Sunday, June 8, 2014

Accidental India, by Shankkar Aiyar

My review of Shankkar Aiyar's book, "Accidental India", was published in the DNA on May 22nd, 2014. Except for the review's title and sub-title - "Should I Be Stupid Just Because the Government Is?"
Funnily enough, in India that was a fact of life and not an absurdity for several decades. - the review was published in its entirety.

This, below, is the review as it appeared in the DNA:

The opportunities that India has squandered, either through indolence or apathy, either individually or collectively, are far too many to be counted. Then there are the quirks of fate that have convinced Indians that perhaps the gods had it in for India – like Lal Bahadur Shastri’s untimely demise just when it seemed India would break free of the socialist straitjacket that had been imposed on the nation, or Sardar Vallabhbhai Patel being asked to make way for Pandit Jawaharlal Nehru as India’s first prime minister despite being the more qualified and better person on every count, or the most unexpected loss of the NDA in the 2004 general elections just when the nation had found a new, confident, and resurgent voice. The list goes on. Perhaps the most public of all humiliations would have been the shipping of Indian gold reserves to England as surety for a paltry loan of $400 million from the Bank of England. But as in every dark cloud, there proved to the silver lining. An accidental silver lining of sorts.
Shankkar Aiyar’s book, Accidental India, has even more relevance in today’s environment, given the trend towards consumption of real-time information in an abbreviated manner (read social media, especially Twitter) which encourages an almost junk-food style of an information diet – quantity without much value. This book looks at seven “accidents” that shaped India’s post-independent socio-economic landscape, for the better, and substantially so.

The nationalisation of banks in 1969, the Green Revolution of 1964, Operation Flood that started around 1949 but took off only in 1970, the Mid-Day Meal Scheme of 1982, the software revolution that traced its roots to 1990, the Right to Information of 2005, and the economic liberalisation of 1991 – each owed their origin to happenstance for the most part.
The most known and the most accidental of these seven has to be Verghese Kurien’s case. Kurien received a scholarship from the government of India to study dairy engineering at the Michigan State University (MSU), but studied metal casting, metallurgy and nuclear engineering instead. On returning to India, he was required to serve out a bond at Anand in Gujarat as part of the scholarship, where, by his own account, he whiled away much of his time, and almost left after the bond period.
Kurien stayed back in February 1950 back at the request of Tribhuvandas Patel, and ended up staying for the rest of his life. The results? The triumvirate of Kurien, Tribhuvandas Patel, and Harichand Dalaya – with Maniben, Sardar Patel’s daughter, as their “spiritual compass, philosopher, and guide” – would see India’s annual milk production rise from 17 million metric tons in 1950 to 66 million tons in 1996. The nationwide replication of the “Amul” model in Kaira would be undertaken at the behest of Prime Minister Lal Bahadur Shastri, who asked Kurien to create a national grid of “Amuls” across the country – “Make this your mission and whatever you need for it, the government will provide.”
It can be said at least three of the “accidents” – the Green Revolution, economic liberalisation of 1991, and the software revolution – owed their beginnings to the socialist straitjacket that was cast on to the Indian economy after Independence. The stifling and overbearing intrusion of the state and its bureaucrats into every sphere of the economy made any large-scale innovations next to impossible.
Indian businesses spent more time lobbying for permits and quotas in Delhi and devising ways to circumvent arbitrary limits on production than optimising their manufacturing processes or building the scale to compete globally. Consequently, “between 1960 and 1979, the per capita income of Malawi grew by 2.9% while that of India grew by an abysmal 1.4%.” Despite being an advocate of the poor, it was “the Congress party’s conviction that any initiative to improve agricultural growth should not lead to the enrichment of the rural rich” that led to the impoverishment of the rural economy, where three-fourths of India lived for much of the period post-Independence.
While the economic liberalisations took birth during the waning days of the under-appreciated Chandra Shekhar government, and the ever resourceful Subramanian Swamy, it would rest upon the Congress leader Narasimha Rao to nurture these reforms through the turbulent early years. He was assisted by Manmohan Singh, who “owed his survival to his ability to make a distinction between his opinion and the expediency his political masters expected of him.”
The roots of what perhaps can be called the single biggest economic planning disaster of the 20th century could be traced to India’s first Prime Minister Pandit Nehru, who believed it was “inevitable” that “the State which will survive, not that group which represents the profit motive in industry in its pure essence.” This, despite the (yet again) prescient warning of Sardar Patel, just months before his death, that “a government which engaged itself in trade would come to grief.”
Few would know that the Industrial Policy Resolution, moved by Shyama Prasad Mookerjee, “the minister for industry and supplies,... the first week of April 1948, some six years after the Bombay Plan was first presented to the Congress,... restricted the role of the State to just three sectors – munitions, atomic energy and railways.” This itself represented a significant reining of the “hardline socialists”, who wanted a much more substantive role for the state, and was in no small part due to the “influence of Deputy Prime Minister Sardar Vallabhbhai Patel.”
However, quickly and inexorably, the State, under Pandit Nehru and his chosen “high priest of planning”, PC Mahalanobis – described by industrialist GD Birla as a “statistician devoid of a sense of economic organisation” – would extend its reach deeper into industry. The American economist Milton Friedman would wryly observe, “One gets the impression, depending on whom one talks with, either that the government runs business, or that two or three large businesses run the government.”
The results were wretchedly predictable. India faced its first foreign exchange crisis in 1957. From 1950 to 1965, there was “only modest improvement in average living levels, and virtually none in the Third Five Year Plan.” Truly a generation brutally sacrificed at the altar of socialism.
Each chapter in Aiyar’s Accidental India provides one with not only an engrossing and fast-paced account of the “accident”, but expertly intertwined in the narrative is a succinct commentary of the political backdrop that influenced events as they happened – none more effectively than in “Das Kapital”, the chapter on the nationalisation of banks in 1969. Or even with “The Da Vinci Code”, the chapter on the origins and long drawn out birth of the Right to Information law. Though the developments are relatively recent, people will be surprised to learn of some of its lesser known facets, like its Indian origins from a lost in the mists of time “jansunwai” in Kot Kirana in Rajasthan 20 years before the birth of the first ever Freedom of the Press Act in Sweden in 1776 – the battles to obtain the right to freedom has been a painful one.
Despite having an inglorious, though some may say well-deserved, reputation for being the most somnolent of PMs India has seen, it was HD Deve Gowda who appointed a “Working Group headed by HD Shourie [father of Arun Shourie] ... to examine the feasibility and the need to introduce a full-fledged right to information bill” in January 1997. Metaphorically speaking, one’s eyes may pop out on reading that Digvijay Singh, then chief minister of Madhya Pradesh, was one of three influential CMs to speak out in support of the Right to Information as a means of checking corruption. The NDA government dragged its feet, despite some exhortations by Atal Bihari Vajpayee and some maverick interventions by the likes of Ram Jethmalani, for six years. The Freedom of Information bill received presidential assent in 2003, but the NDA government delayed formulating the guidelines needed to make the bill operational. It fell upon the newly elected UPA government to finally pass a modified and much strengthened Right to Information bill, which became an act in June 2005. This act has been used to shine a light on corruption and misdeeds all over the nation. Whether it has succeeded in curbing corruption remains a debatable question, but the act has been a welcome start.
In summary, this book packs a punch. I recommend this book for several reasons. It has an innovative selection of “accidents” as the underlying theme of the book – which in my opinion is a first. I don’t remember coming across any other book with a similar leitmotif. While the themes by themselves are excellent, the author has blanketed these with a superbly researched and in-depth look at both the politics and economics of the time.
It may be of interest to many that despite Nixon’s almost psychopathic antipathy towards India, it was during his regime that “Indian officials negotiated with Ambassador Daniel Moynihan and got interest payments due to the US—to the tune of over $4 billion—written off. This creation of money, studies by economist BR Shenoy have revealed, fuelled inflation and amounted to 35% of the deficit financing between 1962 and 1971.” Or that it was Morarji Desai who was a staunch opponent of the nationalisation of banks, while Chandra Shekhar – one of the “young Turks” – was in favour. Yet it was Chandra Shekhar who initiated the economic reforms of 1991. Such is life in politics and economics! The book is sprinkled with such nuggets. A must-have for anyone wanting to understand India’s erratic journey towards economic salvation.

