Ashoka Mody, Wilful Blindness And The Follies Of Full-Blown Anti-India Cassandrahood

Academic Cassandras get their knickers in a twist whenever anything seems to be going right for India.

If the country gets its Covid act more or less right after some initial fumbles, then they will claim that the death count is 10X higher than what the official figures suggest.

If India gets its fiscal math better than the US during the crisis, they will still point to the fact that Indian deficits are still way too large. If Indian growth currently is one of the brightest spots in the global economy, they will claim this is unsustainable.

This is particularly true of Indian academics who have found a lucrative perch in western institutions. 

So Ashoka Mody, a visiting professor of International Economic Policy at Princeton, should be forgiven for his recent article in Project Syndicate, where he suggests that “India’s Boom Is A Dangerous Myth”.

Having written a book that simply declares that India is Broken, Mody suffers from confirmation biases. He has no option but to scrounge around to figure out what appears broken, and, if nothing substantial is found, declare that what is not broken will soon be broken.

For India can never get it right. So our current economic positivity must be declared dead before arrival.

For Mody, nobody with any degree of optimism on India’s growth trajectory, whether it is the World Bank or the International Monetary Fund (IMF) or various research outfits, can be right. The blurb to his article says the following: 

“Indian elites, official forecasters, and international media have piled into the narrative that India’s economy is booming and positioning the country to become the great success story of the twenty-first century. But looking past the illusion created by headline GDP numbers, nothing could be further from the truth.”

One can reverse the gaze and point out how Indian-origin elites located in western academia have equally "piled into the counter-narrative that India's economy is broken, and nothing can rescue it, even faster growth and better policies."

This is not to suggest that India is in any way sitting pretty on the growth front, or, for that matter, on any of its major long-term challenges. We have to improve our primary and secondary education; we have to create more jobs; we have to get more women into the workforce. We have to reform many old laws. So, if Mody was only telling us about our challenges, few can fault him.

But surely an inability to see what is going right cannot be a virtue. The question is whether Mody wants to ever revise his views in the light of new facts, or he just wants to choose the “facts” that support his predictions.

The truth is India is paying the price for the mistakes made by our elites at the time of independence. Sometimes, the wrong choices made at inception can have disastrous consequences decades down the line.

India basically failed, so far, on three fronts: education, health and reform of the factor markets. But the mistakes are being corrected one by one, and the results are taking time to play out. In a pluralist democracy, it is easier to step on the brakes than the accelerator.

Given below are some of the challenges Mody mentions, and why we have at least begun to grapple with them to get ourselves back on track.

Education: Post-1947, our Macaulayputras created an elite education system that privileged English over regional languages. We also needlessly pitted Hindi against regional languages, miring ourselves in political rhetoric instead of action to improve literacy.

If education had been focused on regional languages, our illiteracy problem could have been eradicated 50 years ago. It is always far easier to educate children in their mother tongues, or even in any Indian language, than in a foreign language. 

The first task of independent India should have been to invest in public education, using both traditional learning systems and modern methods.

Some decisions only made things worse. One of the worst decisions of the UPA era was to give up on public schooling and depend entirely on private schools, with the poor getting reservations under the Right to Education Act. This not only ended in large private school closures, but also eroded educational outcomes.

However, many state governments have realised this folly, and are re-investing again in public education. The World Bank is also supporting the initiatives to improve learning outcomes.

We are getting on the right track and the results should follow. India is being fixed, even though slowly, but for Mody this does not mean much for it does not support his thesis that ‘India is broken’ argument. So he cannot see.

Public Health: We also got our primary healthcare investments wrong. Instead of investing in primary healthcare, we went for modern, showpiece hospitals, and our medical education system has turned out to be one of the costliest in the world (ie, outside government-run institutions).

But post-covid, we are investing again in public healthcare systems, including new hospitals at the district level, and digital extension is now a growing reality. We are again on the right track. 

India’s public-private partnership during Covid is also a great eye-opener. We developed our own vaccines roughly a month or two later than the US and Europe, and in just a year we vaccinated almost all our adults. A huge feat that even the US and Europe could not achieve.

