The contents of global discontents

In its second tenure, the United Progressive Alliance government passed the Land Acquisition, Rehabilitation and Resettlement (LARR) Bill 2013, to replace the century-old Land Acquisition Act of 1894.

Although specific provisions of LARR remain deeply contested, the National Democratic Alliance government has tried to amend some of its contentious provisions. Does the LARR address the fundamental cause behind the extensive litigation that arises over the issue of land compensation?

Or, given the penchant of global capital markets to look for the next big investment avenue, which countries have the most potential to catch up with developed world standards over the coming decades?

These are some of the questions that economists have attempted to address in a new book titled Economic Theory and Policy amidst Global Discontent, written in honour of economist extraordinaire Deepak Nayyar.

A compilation of essays written by notable economists, the book spans a range of issues, from inequality to globalisation to market failures.

Each essay has been carefully slotted by the editors in three categories. The first such section examines the evolving dimensions of globalisation. The second section explores aspects of economic theory and public policy, and the last section documents the lessons to be drawn from the experiences of emerging economies such as India.

In an essay titled “Is land a bottleneck for economic development in India?”, Ram Singh, professor at the Delhi School of Economics, begins by tracing the problem land markets in India.

Mr Singh contends that it is wrong to attribute the absence of a well-functioning agricultural land market simply to “market friction, high transaction costs and the hold-up”.

Rather, he argues, and perhaps rightly so, the “constraining land use regulations seem to be more critical reason for the lack of transactions in agriculture land.”

On the contentious issue of compensation, critics of LARR have vehemently argued that the new law has raised the cost of land significantly, making some projects unviable, Mr Singh takes a different view.

He argues that under the new law, as was the case in the previous one, government officials are required to assess compensation on the basis of sale deeds. This tends to create a downward bias.

A study of the judgements of the Punjab and Haryana High Court suggests that there “is a tendency among officials to play it safe and award compensation using relatively low value sale deeds,” he says, adding that by comparison, “courts tend to use higher value sale deeds.”

This would suggest that the fundamental cause of litigation — the undervaluation of property in order to evade taxes — remains unaddressed even by the new law.

Thus, Mr Singh concludes that as the LARR “is open to strategic manipulations and litigations,” it “does not address the fundamental causes behind litigation over compensation.”

In another chapter, Y V Reddy, former governor of the Reserve Bank of India (RBI) takes a tour of the major policy debates that have dominated public discourse in India since independence.

Mr Reddy begins with the key debate of the 1950s — the choice between the development model proposed by P C Mahalanobis and that proposed by VakilBrahmananda.

But rather than exploring various aspects of these plans in detail, or how adopting the Mahalanobis plan actually affected India’s development trajectory, Mr Reddy then steers towards the key debates of the sixties — the devaluation of the rupee and the nationalisation of banks.

The author then moves swiftly to the seventies where the debate over equity and efficiency dominated economic discourse.

In the eighties, discussions veered around the loan from the International Monetary Fund (IMF), while in the nineties the great India poverty debate took centre stage.

Each of these debates is dealt with in a rather perfunctory manner, which leaves the reader wanting more.

At times, though, Mr Reddy teases the reader by posing intriguing questions such as: Was the IMF the only alternative for India to borrow money from in the 1980s?

Or, he says, “I wondered why the economic ideology advanced by Swatantra Party, led by C Rajagopalachari, which predates President Reagan and Prime Minister Thatcher, did not find a pride of place in debates on economic policy in India.”

But neither of these questions are addressed by the author.

In another chapter titled “Beyond catch up: some speculations about the next twenty-five emerging economies” Sudipto Mundle, emeritus professor at the National Institute of Public Finance and Policy (NIPFP), draws on Deepak Nayar’s book Catchup to explore the prospects of 25odd countries over the coming decades.

Mr Mundle’s approach to the subject attributes primacy to economic and political institutions, similar to the approach espoused by the economist Daron Acemoglu and the political scientist James Robinson.

He draws a clear distinction between countries with economically inclusive and extractive institutions and between inclusive and exclusive institutions.

Based on an exhaustive analysis of the economic and political institutions in the 25-odd countries, the author concludes that “sustained high growth in Asia is being driven by the existence of inclusive economic institutions”.

By comparison, he notes that the “absence of catchup in most countries of Africa and Latin America is attributable to the prevalence of exclusive extractive economic institutions, usually combined with similar political institutions.”

ECONOMIC THEORY AND POLICY AMIDST GLOBAL DISCONTENT

Essays in honour of Deepak Nayyar Edited by Ananya Ghosh Dastidar, Rajeev Malhotra and Vivek Suneja Routledge

448 pages

~995