The Tyranny of the License-Permit-Quota Raj – An Excerpt:
By definition, a small-scale enterprise could not install machinery worth more than 10 lakh whereas the cheapest import cost 12 lakh. So the first step the entrepreneur had to take was to under-invoice his imports. The second challenge was to manage the problem of scale. The number of cassettes that a small-scale unit could produce was capped at 20,000 a year while the machine actually produced 20,000 in a week. So what did one do with the machine for the rest of the year or fifty-one weeks? The way around the problem was tedious, explains Mumbai-based Shravan Kumar Sharma, financial consultant and auditor. The entrepreneur would lease licences, under various names, to put his installed capacity to full use. He would approach the regulatory authority that issued the permit—in this case the Department of Electronics in Delhi—and choose a place designated as a destination by the State for small-scale electronics, say Chiplun in Maharashtra. He would then obtain a Small Scale Industries (SSI) licence. The next steps would entail renting a place in Chiplun, which is near Ratnagiri, driving to Ratnagiri, and registering the business to get a provisional SSI certificate. This would then be stamped by officials in Chiplun, following which the stamped copy would be sent to Delhi with a fee of 100. The entire process would take from six weeks to three months. He would then have to repeat the process fifty-one times, under different names, even though the address for the manufacturing unit would remain the same in order to acquire licences to produce 20,000 cassettes every week. A very high duty—330 per cent—was imposed on imported video cassettes. So if the entrepreneur could work the system, he could make a lot of money very quickly. In fact, the accumulation of SSI licences in itself became a small-scale industry.”

Buying Information:
Amazon: US, India, India paperback, Kindle e-book
Flipkart: book, ebook
5 stars

Kindle Excerpt:

© 2014, Abhinav Agarwal (अभिनव अग्रवाल). All rights reserved.