Carrots not Stick: Smart ways for GDP growth
This book talks about reasons for our slow growth in the past, and gives a pathway to rapid growth in the future. This Book written by renowned Economist, Politician and Lawyer, Mr Subramanian Swamy gives ways to Reset past mistakes, and achieve rapid growth.
Book Review by: Strategy Boffins Team
Subjects: Economic Development, Economics
Drain of Wealth
Book Reset: Regaining India’s Economic Legacy starts with reasons for poor growth in the past. As there was systematic loot during pre-independence India that happened through the rigged trade system, the zamindari revenue extraction mandate, and the collection made from taxes and levies imposed on Indians for British expenses incurred during World War I and II, Indian economy continued to decline pre independence.
Continued Dominance of Comprador
Jamindars or Comprador class of Moneylenders, who amassed wealth without contributing to productivity or taking any risks before independence, continued to dictate Indian policy after Independence.
“These India’s children of the ‘comprador’ class—children who had gone to England as students to get ‘Oxbridge’ degrees and then entered the bureaucracy through the civil service examinations. A Soviet-type socialist economy meant no loss of power over marshalling the resources of the economy. This future elite’s control over the state by virtue of its privileged education meant strategic placement and positioning in a future independent government of India. By the interlocking of families through marriages, caste brotherhood and cronyism, they ensured not only that, but they were also able to see to it that anyone who did not accept this socialist oligarchic dogma in Indian society found it difficult to secure any position of authority or even any employment.”
New Class ‘Rent Earning Losers’
These were businessmen who utilised captive markets, protectionist policies and the government’s directives, and made money by selling subsidized, licenced and quota-based raw materials and intermediate products to the private sector in the black market. Due to them, most of the structural reforms were further delayed and diluted by governments after 1996.
Government neglect of Agriculture
Agriculture has been covered in detail in the book. The poor and erratic performance of agriculture is attributed to the consistent neglect in the allocation of public investment to this sector
Poor growth rate of GDP
Detailed reasons for poor industrial growth, recent events such as demonetisation and NBFC crisis are given to analyse the current situation.
“The enormous costs imposed by demonetization, viz. over 1 per cent loss of GDP, the near-collapse of small-scale industries, supply chain disruptions, drop in employment, the multi seasonal effect on the crop season and the loss of livelihood due to the government’s unpreparedness to change over to new notes, is a governance horror.”
Future Strategy
Carrot not Stick policy is suggested. Incentives such as abolishing the income tax—and not by coercion, such as harsh levies and taxes are talked about in the book to boost GDP growth rate. Whole range of different steps to be followed by the government are given in the book.
The book is a must read for all economics students, bureaucrats, and the government.
