------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (September 2008)

Arvind Panagariya, _India: The Emerging Giant_. New York: Oxford 
University Press, 2008.  xxx + 514 pp., $40 (cloth), ISBN: 
978-0-19-531503-5.

Reviewed for EH.NET by Arjun Jayadev, Department of Economics, 
University of Massachusetts -- Boston.


Arvind Panagariya?s book represents an important contribution to the 
voluminous literature on India?s economy. While there has been no 
shortage of scholarship on the subject -- one of the favorite countries 
of study for development economists worldwide- there have been few 
authors who have attempted the ambitious task of providing a 
comprehensive survey of the trajectory of the economy and the history of 
macroeconomic policies in a single volume. Panagariya?s lifetime of 
research on the subject makes him well placed to tell this story. The 
depth of this knowledge is certainly evident throughout this book, and 
most tellingly in his description of the evolution of various policies 
in the history of independent India. Yet, despite the considerable 
weightiness of this work, its central message is rather musty and the 
uneven and slanted marshaling of debates will do little to convince 
those who are less well inclined to the common liberal narrative of 
India?s growth pattern.

The morality tale of the fall and resurrection of market-oriented 
policies and the rescue of India from poverty and moribund growth when 
policy makers turned away from dirigisme is the backdrop for the 
analysis in this book. In Panagariya?s retelling, the modern economic 
history of India is a play in four acts: 1951-65 -- a period of relative 
liberalism under Nehru; 1965-81 -- a period where ?Socialism Strikes 
with a Vengeance?; 1981-88 -- ?Liberalization by Stealth?; and 1988-2006 
-- ?The Triumph of Liberalization.?  The general story is told in the 
first part of the book and is by now well known and standard. What is 
striking, however, is how ideologically uncompromising, even stubborn, 
the author is in the defense of this narrative.  Panagariya?s odd 
periodization can be seen, for example, as a response to arguments made 
by Dani Rodrik, Arvind Subramanian and Atul Kohli that the period 
1980-91 should properly be seen as the beginning of the productivity 
surge in India. Panagariya?s annexation of the high growth rates from 
1988-1991 to the era of liberalization (a full three years before its 
official start) makes the overall growth rates seem that much higher in 
the latter period. There is no compelling reason given for this maneuver 
and it is one of several dubious presentations of evidence or 
mischaracterizations of opponents throughout the book.

Consider as an example, the chapter on South Korea and India. Panagariya 
does no justice to the arguments of what he calls the revisionists.  For 
example, he attacks Dani Rodrik?s (1995) argument that the initial 
impetus to Korean growth could not have been export orientation (since 
incentives to export were not high enough in the 1960s) and more likely 
investment coordination and an increase in incentives to private 
investment began the cycle of growth. Rodrik argues that the 
contribution of exports to overall growth was low until the 1970s. 
Panagariya?s ?proof? via an argument of Westphal and Kim that exports 
also had an effect on investment growth is in no way a refutation of 
anything that is claimed by Rodrik. An examination of Rodrik?s paper 
shows much greater care with the arguments than Panagariya takes. 
Furthermore, the fundamental claim of the revisionists is that there was 
substantial dirigisme in the Korean case -- an argument which Panagariya 
does nothing to dismiss.

Another example is the treatment of regional divergence in India. 
Panagariya seems to treat this as a non-issue and suggests that since 
the number of poor in all regions is falling, greater effort towards 
poverty reduction in the poorer states will automatically treat this. 
Scholars of the Indian experience will point to two missing aspects. 
First, the rate of poverty reduction has not increased in the 
post-liberalization period and certainly not in the states where poverty 
reduction has been most needed. Second, any effort towards poverty 
reduction in these regions will likely require illiberal policies such 
as increased public expenditure and directing of finance. There are 
several other examples which any reader will observe.

