As a $3-trillion economy, India is on her way to becoming an economic superpower. Between 1991 and 2011, the period of our best growth, there was also a substantial decline in the number of people below the poverty line.
Since 2011, however, there has been a marked retreat in the high growth performance of the previous two decades.
What happened to the promise? Where have we faltered? How do we change course? How do we overcome the ever-present dangers of the middle-income trap, and get rich before we grow old? And one question above all else: What do we need to do to make our tryst with destiny?
As professional economists as well as former civil servants, Vijay Kelkar and Ajay Shah have spent most of their lives thinking about and working on these questions. The result: In Service of the Republic, a meticulously researched work that stands at the intersection of economics, political philosophy and public administration. This highly readable book lays out the art and the science of the policymaking that we need, from the high ideas to the gritty practicalities that go into building the Republic.
In their thought provoking and densely technical book titled “In Service of the Republic”, former Finance Secretary to the Government of India, Vijay Kelkar, and Professor at National Institute of Public Finance and Policy in New Delhi, Ajay Shah track the trajectory of the Indian economy, alluding in particular to the ‘reversals’, which the country has suffered since 2011, following an exemplary growth spurt following liberalization. The authors also offer prescriptive structural and institutional measures to get the rails back on track.
A great portion of the book is devoted to explaining the functions of the state and an imperative need to instill implementable measures of checks and balances in a state’s working. According to the authors, “all state activities fall into two categories. In the first case, the state can use force to modify behaviour. A law can be enacted, that forbids a certain activity (e.g., killing, defamation or sedition) and threatens violators with punishment ranging from monetary penalties to imprisonment to death. In the second case, the state obtains tax revenues and spends this money in certain ways. But obtaining tax revenues is itself done through the threat of violence. The state demands that residents must pay certain taxes, and threatens us with monetary penalties or even prison time if these demands are not complied with. The big idea of liberal democracy is to limit state violence into a controlled, predictable and just form. In an ideal democracy, we consent to an ethical regime of coercion. When the checks and balances surrounding the state are imperfect, state violence can be applied in unjust ways.”
Terming economists in India to be ‘doctors without stethoscopes’, Mr. Kelkar and Mr. Shah identify the core reasons for public policy failures in the Indian economy. The authors expound that the quintessential reasons behind policy paralysis in India is a conflation of five key factors:
(1) The information constraint; (2) The knowledge constraint; (3) The resource constraint; (4) The administrative constraint; and (5) The voter rationality constraint.
The authors repeatedly stress upon the need for authentic, reliable and measureable data in order for meaningful conclusions to be drawn regarding the progress, or the lack of it, of the economy. This facet is an indispensable necessity especially while tackling issues of seminal importance. Prior to instituting and implementing any reform, the policy mavens need to ask the following questions:
• What is the problem? • What is the underlying root cause? • What are the interventions which can make a difference? • When interventions were undertaken in the past did they deliver useful results?
Mr. Kelkar and Mr. Shah bemoan the lack of a systematic process leading to an absence of posing the aforementioned questions prior to the unleashing of a policy reform. The authors also highlight that many of the draconian and ante diluvian measures that reared their ugly heads during the license-permit-raj era even now continue to rule the roost, albeit in a diluted and disguised form. While the process of liberalization ushered in a new era of free market philosophy, and tempered the intervention of the state in the working of the economy, there still continues to exist a more than “light touch economic regulation” by the State leading to roadblocks and stumbling choke points.
The authors also cite the examples of demonetization and the Goods and Services Act as a classic case of ushering in a measure without analyzing the potential ramifications and outcomes. A very interesting point made by the authors that makes a reader sit up and ponder is what they term ‘the under-supply of criticism,’ While it is universally recognized that dissent is the corner stone of any democracy, the authors argue that an absence of criticism or an under-supply of criticism in any society represents a market failure. Citing the example of Xu Zhangrun, a law professor at Tsinghua University in Beijing, the authors underscore how the absence of criticism impairs the functioning of a market. “In July 2018, Xu Zhangrun wrote a tough review of the hardline policies of Xi Jinping, the revival of communist orthodoxy and the adulatory propaganda surrounding Xi Jinping and the regime. Prof. Xu Zhangrun’ s essay has text such as: ‘People nationwide, including the entire bureaucratic elite, feel once more lost in uncertainty about the direction of the country and about their own personal security, and the rising anxiety has spread into a degree of panic throughout society.’ Such writing by intellectuals is the essence of building a civilized society, and imposes positive externalities upon the Chinese populace. However, Prof. Xu Zhangrun is alone in facing the attacks from the regime. He has been suspended, barred from teaching, investigated and barred from leaving the country. The externalities do not accrue to Xu Zhangrun, while the costs do. A few academics are courageous and speak up like this, but most would prefer silence.”
