The aftermath of the Sen-Bhagwati debate - Hindustan Times
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The aftermath of the Sen-Bhagwati debate

Jul 11, 2022 08:11 PM IST

In 2013, shortly after the rupee crisis, the two economists sparred on India’s governance priorities. Modi’s win in 2014 might have symbolised the rise of the Bhagwati model, but Sen’s ideas seem to have been more successful under this government

The current debate on the rupee’s fall evokes a sense of deja vu. In the summer of 2013, concerns about India’s burgeoning trade deficit and rising inflation triggered an exodus of foreign investors, leading to a sharp fall in the value of the rupee. As is the case now, economists and policymakers were divided on the extent to which the Reserve Bank of India (RBI) should intervene in forex markets to stem the tide. Given that the Indian economy runs on imported energy, chronic trade deficits and their side-effects will be with us for a long time. How to manage them is likely to be a perennial debate.

The push to provide more women with bank accounts and gas connections and the heavy State thrust on providing safe drinking water and improved sanitation are ringing endorsements of Sen’s ideas. (Arvind Yadav/HT PHOTO) PREMIUM
The push to provide more women with bank accounts and gas connections and the heavy State thrust on providing safe drinking water and improved sanitation are ringing endorsements of Sen’s ideas. (Arvind Yadav/HT PHOTO)

However, the other big debate of 2013 seems to have lost its salience. Shortly after the rupee crisis of 2013, India was witness to a heated debate between two of its most famous economists: Amartya Sen and Jagdish Bhagwati. The two sparred on what India’s governance priorities should be, setting the stage for a wider public debate.

Sen argued that India should invest more in its social infrastructure. This would boost the productivity of its people and raise growth at the same time. Without better health and educational outcomes, rapid growth is meaningless, he argued. India’s primary focus should be on expanding welfare schemes, Sen wrote.

Bhagwati argued that India’s focus should be on growth-enhancing reforms. Rapid growth would pull millions out of poverty, and also generate enough resources for the State to take care of those left behind. Without sustained and rapid growth, India would not be able to make sizable investments in social sector schemes, Bhagwati wrote.

Sen and his co-author Jean Dreze elaborated their views on this issue in their 2013 book, An Uncertain Glory: India and Its Contradictions. Bhagwati and his co-author Arvind Panagariya likewise put forth their views in their book published the same year, Why Growth Matters: How Economic Growth in India Reduced Poverty and the Lessons for Other Developing Countries. The debate also played out in a terse exchange of letters between the two economic giants in The Economist, and subsequent op-eds on this subject by them and their followers.

Apart from the stature of the two economists (one a Nobel-winning welfare economist, and the other a Nobel-worthy trade theorist), the upcoming 2014 Lok Sabha elections added an edge to this debate. Sen and Dreze backed the Congress-led United Progressive Alliance (UPA) government’s attempts at creating a new set of entitlements for citizens such as the right to information, education, and food. Bhagwati and Panagariya were unabashed admirers of the so-called “Gujarat model” of development under the leadership of Narendra Modi.

The academic debate between the two sets of participants quickly assumed political hues. It was inferred that Modi’s rise symbolised the advent of the Bhagwati school of thought. This impression was reinforced when he made Panagariya the vice chairman of the NITI Aayog. Sen’s strident opposition to Modi — largely because of concerns related to the safety of minorities but also because of Gujarat’s limited successes in health and education — put him in the opposite and “losing” camp.

Yet, Sen’s ideas seem to have enjoyed greater success in the Modi regime than those of Bhagwati. The push to provide more women with bank accounts and gas connections and the heavy State thrust on providing safe drinking water and improved sanitation are ringing endorsements of Sen’s ideas.

It was Sen who highlighted the issue of widespread open defecation in his 2013 book, not Bhagwati. Sen and Dreze pointed out that Bangladesh had made more progress in building toilets than India, leading to improvements in its health and nutritional outcomes. They lamented the lack of public attention on an issue affecting half of India’s population. Modi succeeded in galvanising the State machinery to act on this issue. The sanitation ministry’s claims of success are no doubt exaggerated. Surveys by other governmental and non-governmental agencies suggest that open defecation still persists. Yet, these surveys also show that the share of households using toilets has risen sharply in recent years.

It was Sen and Dreze who passionately advocated a safety net for the poor in the form of employment guarantees and generous in-kind food transfers. Bhagwati and Panagariya had advocated a shift to direct cash transfers. Yet, the Modi regime has reposed trust on the much-maligned Mahatma Gandhi Rural Employment Guarantee Scheme (MGNREGS) and the Public Distribution System (PDS), especially during the pandemic. Modi’s economic advisers have even recommended that the MGNREGS be expanded to urban areas. Others sympathetic to the regime have discovered that they like the PDS very much.

The Modi regime has not abandoned big macro-economic reforms altogether. It has implemented the insolvency and bankruptcy code (IBC) and made some efforts to cut red tape. Yet, it has invested far less energy in pushing macro-economic reforms than it has in pushing the welfare agenda. On trade, India’s protectionist turn goes against Bhagwati’s prescriptions.

On balance, the Modi regime seems to have done more to advance Sen’s ideas than it has done to advance Bhagwati’s. The reason is not difficult to fathom. It is relatively easier to sell Sen’s ideas in the electoral marketplace.

Pramit Bhattacharya is a Chennai-based journalist

The views expressed are personal

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