Vijay Kelkar Convocation Address at BHU: Three development paradigms of Indian economy

Vijay Kelkar gave the convocation address at BHU on 23 Dec 2019. The lecture is up on the NIPFP website:

Today I want to share with you my reflections on our country’s journey towards what our first Prime Minister Pandit Jawaharlal Nehru so eloquently expressed in his mid-night speech on 15th August 1947 as our “Tryst with Destiny.” To my mind, this “Tryst with Destiny” meant wiping out the curse of poverty from our land and make our nation a prosperous and liberal Republic and thus contribute handsomely our due share to the wellbeing of every nation and to the advancement of global peace.

He points to three development paradigms:

It is hard to even comprehend the India of 100 years ago, where our leaders like Gandhiji, and Nehru got going on building the freedom movement. It was an India of incredible backwardness. To give you one illustration of how things were, here is an astonishing fact: literacy in India in 1920 was 8%. Today we’re at about 75%. We know how bad it is, that 25% of India is illiterate. But can you even imagine an India where 92% is illiterate? That was the starting point, where our founding fathers had the nerve to challenge the British, and also ambitions to envisioning what a free India would look like. They wanted India to
aspire to be a great and prosperous Democratic Republic. The founding fathers of our republic drew their inspiration from our syncretic civilizational heritage as well as from the French Revolution, American Resolution and the Revolutionary Magna Carta and most importantly from the robust good sense of the people of India.

The Second Paradigm was developed by thinkers from the mid 1960s onwards. Critical elements of this were built by the Ph.D. Thesis of Manmohan Singh and many other thinkers such as Arun Shourie, Abid Hussain, Jagdish Bhagwati and T. N. Srinivasan. These thinkers were acutely aware of India rapidly falling behind other dynamic economies of East Asia. These countries achieved great success in exploring export opportunities. For accelerating growth and removal of poverty, our reformers argued in favour of trade liberalization, scaling back the license-permit-raid raj, a flexible exchange rate, and a greater role for the private sector and linking actively with the global economy. These ideas were put into practice, slowly, from 1977 onwards, with Morarji Desai as PM
and changed course in Indian economic policy, gradually and carefully. Trend growth rose from 1979 onwards.

Third paradigm needs to be discussed:

In India today, we are veering towards “the administrative state”, which essentially means the rule by officials who possess arbitrary power, and who creep into legislative and judicial functions. We need to push back against this. Laws must be drafted through negotiation in the legislature, and not by the joint secretary. We need a much better functioning judiciary. And the arbitrary power of officials needs to be replaced by a rule of law system with elaborate checks and balances, which give protections to private persons.

These are the key ideas that need to go into the Third Paradigm that our thinkers need now to construct. These are the requirements of India at our present state of development, where a middle income economy has emerged, where weaknesses of the state have created fear in the minds of private persons who have retreated into low investment and consequently to deceleration of productivity growth and national income. Addressing these problems will put us on the path of growth over next few decades and thus will become an advanced and high income economy.

The essential features of the First and the Second Paradigms are principles, and a conceptual framework. Once the framework is understood, there is the practical process of looking at the short term situation and taking practical actions. In similar fashion, the third wave or policy paradigm is about ideas and principles. The First Paradigm was developed through a process of debate from 1920 to 1947. The Second Paradigm was developed through a process of debate from 1964 to 1977 and then all the way to 1991. In similar fashion, we must embark on a long journey of ideas, to debate the elements of the Third Paradigm, and flesh it out from high ideas into a practical program of action. This is our task in India today.

Nice way to summarise Indian economy in a mere 6 pages!

2 Responses to “Vijay Kelkar Convocation Address at BHU: Three development paradigms of Indian economy”

  1. A. Vasudevan Says:

    Dear Amol:
    I read with great interest my contemporary (age-wise) Vijay Kelkar’s Convocation address at BHU, where from I took my Masters in Economics in 1959 when Prof A K Dasgupta was the Head of the Department. I found it interesting when he spoke of the two paradigms. The third one, however, sounded to me flat and more noise-oriented.
    Even in the first paradigm, Kelkar made a mistake of attributing it, among others, to the efforts of Sukhamoy Chakravarty. That is not true, as one could glean from the Panel of Economists’ discussions at the time of the Second Five Year Plan and the Papers submitted by the Panel members. In fact, Chakravarty’s book on The Logic of Investment Planning came out in the late 1950s and his own presence in India was most seen in the 1960s when he edged out T N Srinivasan for Professorship at the Delhi School of Economics. The economists most prominent in the 1950s were: VKRV Rao, D R Gadgil, A K Dasgupta, K N Raj (the person who was said to be the main drafter of the First Five Year Plan). Pitambar Pant, an insider in the Commission became prominent in early 1960s with his piece on Perspective Planning. The fiasco of the 1966 devaluation of the rupee, and the writings of Jagdish Bhagwati and Padma Desai for liberalization should have been noted as critical points. Chakravarty wielded most influence in the 1970s in the Planning Commission with his basic needs approach. His battles with the brilliant Prof B S Minhas for influence however form a different story. And Dr Manmohan Singh was at that time one of the important technocrats who worked out the problems that were faced by India at the first oil crisis of 1973-74 from the Ministry of Finance.
    Dr Singh remained as a strong left of the centre right till he returned from the South South Commission chaired by Julius Nyerere. He was picked up by Prime Minister P V Narasimha Rao as Finance Minister after I G Patel refused the offer.

    Kelkar has not bothered to deal with the debates on development strategy under the First Paradigm which is such a pity. Why not look at the debate now that many speak of fiscal rules and monetary discipline in the current context? Perhaps he wanted the address to be short.
    The second paradigm was really contextual. Economic liberalization had been gradually making inroads in India in the second half of the 1980s when it was realized that a number of Asian economies have been growing faster than India with policies that are more oriented towards the need for functioning of markets. Whether it was PM Rao who wanted Dr Singh to work out the market oriented budgets and policies or whether Dr Singh influenced PM Rao on the issues of economic liberalization is a question that has no answers. My own hunch, going by my upbringing in Andhra Pradesh is that PM Rao wanted to come on to the political scene as a dominant figure with new ideas and a complete overhaul of the systems in place, thereby carving a place for himself in India’s economic and political history. But for his ‘nudging’, as I sense, Dr Singh would have proceeded much more cautiously than what he ultimately had done.

    These may look like rambling thoughts but they are important because Convocation Addresses could also leave some points for people to ponder.
    You have done a good service by making a note of Kelkar’s address which incidentally is available on the NIPFP website.
    A Vasudevan
    Former Executive Director,
    Reserve Bank of India

  2. Share from Mostlyeconomics: Three development paradigms of Indian economy – Pallavi Singh Says:

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