The authors, however come across as placing undue emphasis on Gross Domestic Product (“GDP”) as a barometer of progress. Readers may recall that as early as in February of 2008, when the world was racked by a financial recession of dangerous proportions, President Nicolas Sarkozy of France tasked Nobel Prize–winning economists Joseph Stiglitz and Amartya Sen, along with the distinguished French economist Jean Paul Fitoussi, to establish a commission of leading economists to study whether Gross Domestic Product (GDP)—the most widely used measure of economic activity—represented a reliable indicator of economic and social progress.
The Committee in a book titled “Mismeasuring Our Lives” provides a radical assessment or rather reassessment of the limits of GDP as a measurement of the well-being of societies. The authors propose a new slew of concepts ranging from sustainable measures of economic welfare, to measures of savings and wealth, to a “green GDP.” Even countries such as Bhutan have shifted emphasis from GDP to more deservingly alluring and logical measuring parameters such as Gross Happiness Index (“GHI”) to assess the holistic progress of the nation.
“In Service of the Republic” is an erudite work by two eminent economists, that makes for a necessary addition to anyone interested in embellishing the economic, political and social progress of India.
4.5/5 This was a classy, mature book and a lot different in tone from usual books on macro-economics. Starting from analysing the very need of state intervention, it goes on to explain policy-making - the pitfalls and the reasons for those pitfalls, the need for institutions over the Indian preference of taking shortcuts, the role of state capacity and also on tackling crisis. And all this in a completely non-partisan manner and with minimal anecdotes. As an accounting software developer, I was able to observe closely the implementation of GST. Doubly so since I dealt with clients in the textile industry who were outside the scope of excise and other indirect taxes. Possibly GST fell in every single pitfall - complicated design with 3 (or more) sub-taxes, botched GST govt softwares - right from excel sheets to the portal, a total lack of understanding how basic functions like goods return and credit/debit notes work in the real world and adding layers-upon-layers of complexities instead of cutting thru them. But, I guess we will keep going on like this. I would have loved some analysis of our society and our collective mindsets. Also, sometimes I felt the authors got repetitive else it would have been a perfect 5/5. Also, I am myself surprised how books on public policy and constitutionalism have become my comfort reads :)
Dr. Vijay Kelkar is one of those elders whom I was very keen on reading. But the book has left me disappointed because it is (a) Very theorising; (b) Quite superficial in the sense that it does not discuss any problem in depth - it rather skins over a variety of topics; and (c) Sporadic in writing. It seems to me that Dr. Kelkar was asked, after a very long time (his last book being in 2010) to write a book for a popular audience. And in my humble opinion, he has failed at communicating his ideas properly.
This is what all text books should be like. A text book on public policy, it makes the subject interesting and enjoyable. And it relates the concepts to current policies as well as the current problems of the country. Extremely important book to read.
This book is written at the intersection of economics, law, and public administration. It provides an overview of an ideal interdisciplinary approach that we should follow in policymaking in India, given its capacity constraint and immature institutions. The principal theme of the book is that market failure in itself does not justify state intervention. Between it, we must examine the state capacity, the incentives of political actors, and checks and balances provided by the larger institutions of the framework. In the pursuit of being broader than simple public economics, this book sacrificed on the technical front and is filled with incomplete examples. Overall, it is a good read for anyone interested in public policy and economics in general.
I am no expert on public policy but i don't ascribe to the general ethos of the book- it reeks of status quoism, a cynicism against everything Indian and obsessed with policymaking and state capacity of the west.
