Thoughts on economics and liberty

A review of ‘Imagining India’ by Nandan Nilekani

Imagining India

I was able to got a copy of Nandan Nilekani's book on 24 February 2009 through my wife who had made a two week trip to India. Since then I've been able to haphazardly read through chunks of the book during the pauses between my work for the Freedom Team and my draft manuscript, The Discovery of Freedom – work which occupies almost all my spare moments.

I will need to read this book again, carefully, with detailed underlining. The problem is that I read books mostly in my bus ride to work, but this is a very chunky book, making it difficult to do that. Instead, I'll read it again on my sofa at home in the next few weeks. [Additions made after 1 March are in maroon]

Over the few snatches of reading of the book so far I think I've got enough of a sense of what it is talking about to write this initial review. In due course I'll revisit this and revise it where appropriate. You are most welcome to comment on the review if you like.

First of all, let me say that I STRONGLY RECOMMEND this book to every person who has even the remotest interest in Indian policy. Despite its (few) weaknesses, I believe everyone on the Freedom Team, for instance, must read this book. All future leaders of India must definitely peruse this book very carefully.

Strong points

1) Deep knowledge: Mr Nilekani is extremely knowledgeable – rather surprisingly! – on a wide range of policy matters. For a person whose full-time job must have kept him quite busy, this shows extreme passion for India – something I deeply admire, and may I daresay, share with him.

2) Sound policy prescriptions: It was a pleasant surprise to find a close match between his ideas and mine – for the most part. He speaks almost in my tongue, and advocates many liberal policies. He also displays a deep understanding of the potential of IT in solving many of India's problems. The book is far more comprehensive in its policy coverage than Gurcharan Das's two outstanding books (India Unbound and Elephant Paradigm), which is no mean accomplishment.

His policy advisers/ acquaintances overlap in part with mine. For instance he cites Ramesh Ramanathan, Ajay Shah, N.Seshagiri, and many others I know and admire. I worked with Dr N. Seshagiri in my Assam days both as Project Director DRDA and as Director of Computer Applications. The last I met him was as Commissioner for Information Technology, Meghalaya, in 2000, and he was kind enough to provide Meghalaya with Rs. 50 lakhs worth of IT infrastructure at my request. In the 1980s/1990s, I helped to strongly support his efforts on the ground but also challenged him where NIC was, in my view, exceeding its brief in the federal model we must insist upon in India.

Separately from Seshagiri's efforts, though, I created a deep database at the village level, the design of which can act as model for the direct elimination of poverty (details of the information system I created are here, and details of how it can be used to eliminate poverty are here). I believe, along with Mr. Nilekani, that a citizen ID is necessary and compatible with freedom, so long as its purpose is limited to basic uses (p.373). Indeed, he is promoting exactly what I had written about in 1999 and 2000 – cited above. I had taken my detailed model for trialling in Meghalaya to the then Secretary Planning Commission who said it wouldn't get political support. I thereafter resigned from the IAS in disgust, after realising that good ideas were simply not going to be even trialled in India.

Overall, the themes covered in this book are in many ways similar to the themes I cover in Breaking Free of Nehru. The key difference is that my book is focused far more clearly and precisely on liberty and governance reforms than his is. But I won't go into details here, except to emphasise that I agree with most of his views.

Some worries
I have a few worries about the book, as well:

1) Action Plan: There is no clear action plan arising from Mr. Nilekani's thoughts. In Breaking Free of Nehru, on the other hand, I have proposed a clear plan of action. I believe we are obliged not merely to offer solutions: we must offer to implement them as well. In my forthcoming March 2009 article in Freedom First (the article was sent off on 12 Febraury, before I got hold of this book) I wrote:

"Nandan M Nilekani of Infosys wrote in Imagining India that he is 'quite unelectable' – thus conveniently washing his hands off politics. Apart from the fact that it is highly presumptuous for anyone to assume the response of the voter, all that the voter really wants is a demonstration of good citizenship, not some mythical glorious leadership. I therefore ask Mr Nilekani and others like him to stop making excuses and join politics as good citizens. Give our voters a chance to elect good people."

Whether he joins politics or not is a matter for Mr. Nilekani to consider. It is, in the end, a personal choice. All I'd caution him against is to not join any existing party – all of which are badly tainted with black money and vile people who either directly indulge in corruption or connive with others who do. The only way to join politics (if Mr. Nilekani ever wishes to) would be to work with a group of leaders committed to integrity in every way. Infosys is distinguished by values leadership. Similarly, there is no way that politics should be divorced from values.

But I wouldn't say that this lack of action plan is a major worry. It was desirable to have one, but it absence is not an overriding problem.

b) Lack of awareness of major policy advocacy efforts in India: In such a comprehensive book, I expected a discussion of the many crucial contributions of Parth Shah, Barun Mitra, and Bibek Debroy, among many others. Promoting their work is, in my view, critical for the spread of the ideas of liberty and good governance in India. But I found little or no mention of their work. Perhaps there was no place in this already large book, but this does remain a shortfall to be addressed in future editions, perhaps.

c) Inconsistent philosophy. This is my strongest criticism of the book. Mr Nilekani does not display a clear, underlying, consistent worldview. I have tried to outline mine in The Discovery of Freedom, for it is vital to have one, else one soon lands up in a total mess.