Several large sections of the book are arguments countering the work of 
more recent authors who have started to question and revise our 
understanding of the policies of the pre- and post-liberalization 
periods. Panagariya crosses swords with Rohini Pande and Robin Burgess 
on the idea that nationalization of banks and the rural banking movement 
reduced poverty; he takes issue with Petia Topalova?s finding that those 
districts which imposed fewer tariffs saw slower decreases in poverty; 
he takes on Nouriel Roubini?s and Richard Hemming?s contention of 
fragility in India?s financial sector; he argues with Pranab Bardhan?s 
characterization of the debate on labor laws and so on. While there is 
nothing wrong with the robust partisanship on display, one has the 
impression that he is taking on too much and as a result is too often 
unconvincing. Several criticisms devolve into a criticism of 
methodologies of his opponents; valuable perhaps, but rarely definitive.

The book then turns to chapters dealing with a specific topic, beginning 
with the debate on poverty, inequality and reforms before considering 
specific sectors of the economy such as the external sector, 
agriculture, industry, health, telecommunications and so on. The 
question of poverty, growth and reforms is one that is immense (for a 
full, book-length treatment, see Angus Deaton and Valerie Kozel?s _Great 
Indian Poverty Debate_) and Panagariya?s summary of this debate 
naturally leaves much out. While his exposition has an unobjectionable 
conclusion -- higher growth rates have led to lower poverty and have 
been the single biggest benefit of liberalization -- he is too often 
dismissive of genuine concerns of policy makers and scholars.  For 
example, he is scornful of those who are concerned with equity, 
underscoring a narrow Paretianism at best and ?trickle down? championing 
at worst that underlies his views. In Panagariya?s view (pp. 160-61), 
reforms have become ?hostage to the ... pursuit of equity,? which may 
have an adverse impact on growth. Best rather to trust to the 
philanthropy of the super rich to reduce poverty (he cites Bhagwati?s 
use of Bill Gates as an example). This is a rather strained position 
considering the spending habits of India?s super rich (where the fourth 
wealthiest man in the world is best known for planning to build a 
billion dollar home). Other positions on poverty debates also are 
equally implausible. For Panagariya there is no clear link between 
India?s problem of farmer suicides and reforms (and in doing so he 
ignores the findings of several researchers that increased market 
orientation in agriculture, greater volatility from world prices and 
lack of sources of formal debt engendered by financial reforms were 
strong correlates). Instead he suggests, farmers who committed suicide 
were perhaps simply of a greater ?risk taking nature? and thus were 
highly indebted.

The book is at its strongest in the chapters on policy changes in the 
various sectors that he tackles. There is much to be commended in these 
chapters.  I have not come across a single similar source with the level 
of detail and historical information on the history of policy in these 
sectors. This is an erudite exposition but the reader should be warned 
that it does not make for casual reading. The exhausting mountain of 
facts and the linear narrative are more in the mode of a textbook than a 
synthetic reading in the light of an overarching theme.

As a whole then, this is an ambitious and wide ranging book and will 
allow a patient reader a much greater in-depth knowledge of the ebbs and 
flows of policy. It is not, however, without flaws. An ideological 
fidelity can often lead to great perspicacity and allows for a new way 
of thinking about a subject. One thinks of such books as Jagdish 
Bhagwati and Padma Desai?s 1970 book (_Planning for Industrialization_) 
which was an early critique of planning or Pranab Bardhan?s 1984 book 
(_The Political Economy of Development in India_) which examined class 
dynamics in India as exemplars. Those books made arguments with verve 
and penetration but most importantly provided a template by which to 
think about the Indian economy. In doing so they became and remain 
classics. Panagariya?s book also displays an ideological affiliation but 
one that that is increasingly stale. This is a pity because there are 
many nuanced ways in which liberalization can be defended. In addition 
it takes too many liberties in creating straw men opponents and twists 
too many arguments without adequate defense to suit the required 
conclusion. As such, despite its undoubted scholarly strength, it is 
unlikely to make anyone think differently.


Arjun Jayadev is a Post Doctoral Fellow at the Committee on Global 
Thought, Columbia University as well as Assistant Professor of Economics 
at the University of Massachusetts Boston. He has published articles 
recently in the _Journal of Development Economics_, _Economics Letters_, 
and the _Cambridge Journal of Economics_. Arjun.jayadev at umb.edu

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