Why Growth Matters: How Economic Growth in India Reduced Poverty and the Lessons for Other Developing Countries

by Jagdish Bhagwati, Arvind Panagariya

Overview

In its history since Independence, India has seen widely different economic experiments: from Jawharlal Nehru's pragmatism to the rigid state socialism of Indira Gandhi to the brisk liberalization of the 1990s. So which strategy best addresses India's, and by extension the world's, greatest moral challenge: lifting a great number of extremely poor people out of poverty?

Bhagwati and Panagariya argue forcefully that only one strategy will help the poor to any significant effect: economic growth, led by markets overseen and encouraged by liberal state policies. Their radical message has huge consequences for economists, development NGOs and anti-poverty campaigners worldwide. There are vital lessons here not only for Southeast Asia, but for Africa, Eastern Europe, and anyone who cares that the effort to eradicate poverty is more than just good intentions. If you want it to work, you need growth. With all that implies.

Product Details

ISBN-13:	9781610392723
Publisher:	PublicAffairs
Publication date:	04/09/2013
Sold by:	Hachette Digital, Inc.
Format:	eBook
Pages:	304
File size:	1 MB

About the Author

Jagdish Bhagwati is university professor of economics at Columbia, and a long time fellow at the Council on Foreign Relations. A native of India, Professor Bhagwati studied at Cambridge University, MIT, and Oxford before returning to India in 1961 as professor of economics at the Indian Statistical Institute. He is the author of many books, among them In Defense of Globalization.

Arvind Panagariya is Professor of Indian Economics at Columbia. He is a non-resident senior fellow at the Brookings Institution. He has been the chief economist of the Asian Development Bank and a professor of economics and co-director, Center for International Economics, University of Maryland at College Park. He is the author of, among other books, India: The Emerging Giant.

Table of Contents

Preface vii

Introduction The Tryst: The Vision and the Reality 1

Part I Debunking the Myths

1 Indian Socialism and the Myths of Growth and Poverty 7

2 Myths About the Early Development Strategy 11

3 Reforms and Their Impact on Growth and Poverty 27

4 Reforms and Inequality 45

5 Reforms and Their Impact on Health and Education 57

6 Yet Other Myths 81

Part II The New Challenges: Track I Reforms for Faster and Broader Growth

7 Track I and Track II Reforms 95

8 A Multitude of Labor Laws and Their Reform 101

9 Land Acquisition 125

10 Infrastructure 129

11 Higher Education 135

12 Other Track I Reforms 143

Part III More Effective and Inclusive Redistribution: Track II

13 Track II Reforms 149

14 Attacking Poverty by Guaranteeing Employment 157

15 Adult Nutrition and Food Security 165

16 Reforming Health Care 177

17 Elementary Education 189

India: Past and Future 201

Acknowledgments 209

Appendix 1 Socialism Under Nehru 211

Appendix 2 Measuring Inequality: The Gini Coefficient 215

Appendix 3 Key Provisions of the Right to Education Act, 2009 219

Appendix 4 Prime Ministers of India 223

Notes 225

References 255

Index 267

What People are Saying About This

From the Publisher

George A. Akerlof, Nobel Laureate in Economics, 2001“Jagdish Bhagwati and Arvind Panagariya are two of the great intellectual lights behind one of the greatest miracles of economic history: the economic reform of India, and its subsequent takeoff.  It is not just the well-to-do who have benefited, but, especially, the poor.  The lessons from the spirit of 1991 are not just relevant for India today; they are also of prime importance for the billions of citizens of low income countries around the globe.”
Martin Feldstein, George F. Baker Professor of Economics at Harvard University and president emeritus of the National Bureau of Economic Research“In this important book the two leading experts on India’s economy refute the claims of those who reject pro-growth policies in favor of redistribution schemes. India’s experience in the past two decades shows how a nation’s economic growth reduces poverty and improves the well-being of disadvantaged groups. Bhagwati and Panagariya explain what India needs to do now and how other countries can learn from India’s experience.”
Hernando de Soto, economist and author of The Mystery of Capital“Assembling reams of evidence from India’s astonishing economic success story, Bhagwati & Panagariya make an unbeatable case for why market reforms are essential to economic growth—and improving the lives of the poor. Serious reformers throughout the developing world cannot ignore this book or Bhagwati’s work throughout the years.”
Ernesto Zedillo, director of the Yale Center for the Study of Globalization and former president of Mexico“Every important developing country should be the subject of a masterful book like this. Bhagwati and Panagariya have paid a great service to India—and actually other emerging countries—by writing it. If it’s a must read for scholars and practitioners of economic development, it should be absolutely mandatory for the Indian political leaders."