It has very limited examples that are repeated again and again throughout the book. It's recommendations , to my layman understanding, don't make a lot of sense in a dynamically changing world we live in today.
There are definitely some good ideas on the book- like limited state intervention, a design thinking-eseque approach to complex policy problems, one solution for one problem etc. but far and few.
But again, i am no expert on the subject, would like to read more public policy theory to validate my feelings or to come back and revise the rating later.
This is easily the finest book on Indian public policy that I have read in a very long time. Kelkar and Shah are 2 preeminent academics and policy makers in India today, and this book flows from their wisdom and experience of institution building.
People with the best of intentions typically think of nation building as a project requiring state interventions in multiple areas, the use of coercive power, and setting up a network of agencies and watchdogs. The first concept outlined (and hammered in) through the book is that several conditions must be satisfied (market failure coupled with the unworkability of Coasean/ community based solutions) before a state intervenes. This is especially true when there are many demands on the rather limited capacity of a state like India.
The other key takeaway is that policy making and institution building are very long term processes. They authors outline how several years of progress in the right direction set the foundation for strong growth over 1991-2011. What is clear (from this book and common sense) is that there has been a failure in building the enabling environment for India to grow beyond being a low middle income country.
The need for accurate measurement of outcomes, engagement with academics, favoring bite sized rather than "transformation" interventions, building administrative capacity at all levels, and being stingy in handing out discretionary powers are repeatedly brought out. Long term growth cannot be a function of pump priming the economy but of having strong institutions, limited and targeted state interventions, and intelligent remedy of market failures.
What is heartening is that India did go through a phase of falling coercive power of the state, stronger institutions, and general good growth. The 1991-2011 period saw landmark reforms including banning RBI from participating in government debt issuances, the setup of SEBI and market infra institutions, reduction of trade barriers, abolition of an alphabet soup of agencies, the passage of the Electricity Act, transparency in petroleum pricing, and so on. Sadly, this performance has not been repeated since, and institutional and academic capabilities have been eroded over the last decade. "Sad is the land which needs a hero" - and we are in need of quite a few now to kick start the virtuous cycle once again.
Anyone even slightly interested in India's economy, policy landscape, or future should read this book.
Indian policy ecosystem has been a showcase of plan in secrecy, a reversal in haste and gridlock in leisure. Mr. Kelkar and Mr. Shah write particularly well about the process and pitfalls of economic policy in India. There is probably little point in reading this book if you aren't interested in the working of the state. The authors infuse a new life into this timeless theme of public policy throughout 40 chapters. The book has a strong narrative flow, yet can be found repetitive/too elaborate in few chapters. There is mild criticism of SEBI, RBI handling of the bond market, and demonetization. A number of themes are prevalent in the book, few among them : coercive power of the state, separation of powers in an institution, state capacity, rule of law, & market failure. Some Insights are worth mentioning:
1. Intensification of the efforts comes easily to a bureaucracy as opposed to fundamental reforms. 2. The art of politics lies in understanding the map of interests and pulling off such reforms. 3. We suffer from three-page notes of individual reform measures, typically written by interested parties, which lack strategic thinking.
The march from the administrative state towards the libertarian state is slow, painful & full of conflicts of interest. We need literature that prioritizes economic freedom and strong institutions. The book is worth reading for all as it emphasizes the open and consultative public discourse over silver bullet appeal. I will end the review with a memorable quote by Dr. Isher Ahluwalia: "Nothing gets done by writing in a government committee report, but nothing ever got done without it being repeatedly written into multiple committee reports. "
This book is the latest addition to the handful of resources available to the general public in the context of the policy-making methodology and its application to the different market failures we observed in the Indian context.
The authors support the free-market as the innate solution to every policy failure which I find less agreeable to because in many cases they didn't provide any historical context and constraints in ways those policies proceed. Also, each small case was just an introduction to the problem and solution without any justification through the principals of economics, finance or social science. I was expecting it to include a more elaborate discussion of a case to each policy pipeline failure.
This book is a good introduction of "art" in this field but loopholes of reasoning and discussion which is also a crucial factor in "science" of economic policy. This can be compensated by going through the book written by Arvind Subramanian "Of counsel the challenges of Modi Jaitely economy"
This isn't a book only for policymakers, beaurocrats, or economists. It's for everyone interested in the working of the Government- which ideally should be every citizen. Highly recommended - it demonstrates the ideas with real examples from the past with a useful summary after each chapter. Have to say, it clarified so many of my own misconceptions.
