence Governments till 1991, Mr. Swamy draws the attention of his readers to both the stagnation of the Indian economy as well as the rampant growth of other economies which had more or less commenced development on the same pedestal as India. “The so-called ‘Four Tigers’, namely South Korea, Taiwan, Hong Kong and Singapore, with less trained manpower and fewer natural resources, have moved from the Third World category to First World status (or Newly Industrialized Countries [NIC]) in just one generation! The per capita income of South Korea, for example, in 1962 was $82, comparable to India’s $70 at that time. Today, South Korea’s per capita income is about nine times that of India’s current level.”

However, there could be discerned an element of inconsistency in Mr. Swamy’s contention as while on the one hand he alleges that South Korea’s per capita income is about nine times that of India, he contradicts himself in a succeeding passage in the book where he contends that South Korea’s per capita income is about thirteen times that of India.

Mr. Swamy’s stinging criticism is not restricted to the Congress Government alone. The current BJP led Narendra Modi Government also comes in for some spectacular rebuke. Alleging that the economy currently is in a ‘tailspin’ and if left unchecked, has the potential to spiral into a disastrous zone, Mr. Swamy lays down a litany of woes from which the economy suffers. The much reviled and recalled moves of demonetization and Goods and Services Tax (“GST”) lie front and centre of Mr. Swamy’s wrath. Terming the GST implementation as a “flop”, Mr. Swamy goes on to pan the Government for its introduction. “The GST as a practical measure has been a flop, borrowed unthinkingly from the previous UPA government. Despite my sole protest in the Parliament, it was introduced much as a carnival, with gongs reverberating, and the president, prime minister, speaker of the Lok Sabha and the finance minister on stage. Today, we are saddled with redistributed tax revenue collection of nearly 1 trillion.”

For Mr. Swamy, if GST was an untimely measure gone awry, demonetization is but the handmaiden of disaster! Quoting similar demonetization experiments conducted in Europe, Mr. Swamy brings his reader’s attention to the fact that 99.15 percent and 98.77 percent of Italian Lira and French Francs respectively were returned over a ten-year period. However, the most damning aspect of the demonetization, as also the very evidence of its catastrophe is the fact that Indians managed to return a whopping 99.3 percent of the demonetized value in just sixty days! Mr. Swamy also lays down a slew of ingenious means which people and businesses resort to, to convert black money into legitimate currency such as routing them to Shell companies, foreign accounts, deposits in Jan Dhan accounts, round tripping schemes whereby money is sent to Nepal before being remitted back into India etc.

Mr. Swamy after waxing eloquent on the pitfalls and perils of the economy, proposes a slew of ameliorating measures before ending his work with a metaphysical flourish by quoting from the late Deen Dayal Upadhyaya’s Treatise on Integral Humanism. Some of the mechanisms that Mr. Swamy exhorts the Modi-Government to implement post-haste include:

  • Abolishing Income tax and freeing the individual from the grip of ‘tax terrorism’;
  • Raising GDP growth rate to more than 10 per cent, by propelling a corresponding increase in the rate of investment, (including FDI) to 38 per cent of GDP from the present 29 per cent;
  • Households to be incentivized by abolishing personal income tax to raise savings back to 34 per cent of the GDP;
  • For fixed deposits in banks, the rate of interest should not be less than 9 per cent. This will boost institutional and household savings in fixed deposits; and
  • To invest in innovations and enhancing the Total Factor Productivity

Mr. Swamy spares no blushes however in blowing his own trumpet. Harping on the invaluable and precocious nature of the Samuelson-Swamy Theory of Index Numbers, Mr. Swamy also makes it known in no uncertain terms that the economic reforms and liberalization which were promulgated by the Narasimha Rao Government originally stemmed from a reform paper conceived by him when he was a Cabinet Minister in the Chandrashekar Government. This is not the first time Mr. Swamy has issued such proclamations. He once took to Twitter to menacingly make the following declaration:

“If I apply Samuelson-Swamy Theory of Index Numbers to India’s GDP calculation or RBI interests’ rates, media will scream anti party activity!”

May modesty be damned!

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