Editorial Reviews

Though it seems like common sense that economic growth lowers poverty, Columbia University economists Bhagwati (In Defense of Globalization) and Panagariya (India, The Emerging Giant) argue forcefully that growth is the only effective approach. They assert that India’s economic development is relevant to the developing world as a whole, and, in lively fashion, rebut myths of growth and poverty under the Jawharlal Nehru and Indira Gandhi administrations. The authors’ view that a country with widespread poverty has a comparative advantage in labor-intensive goods, due to the availability of cheap labor, may be debated. Bhagwati and Panagariya more effectively argue that general economic growth is an indispensable prerequisite to redistributionist programs aimed at assisting the poor; without growth, there is little to redistribute. As much of the world struggles with elevated debt levels, the vision of India as “a role model for reform today” has applications reaching beyond the developing world. Agent: Markson Thoma Literary Agency. (Apr.)

Publishers Weekly

Publishers Weekly
“[Bhagwati and Panagariya] assert that India's economic development is relevant to the developing world as a whole, and, in lively fashion, rebut myths of growth and poverty under the Jawharlal Nehru and Indira Gandhi administrations… As much of the world struggles with elevated debt levels, the vision of India as ‘a role model for reform today' has applications reaching beyond the developing world.”

Washington Examiner
“All economic correlations are complex, and many factors are at play, but Why Growth Matters shows how the poor benefit from economic development and which regulations still stand in the way. As Pope Francis opens a discussion on reducing poverty, the book could not have come at a better time.”

James Crabtree, Financial Times
“This latest contribution from Jagdish Bhagwati and Arvind Panagariya, two Indian-born economists at Columbia University, is welcome. In Why Growth Matters, the duo provide perhaps the most full-throated defence to date of India's economic liberalisation, which began in 1991 and is widely understood to have led to a period of fast growth over the past decade.“

George A. Akerlof, Nobel Laureate in Economics, 2001
“Jagdish Bhagwati and Arvind Panagariya are two of the great intellectual lights behind one of the greatest miracles of economic history: the economic reform of India, and its subsequent takeoff.  It is not just the well-to-do who have benefited, but, especially, the poor.  The lessons from the spirit of 1991 are not just relevant for India today; they are also of prime importance for the billions of citizens of low income countries around the globe.”

Martin Feldstein, George F. Baker Professor of Economics at Harvard University and president emeritus of the National Bureau of Economic Research
“In this important book the two leading experts on India's economy refute the claims of those who reject pro-growth policies in favor of redistribution schemes. India's experience in the past two decades shows how a nation's economic growth reduces poverty and improves the well-being of disadvantaged groups. Bhagwati and Panagariya explain what India needs to do now and how other countries can learn from India's experience.”

Hernando de Soto, economist and author of The Mystery of Capital
“Assembling reams of evidence from India's astonishing economic success story, Bhagwati & Panagariya make an unbeatable case for why market reforms are essential to economic growth—and improving the lives of the poor. Serious reformers throughout the developing world cannot ignore this book or Bhagwati's work throughout the years.”

Ernesto Zedillo, director of the Yale Center for the Study of Globalization and former president of Mexico“Every important developing country should be the subject of a masterful book like this. Bhagwati and Panagariya have paid a great service to India—and actually other emerging countries—by writing it. If it's a must read for scholars and practitioners of economic development, it should be absolutely mandatory for the Indian political leaders."

Pankaj Mishra, New York Review of Books
“A passionate case for more privatization and liberalization, and less protection for labor…Bhagwati has provided intellectual authority and sustenance to those who think that India, by prioritizing wealth-creation over health and education, can become a ‘role model' for ‘other developing nations.'

From the Publisher

Bhagwati (Economics/Columbia Univ.) and Panagariya (Indian Economics/Columbia Univ.) collaborate again (co-editors: India's Reforms: How They Produced Inclusive Growth, 2012, etc.) in this rebuttal of critics of India's present economic performance. The authors seek to lay to rest the views of some who disagree with them about poverty, malnutrition, health and mortality, and education. They seek to show, for example, that while caloric consumption seems quite low on average, the numbers don't point to the extensive malnutrition their opponents claim exists and need not have much to do with the prevalence of stunted growth and other continuing evidences of persistent poverty. Their arguments, however, are occasionally undermined by the evidence they provide and may not convince non-Indian readers. Among the most dramatic indicators are those concerning per capita income, life expectancy, infant mortality, maternal mortality, deaths from malaria and childhood stunting. While India's performance is comparable to Bangladesh, it differs markedly from China. India's women, as well as their children, do indeed appear to be in a class apart. The authors leave many unanswered questions about the continuing influence of India's caste system in its struggles to achieve what they identify as necessary growth--nor are institutions of higher education the hoped-for panacea. Bhagwati and Panagariya show how India's food-subsidy system becomes perverted as supplies are sold into private distribution channels to raise cash that can be spent on nonfood items. The authors seem to undermine the view that India can successfully compete with China. For students of Indian affairs or global economics, particularly in the East.

Kirkus Reviews