Great book that draws from the lifetime experiences of the authors. This book equips us with a repertoire of tools to understand and analyse policy decisions and teaches a general framework to build republic. The only compliant I have is with the way chapters are organized which makes it a difficult read although worth all the effort. Definitely recommended for all the IAS aspirants and policy enthusiasts.
A very different book from the conventional Indian Economy texts. Its more about the failures of market, when the govt should intervene and how to manage democracy and reforms.
It does not go deep into any issue but talks about how failures arise in policy making and takes examples from the issues that the Indian Economy faces, from black money, education, to why GST and demonetization failed.
If you are one of them who thinks that reforms are not possible in a democracy or forcing reforms on people is the only way, then this is a must read for you.
In service of the republic is written by a former celebrated bureaucrat with strong reform credentials. This is also clearly reflected in the book where the author basically argues for “minimum government, maximum governance” in different words. The book lies at the cross-junction of public administration and economics. The book is mostly prescriptive and procedural in content and aims at emphasizing the “when” and “how” of state interventions. Moreover, it also attempts to highlight the deficiencies in Indian policy making and public administration while simultaneously trying to locate the reasons for those deficiencies in misplaced priorities. Although the suggestions offered by the author are good and definitely worth trying, it is quite repetitive and often bores the reader by throwing the same content again and again. The book also doesn’t offer any suggestion in how to build up capacity in the bureaucracy which is crucial for pursuing the suggestions offered. Overall, the book should be read by those who are in public administration and wants a sort of executive manual into some elements of policy making and public administration.
This book can serve as a primer in public economics & Policy. It traces the trajectory of Indian economy post 1991 covering the liberalization, Financial Market, Regulatory frame works, state interventions, institutional health and their failures etc. Considering the complexity of the subject, the aim of lucid presentation, it looks like, is to reach interested lay reader to get a hang of how & what of public policy. Any lay reader with a bit of curiosity in economics can get a grasp of what ails the Indian economy. In the hands of Kelkar & Shah the subject of public policy appears deceptively simple.
The authors develop their arguments from the basic economic principles to understand the nature of State, its coercive nature and its aversion for being accountable. They are very skeptical about state intervention in private life as it tends to use violence over which it has monopoly. Further limited & weak state capacity can not do anything right. Thus, the role of the state should be limited to those areas where individuals or society can not resolve within themselves. They say that society and individuals have a mechanism to organize themselves to mutual benefit and have in themselves a capacity for spontaneous order.
State interference is warranted where markets and society fail to solve their problems. They elaborate what are these market failures under which state has a role to intervene and resolve. These include provision of Public goods (clean air, clean water, road safety, criminal justice system), market externalities (water pollution, air pollution etc), asymmetry of market information (like the info about the medicine we purchase) and Market power (monopolistic competition etc).
Intervention by itself being a coercive tool, it should stand the scrutiny of series of questions such as, is there really a market failure, what is the type of failure, what is the purpose and scope of intervention, what is the state capacity to undertake that intervention, what are the specific objectives of intervention, do we have a plan to measure the results and take the feedback in to account etc.
They discuss elaborately the public choice theory which essentially states that people/groups respond to incentives and by changing the incentive structures the behavior can be changed. It says that whenever we design a system we should not expect ideal conditions at the ground level. We should formulate the policy taking ordinary men and not saints in to consideration and build provisions in to the policy which lead to intended outcomes in the real-world situation.
They recommend gradualism in policy implementation – crossing the river while feeling the stones (a remark attributed to Deng Xiao ping). They are averse to bin bang changes as they feel the society is so complex and its reaction is so unpredictable, the outcomes are bound to be way off the mark. Taking small steps, conceding limited scope & power of punishment to state, establishing feedback mechanisms, improving the state capacity, attempting the course correction as we proceed (feeling the stones!) are the recommendations of the authors.
