How India's Economy Can Break the Mold

05/15/24 • 51 min

Breaking the Mould: India’s Untraveled Path to Prosperity is a big new book by the economists Raghuram Rajan and Rohit Lamba. The book is both a critique of India’s development model as well as a manifesto for reform.

Most notably, it challenges the conventional wisdom that India’s primary goal should be to transform the country into a blue-collar manufacturing powerhouse. Rajan and Lamba argue that India cannot duplicate China’s development model, but it has the opportunity to leapfrog by focusing higher up the value chain.

To discuss the book’s ideas and its policy implications, Milan is joined on the show this week by Rohit Lamba. Rohit is an economist at New York University-Abu Dhabi and will soon be joining the Economics Department at Cornell University. He’s twice worked in the chief economic advisor’s office in the Indian Ministry of Finance.

The two discuss what the critics get right about the Indian economy, why India cannot blindly follow the Chinese model, and how India can pivot “from brawn to brain.” Plus, Rohit and Milan discuss the manufacturing versus services debate, India’s inward economic turn, and what India must do to upgrade its human capital.

Episode notes:

1. W. Arthur Lewis, “Economic Development with Unlimited Supplies of Labour,” The Manchester School 22 (1954): 139-191.

2. Rohit Lamba and Arvind Subramanian, “Dynamism with Incommensurate Development: The Distinctive Indian Model,” Journal of Economic Perspectives 34, no. 1 (2020): 3-30.

3. Devesh Kapur, “Why Does the Indian State Both Fail and Succeed?" Journal of Economic Perspectives 34, no. 1 (2020): 31-54.

4. Devesh Kapur, “Exit,” Seminar 677 (2015).

Episode notes:

1. W. Arthur Lewis, “Economic Development with Unlimited Supplies of Labour,” The Manchester School 22 (1954): 139-191.

2. Rohit Lamba and Arvind Subramanian, “Dynamism with Incommensurate Development: The Distinctive Indian Model,” Journal of Economic Perspectives 34, no. 1 (2020): 3-30.

3. Devesh Kapur, “Why Does the Indian State Both Fail and Succeed?" Journal of Economic Perspectives 34, no. 1 (2020): 31-54.

4. Devesh Kapur, “Exit,” Seminar 677 (2015).

Previous Episode

What Rahul Gandhi Wants

The third phase of India’s 44-day long polls took place this week with voting held in 94 constituencies across 12 states. Thus far, the elections have been marked by lower-than-expected turnout, intensifying communal rhetoric, and a sharp debate about inequality and redistribution.

Against this backdrop, the New York Times Magazine recently published an essay by the journalist Samanth Subramanian titled, “Time Is Running Out for Rahul Gandhi’s Vision for India.” The essay was based on a reporting trip in February of this year in which Samanth traveled Uttar Pradesh with Rahul Gandhi, the former president of the Congress Party who remains its most promising face. Samanth is the author of several award-winning books, This Divided Island: Life, Death and the Sri Lankan War and A Dominant Character: The Radical Science and Restless Politics of J.B.S. Haldane. He has also long reported on India and Indian politics.

To talk more about his recent essay, Samanth joins Milan on the podcast this week. On the show, he and Milan discuss Rahul Gandhi’s political vision, the tensions within the Congress Party, and Gandhi’s strengths and weaknesses as a politician. Plus, the two debate the party’s fortunes, its relationship with Muslims, and the Gandhi family legacy.

Episode notes:

1. Rahul Bhattacharya, “Rahul Gandhi is on the march. But where is he heading?” 1843 Magazine, May 2, 2024.

2. Samanth Subramanian, “multi-storied,” Substack newsletter.

3. Bhagi Siva and Samanth Subramanian, “What it takes to live near an elephant herd,” Washington Post, January 21, 2024.

4. Samanth Subramanian, “When the Hindu Right Came for Bollywood,” New Yorker, October 10, 2022.

5. Samanth Subramanian, “How Hindu supremacists are tearing India apart,” Guardian, February 20, 2020.

Next Episode

A Blueprint for India’s State Capacity Revolution

Over the last five years, Milan has interviewed authors of big books, that have brought innovative new ideas to the India policy debate. And he’s also interviewed authors of lengthy books. On the show this week, he sits down with an author who’s written a big book in every sense of the term.

It is no stretch to say that Accelerating India’s Development: A State-Led Roadmap for Effective Governance is one of the most important books written about the political economy of India’s development. Over 600 pages and 200 pages of notes, it takes readers on an exhaustive deep dive of India’s governance challenges, especially in delivering essential public services. The book draws on a wealth of research and practical insights to offer actionable, evidence-based strategies for reforms.

The author of this new book is the economist Karthik Muralidharan. Karthik is the Tata Chancellor’s Professor of Economics at the University of California San Diego.

He is one of the most prolific economists of his generation and his works spans public finance and development economics, with a focus on education, health, welfare, and public service delivery.

Milan and Karthik discuss the book’s origin story, Karthik’s framework for thinking about state capacity, and how to change the incentives of politicians and bureaucrats. Plus, the two discuss some of the book’s big ideas, ranging from data collection to public sector contracting and cash transfers.

Episode notes:

1. Karthik Muralidharan, Niehaus, Paul, and Sandip Sukhtankar, "General Equilibrium Effects of (Improving) Public Employment Programs: Experimental Evidence from India," Econometrica 91, no. 4 (2023): 1261-1295.

2. Karthik Muralidharan, Paul Niehaus, and Sandip Sukhtankar, "Integrating Biometric Authentication in India’s Welfare Programs: Lessons from a Decade of Reforms," Center for Effective Global Action Working Papers, University of California, 2022.

3. Karthik Muralidharan, Paul Niehaus, Sandip Sukhtankar, and Jeffrey Weaver, "Improving Last-Mile Service Delivery Using Phone-Based Monitoring," American Economic Journal: Applied Economics 13, no. 2 (2021): 52-82.

4. Karthik Muralidharan, Paul Niehaus, and Sandip Sukhtankar, "Building State Capacity: Evidence from Biometric Smartcards in India," American Economic Review 106, no. 10 (2016): 2895-2929.

5. Karthik Muralidharan, “A New Approach to Public Sector Hiring in India for Improved Service Delivery,” India Policy Forum 12, no. 1 (2016): 187-236.