If Ashoka Mody wanted, he could have educated himself by reading Aashish Chadorkar and Suraj Sudhir’s Braving A Viral Storm: India’s Covid-19 Vaccine Story. The book tells us how the Modi government adopted an all-of-government approach to develop, mass-produce and distribute vaccines free of cost to almost the entire population in just a matter of months.

Over the next decade, with telemedicine, digital health records, and public investments in cheap healthcare supported by free basic medical insurance, India will largely reduce its healthcare deficits at a fraction of the cost that the west did. 

Mody could also read this research paper on how the government’s toilet building programme improved child health outcomes. (Or this report). Or, if he wants confirmation that nothing may change in India, he could read this CNN report which acknowledges that 110 million toilets were built, but wonders if people will use them.

Factor markets: Post-1991, when we opened up our capital markets, we failed to reform our factor markets in land and labour, as a result of which our businessmen chose to borrow capital to invest in heavy industry, when they should have been investing in light engineering industries that employ more labour. We also made our land laws painful.

Till the UPA came to power, our land acquisition laws simply allowed the state to expropriate the lands of poor people without adequate compensation.

During the UPA-era, we lurched in the other direction, where anyone requiring large parcels of land for projects or infrastructure has to pay four times market value in rural areas, and two times market prices in urban areas. In the process, we have made our airports, highways and logistics costs even more expensive and uncompetitive than before.

But India has overcome this handicap as only it can. It is building infrastructure at a frenetic pace, and new policies are underway (Gati Shakti, etc) to reduce logistics costs for manufacturers. 

More than 156 projects that will reduce time to move products to ports have been identified for early execution.

One can, of course, point out that project announcements are not the same as execution, but if India’s exceptional performance with highways is any indication — more than half of India’s highways were built or expanded since 2014 — we have shown we can deliver. Nearly 21 km of highways are built daily. The aim is to increase this to 60 km a day.

Jobs: Mody is right to flag India’s weak job markets, but he is far too dismissive of the improvements seen in jobs growth potential, thanks to the planned shift of many global manufacturers away from China.

Mody says India’s hopes are illusory for three reasons: he thinks China will move its factories inland to reduce labour costs; foreign manufacturers may prefer Vietnam to India and US players may prefer near-shoring (ie, Mexico or Canada) to India; and three, the production-linked incentive (PLI) scheme to attract manufacturing will bomb.

India’s startups are also in trouble, thanks to the funding winter that has set in after the US Fed started raising rates to bring down inflation.

Short counters to these negative predictions follow.

1: The shift to India or Vietnam is not the result of only coastal China’s rising labour costs. They are the result of a global shift away from over-dependence on one unfriendly trading partner.

What remains in China may well move inland, but no global company wants to be wholly dependent on China.

2. While autocratic states like Vietnam can indeed offer easier short-term options for manufacturers to move out of China, no country offers the kind of domestic market like India does.

So, no, Vietnam or Bangladesh are certainly alternatives to India, but they do not offer the kind of market India can.

3. Mody quotes Raghuram Rajan to suggest that PLI will only fatten company profits. While Rajan also advocated a strategy of “Make for India” rather than “Make in India”, another former governor of the Reserve Bank, D Subbarao, warns against such pessimism even while admitting that the world is less open to offshoring production today than it was when China opened up.

He wrote in The Times of India today (5 April) that the “despair (over India’s manufacturing) is possibly misplaced” and “manufacturing is the only possible option for meeting the jobs challenge”. He points out that if even half the $100 billion worth of goods imported from China can be made in India by productivity gains, “it will mean millions of jobs”.

Challenges remain in skilling and human development, but the difference between a Subbarao and Ashoka Mody is simple: the former is trying to see what can or should be done; the latter is trying to emphasise that nothing can or will be done.

One can see potential and hope. The other suffers wilful blindness. If Mody wants to see the glass half full, he could try reading Gautam Chikermane's book, Reform Nation: From the Constraints of Narasimha Rao to the Convictions of Narendra Modi.

We may fumble, drop the ball occasionally, but we do ultimately pick it up and move forward. Nothing can stop the rise of India. It can be delayed, it cannot be stopped.