There are so many new and interesting concepts, examples and insights for the lay reader, it is difficult to cover all the aspects of the book in a brief review. For the first time one will realize the importance social sciences and Humanities in education curriculum. The authors lament about the importance or weightage given to technology and Science at the cost of Humanities in our educational system.
Honestly this book needs a second and a third reading to grasp the import of the complex concepts.
One thing is clear, building a Republic is a slow, tedious process by people committed the ideal of human welfare with belief in their freedom and choice.
It is good because it is a no frills, accessible manual/how-to on economic policy, and has chunks of sound common sense. It is clear and concise, and a fairly easy read.
It is disappointing for some reasons - first, it starts and ends with market failures as the starting point for economic policy, setting aside inequality (or more broadly, injustice). That is problematic, especially when there is increasing critique of market ideas themselves. Sadly the book does not engage with the literature or the case for the counterfactual. This makes the starting point seem to come from closely held opinion rather than a specific logic. This is exacerbated by the fact that a bulk of the references come from Ajay Shah's blogs - surely there is more saying what the authors want to argue?
Second, I wish it had grappled with politics, culture, and values more than it does. It may be a strategic choice by the authors - but to think of economic policy as not affected by politics or culture at all does not make sense. The authors do not engage with social realities like patriarchy or casteism at all. That leads to oddities - there's one chapter where the author recommends asking the parents of teenage girls how they feel about safety of their daughters to understand the efficacy of law and justice reform. That approach doesn't grapple with the intersections of social and cultural values with policy.
Third, it is repetitive.
However, in the balance of things, I would recommend it, mostly because it makes you seek more, even if only to disagree!
Both Kelkar and Shah are deeply suspicious of State power and the consequences of its actions for the right reasons. While they don't deny a major role for the State in India (no logical person would), they do worry about its capabilities to do well, because as they write, "The law of unintended consequences" is, in a very dark humor way as remarked by Kelkar, too real to ignore!
The book will irritate those who think that the solution to every problem in our country is the paternalistic state. The authors have written this book on the foundation of Public Choice Theory, a major strand of political economy that emerged in Virginia, its founder being James M Buchanan, a major libertarian thinker of the 21st century. PCT is perhaps the most practical way to look at the intersection of politics and economics, and the authors recognize this in their book.
While the core message of this book is obviously fantastic, as a reading experience it is not necessarily great. No, it's not tough to follow, on the contrary, they have made ideas really simple to comprehend, but overall the book feels more like a collection of notes than a detailed manuscript, with some examples just thrown at the reader's face without ever going into the details of it. But maybe, they chose this style deliberately.
This is a brilliant book to understand what is the role of a government and how it should work.
The best part about this book is each chapter covers one topic in 3-4 pages and ends with a summary. It is written in simple English with Indian context and examples covering the period from independence till date.
1. It clearly explains what a government should do - address market failures and what it should not to do - everything else. 2. It describes the policy pipeline process. There are two ways to do this. The usual approach is a seven step process - data, research, create proposals, debate, decision making, draft laws, set up administrative structures to enforce the law. The alternative approach is - define the desired future state, define the specs of the future state, define the transition path from current to future, build political consensus and public support. 3. How to operate when state capacity is low.
For anyone curious about how Indian government works and what is the way to bring positive change, this is a great book.
This is not a well-written book. There are some good ideas in here, but for the most part they are overshadowed by incomplete examples (one of many instances - where they refer to Kenneth Arrow's ideas on elections, they say Arrow had ideas about why elections are flawed, but don't actually tell us what those ideas are or map ideas against reality to test their veracity). There's a woeful lack of citation, which could lead to issues of academic integrity if it hasn't already. The authors are repetitive in many instances, which makes for dull reading after a while. A book of this sort could and should have been more structured, coherent and detailed (where necessary). The authors seem to have gone for a "trust us, we know what we're talking about" route, where some really good ideas get crowded out by a lot unnecessary material, while details that should be there aren't.
A great book because of the coherent presentation of a diverse set of ideas on the role of the Indian state in economic policy making. The book makes a great attempt at answering the questions around "When", "Why", and "How" a state should intervene in a market economy. Some of the ideas seem too theoretical and abstract, without sufficiently grounding them in the realities of the modern world. For example, the authors rightly insist on public debate and discussion before settling on an intervention by the state, but they do not describe how the state is supposed to navigate the complexities of the world of social media, where debates and discussions quickly devolve into mudslinging and name-calling.
