This is a guest post by Vinayak Uppal (previously an economist in South Sudan, more recently at DFID India, soon to be OPM), summing up the recent debates between heavyweight economists Amartya Sen and Jagdish Bhagwati. He would opt for reading Bhagwati if you had to pick only one.
“Is there some action a government of India could take that would lead the Indian economy to grow like Indonesia's...If so, what, exactly? ...The consequences for human welfare involved in questions like these are simply staggering: Once one starts to think about them, it is hard to think about anything else.”
Thinking about India is precisely what some of India’s best-known economists have been doing. An Uncertain Glory, written by Amartya Sen and long time collaborator, Jean Dreze, and India’s Tryst With Destiny by Jagdish Bhagwati and Arvind Panagriya are two recent books that put the spotlight on Indian development.
Economists, even global leaders such as these, rarely make mainstream headlines. The last few weeks however have seen regular updates to an increasingly acrimonious, personal and bitter spat, being played out in op-eds, letters, interviews and talks all over the world, increasingly with strong political overtones.
So what are they saying, and what is the disagreement over?
Sen argues that India under-performs significantly in a variety of social indicators. It therefore needs to focus on building human capital like health and education first, with such services (largely) provided by the State rather than viewing growth as an end in itself.
Bhagwati's book reads like a capitalist manifesto, making a strong case for the gains that reforms have brought the average Indian through economic growth, and argues that far more reforms are needed to sustain progress.
Like all good debates, there is plenty of disagreement. Sen has stated previously that in an under-nourished country such as India, it is stupid to focus obsessively on growth. He points out how India is now like “islands of California in a sea of Sub Saharan Africa”. Bhagwati takes a far more positive view of growth, highlighting the hundreds of millions of people pulled out of poverty in the decades since growth accelerated, and the rapid improvements in almost all social indicators.
Sen clearly believes that basic services can, and should, be delivered through State systems, rightly highlighting many of the gains made in states like Himachal Pradesh and Kerala. Bhagwati comes out firmly on the side of cash transfers in many of the social services like health and education. His view of the public sector can be simplistic, seeing almost any money spent through government as a waste.
There remain a number of untouched issues. Both are relatively quiet on the environment. Sen skirts around economic reforms and growth, giving only passing references to crucial issues like infrastructure, labour reforms and increasing job creation. Bhagwati’s views on improving governance are limited, as are his views on how to combat corruption and social exclusion. His book also doesn’t answer the basic conundrum of why India has been unable to provide its citizens with a basic standard of living, despite being the world’s biggest democracy and many of its poorer neighbours performing far better.
It is important in the middle of this heated debate, to remember that they agree on the fundamentals. (Bhagwati clearly disagrees with this, calling Kaushik Basu and Montek Ahluwalia simplistic bureaucrats for suggesting such a thing!) Neither of them is debating the importance of growth or questioning the need to spend resources on delivering health and education.
These are both big books attempting to grapple with the pressing issues facing India today. They are also both rather staid books; no Poor Economics or More Than Good Intentions style human-interest stories pepper the chapters. Instead they are filled with academic references, charts and statistics to better illustrate their points. Yet, both are worth a read. They present different views on development, with areas of agreement, but also fundamental differences in approach and priorities.
If I had to pick one recommendation, it would be Bhagwati’s which seems more comprehensive, better argued and more grounded in India’s reality where the problem is often not poor policy, but poor implementation of policy. It also thankfully presents his views on policy, unlike some of his downright nasty editorials, which may be one reason the only Nobel he has won has been in Springfield.
 For ease of reading, the views are presented as Sen’s and Bhagwati’s individually, though the books are jointly written by Sen and Dreze, and Bhagwati and Panagriya respectively.