By Amiya Kumar Bagchi, Emeritus Professor, Institute of Development Studies, Kolkata
The book is an in-depth study of the Indian economy in the post-Covid situation and its place in global finance. It has both a strong conceptual apparatus and a solid empirical base. It sometimes reads like an Alice in Wonderland book when it gives an explanation of the weird actions of the government of India. Why, for instance, does the government refuse to release the huge stock of 77 million tons of food grains for the public distribution system when India ranks even lower than some of the poorest Sub-Saharan countries in respect of its hunger index? Or why does the government want foreign capital to enter the government bond market when it is well known that the volatility of such capital has caused crises in countries as far apart as Greece and Indonesia? Or finally, why does the Indian government vote with the United States against the proposal to expand the IMF’s special drawing rights by 500 billion US dollars, when it would have been clearly in India’s interest to support the proposal?
In every case the answer seems to be that the government has chosen a path of willing dependence on the United States – a dependence that has been strengthened by the recent military and security agreements with the USA. The government’s refusal to release food grains for public consumption is owing to the fact that it would involve higher public expenditure, and squeeze the space for foreign investors and their collaborators among India’s big capitalists. The slashing of public investment has created an endemic shortage of effective demand and has created a permanent reservoir of exploitable labour to the benefit of both foreign and Indian capital. Much of Indian big capital has now become ‘internationalized big capital’. In order to get out of this rut and get on to a path of what the authors call ‘democratic economic development’, four steps are crucial: first, expansion of public expenditure on food security, education and health care; stopping the privatization of public enterprises; reversing the steady trend towards capital account convertibility; and finally , developing strong trade and investment links with developing economies such as China, Vietnam and South Korea.
This book can be used as a textbook on finance and development in developing countries. I would also recommend the book strongly to anybody interested in understanding the tentacles that bind developing countries to US capital, and how to move on to a path of democratic economic and social development.
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