Overall, a must-read as an intellectual backbone for any policymaker or someone interested in the art and science of policymaking.
I recently finished David Boaz's primer on Libertarianism and found his arguments on the centrality of Market Failure to be the basis to determine the need for State intervention, quite thought provocative.
Kelkar and Shah in my opinion have packaged this idea in the context of India. In this extremely well-argued book, they bring out some of the key drivers that should ideally guide policy makers in the country. All state interventions in India should be guided by a strong appreciation of need, capacities, sound data etc. With specific examples and case studies, they made this an eye opener. For someone working in the policy space, this was a handy book and something that I may keep dipping into in the future too.
Some sharp editing could have helped this book specially since some ideas kept becoming repetitive in the later chapters.
Lo leí para mi clase con Blattman y aprendí algunas lecciones. Los autores proponen que los países con poca capacidad de estado no deben entrometerse mucho en la vida de sus ciudadanos. La sociedad, y el libre mercado, hacen un buen trabajo distribuyendo recursos de la manera más eficiente. Según los autores, el estado solo debe intervenir cuando haya fallas de mercado que impidan una distribución eficiente; puede ser por externalidades, asimetrías de información, abusos de poder de mercado y/o para garantizar la provisión de bienes públicos. Explican porqué según ellos solo estas razones son justificadas y proveen un manual al lector para entender cómo diseñar intervenciones, desde la identificación de un problema hasta la experimentación para descubrir la solución ideal, hasta la evaluación de los programas implementados.
This book is an advanced course of insights by experts with life time experience in the middle of the state action. Beginning with the purpose of government (enforcement of desirable standards in as many aspects of life as possible by a state) and why they fail to achieve good governance (people expect political actors to be angels and in India the system has been created with such a romantic view of political animals) the book marches on to give required reforms and policies to bring in optimal governance in as many sectors as conceivable.
A good book for beginners on policymaking outlining the classical perspective. I did not read it cover to cover. There's a verbose repetition of ideas all over the book. The bar for this genre of books is low, given the overflood of Keynesians. But nowhere near low enough for the authors to be able to scamper over. But to my surprise they do – with nonsense like "Free market failure", "Asymmetric information" tossed all over the book – all failed and discarded as neo-con nonsense in modern economics.
It would give a deeper understanding of why, how, and when a State should intervene (through public policy). One of the few books that marries the science of policymaking (the domain of the academics) and art of policymaking (the domain of the politicians) in a low-state capacity such as India.
This book is highly recommended for: 1. Policymaking students 2. Development practitioners 3. UPSC aspirants 4. Politicians!? 5. Any person who is interested in understanding the politics and economics of policies.
This book underlines the basics of policymaking in very simple and easy to understand concepts. Most of the book is written in a textbook format.
Kelkar and Shah have poured a very frank and reasonable assessment of the policymaking situation in India. They have also enriched the book with real examples of policy changes and their impact. Highly recommended for people who are interested in policy design and how public choice theory applies to it.
Instead of scratching the surface, this book on public-policy lays bare the fundamental processes in play in our system, giving the reader a reason why India's growth story has taken a beating post 2011. The book, most importantly, provides a blueprint, albeit seemingly generic in nature while being exceptionally critical, to revive our growth story, necessitating India's full-fledged blossoming into a mature liberal democracy. A must read book, especially for policy-enthusiasts.
Absolutely an eye opener, India with an increasing trajectory of economic growth, one of the top-five economies of the world, failed by the policies of the mighty State, with the centralising tendency and a bureaucratic structure which indulges in controlling and rent seeking rather than transforming India. All chapters are elucidated and illustrated with a lot of examples drawn from India's economic history and authors' experience.
Outstanding book on formulating public policy. Should be mandatory reading for anybody who is even remotely connected to public administration. Explained in simple terms, illuminated by pithy examples from India's experience over the years and invaluable first-principles. The book could have been edited to reduce the needless repetitions - for example, the 'coercive nature of all states', which is repeated in almost every chapter! Terrific book, nevertheless.