Raghuram Rajan & Rohit Lamba argue for a uniquely Indian way to prosperity in Breaking the Mould

Raghuram Rajan and Rohit Lamba

Will 2024 be an inflection point for India? It depends. On how well we look back, to stocktake, and look ahead to build a vision. Our imagination will need a supply of questions to ask, facts to gather, and roadmaps to read. To help, Raghuram Rajan and Rohit Lamba’s new book, Breaking The Mould, Reimagining India’s Economic Future, is an important work to pick up.

The book’s main value comes from answers to how, why, and where countries prosper. How countries grow rich is a refresher from economic theory. Why India failed to make use of the known answer, is a quick round-up of economic history. Where India should place its hope is a guide to policy and governance. Each question flows from one to another.

India awaits structural transformation

Penguin Business; 336 pages.

Countries grow rich when the nature of their economic activity transforms from farms to factories. Prosperity levels not just increase, they transform. This period in time is best described as a country’s industrial revolution. India hasn’t seen this transformation, yet, while its peers China, South Korea, and Taiwan have. These economies caught up with prosperity by carrying out land reforms, which generated surplus income from their farm economy to invest in manufacturing. Their manufacturing aimed to meet global demand, facilitated by technology already developed in the west. The gains made were deployed to improve education levels, and worker skills to finally help complete the transformation. India missed every aspect in this chain. Land reforms failed. India was shut off to the world. Education levels and skills are still subpar, leaving citizens at low levels of income. In 2022, agriculture contributed 16 percent of India’s GDP but employed 44 percent of Indians. India is still stuck. This reasoning is under-appreciated. The book emphasises that India can no longer follow this path. Trends like nearshoring, geo-political disadvantages from poor supply linkages, and smaller gains makes it no longer feasible for India to pursue manufacturing. The book then steers to answer, what now?

India’s growth can come on the back of services

The Indian growth story is one where its citizens moved from farms to services. Service-driven manufacturing and export of services using technology is the answer to how India should look ahead to transform itself. Rajan and Lamba emphasise that services are on a spectrum and surplus derived from higher level services creates demand for those on the lower end, bringing prosperity for many. The intended purpose is to speak of crafting the right approach, that is no longer to mimic the approach taken by India’s more prosperous peers. It is also to suggest a path to remedy policies that are heading to commit us to the industrialisation and manufacturing path. The book, however, is like a cheese board, where the reader only gets a nibble of this thought. There are case studies and examples of firms like Lenskart, iD the food products company, Moglix a B2B supply chain company, among many others, to spark imagination. There are other diverse items on the board making it a book wide on breadth, offering principles of governance, ramping-up capabilities of our citizens and public institutions.

Large reference to reform governance, human capital, and innovation

The second part of the book feels like a watchmaker’s description of how to restore a complex mechanical watch. The authors pass on their deeper understanding of decentralisation, need to create government capacity, and ways to use technology to deliver on childcare, education, health, and inequality. The description makes one realise how broken the watch is.

The book’s scope of what has gone wrong and the many challenges is rich. It has the added advantage of two authors with their research work and understanding rooted in India. They can be trusted to know India’s reality and challenges on women labour-force participation, unskilled youth pursuing careers in a jobless economy, most Indians without safety nets running the risk of slipping into destitution, poor incentive structures from targeted subsidies, the need for India to become rich before it becomes old, and our hubris on foreign relations.

In fact, the scope of this book is huge and the ambition is to cover as much as possible, almost making it come across as a central book of references on what India must do. It reveals the authors’ intent on circulating many answers to many challenges.

It is hard to disagree with another central narrative of the connection between the need for ramping up research, improving institutions of higher education, to make Indian firms offer and compete on innovation. Unfortunately, all of it is written to supply wisdom. It comes from a place of aspiration. The politics is sticky and an evaluation of how the government works is not part of the book’s scope.

Interestingly, the book breaks the mould itself, by turning to a final section that is a conversation imagined between a reader and an editor. The reader is an archetype of a person convinced that India is on the right path. Convinced of the current government’s action, inspired by the G20 presidency, steered by the Hindu-first rhetoric. Both authors engage in rhetoric to persuade the reader outside of it. Throughout the book, too, there are clear descriptions of how our governments, politics, and society have slipped.