Thus, for instance, I got flabbergasted when Mr Nilekani seems to recommend a marks subsidy (extra marks in exams, see p. 302) for backward 'castes', something that JP of LokSatta also has been advocating and something that I simply can't support [a concept the state has no business to enter into – see more details in <
span style="font-style:italic;">Breaking Free of Nehru; and there are many other ways to ensure equality of opportunity]. Instead, he seems to castigate the experiment of the 1951 Census which eliminated caste as a factor in the surveys, suggesting that the government seemed thus to "ignore the realities of Indian society" (p.157). That begs the question: what is the theory behind the 'reality of a society'. Why is this reality a factor in policy? Surely it is importnt to stick to the theory of governance if we want to have a government in the first place.

I searched hard for a clear statement of the underlying philosophy behind Mr Nilekani's views. But the closest I got to was at pages 353-355 of the book where he talks of a balance and Golden mean, negotiated between the government, civil society, and markets. But from where comes this Golden Mean? And why? What is the theory behind it? I get the distinct impression that in his mind policy can be isolated from underlying philosophy. But why do we have a state in the first place? Why does a government have ANY role? These are questions which Mr. Nilekani has not asked, nor therefore addressed. But without knowing why a government should exist, and why it should do a particular thing, there can be no benchmarks for analysis and, therefore, utterly problematic ideas can easily seep through. This is not about partisanship, but about clarity.

As a result of this lack of philosophy, Mr Nilekani's understanding of the Global Financial Crisis of 2008 is also extremely limited. He hits out at markets when almost the entire blame must go to the socialist central banking model and to the finance regulators (this was a case of government failure, not market failure – see my article published in Freedom First in January 2009, here) .

This also means he doesn't display an understanding of economic incentives within government – in particular of the incentives of politicians and bureaucrats (public choice theory). But understanding all this is critical to the design of good policy (government failure must be top of mind while designing solutions for alleged 'market' failure). Without this all the regulation he recommends will fall flat on its face. Government failures are in general far more severe than market failures, and I think his model doesn't pay attention to this deep natural flaw of governments, which needs deep thinking to overcome the principal-agent problems in this space.

I would therefore suggest that Mr Nilekani reflect again on what he stands for: thus, from where do his policy prescriptions arise? If his policy stance shifts towards a better understanding of freedom in due course, and inconsistencies in his analysis are removed, we could make significant headway in India, given his obvious high calibre and leadership capability.

What next?
Mr. Nilekani's comment at page 313 (in relation to telling the voter why liberalisation is good for him) is spot on: "Once we do take the risk, the results may in all likelihood prompt us to wonder what we were so afraid of."

I think the Indian voter is ready for the truth about freedom, free markets, and individual justice. I think the time has come for our politicians to become thought leaders. Indeed, studies show that people are enthused (not disheartened) by inequality – provided the inequality signals an opportunity for them or their children to succeed in the future. Experiments on Rawls's difference principle also proved him wrong: people have no objection to the 'upside' so long as the 'downside' is minimised.

I've been clear since 1998 that that the only way to change India is through reform at the fundamental, policy level. We need to work towards actualising our dreams for India. Our goal must be the total modernisation of India.

It is time for action, not just for writing books. I look forward to Mr. Nilekani's actions to support activities that will deliver the policies he talks about. I look forward to people like him joining (or otherwise supporting) clear-headed policy reform efforts like the Freedom Team of India.

Once again – none of my reservations over-ride the VERY STRONG recommendation that you buy this book and read it, line by line. Underline it, review it, learn from it. You won't regret this investment of a few hundred rupees.

Sanjeev Sabhlok
1 March 2009

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3 thoughts on “A review of ‘Imagining India’ by Nandan Nilekani
  1. elkaypee

    You have certainly read between the lines and your comments are praiseworthy. Yet, you will agree that he has written it straight out of his heart. I find it quite spontaneously flowing. He seems to share the concern of every Indian who has some stake in Indian governance. We can give him some discount on the issues highlighted by you as you have rightly said he regards himself’quite unelectable’ and hence has no ambition to raise hornets nest. He has to survive the gall/sting of the existing policy makers as well.Best regards,LK Kandpal

  2. Sanjeev

    Thanks, Mr.KandpalFully agree with you. Therefore, I have not the slightest hesitation in making a very strong recommendation that everyone interested in policy in India read this book.I also understand that Mr. Nilekani has a real-life challenge of avoiding negative repercussions of his comments for his business. Having said that, it is important that we recognise that policy must be based on philosophy. I have no doubt he is a liberal at heart, and no! I don’t think he is unelectable. Indeed, I think he is HIGHLY electable – far more than me. RegardsSanjeev

  3. Vishal Singh

    Sanjeev – I agree with you. Nandan does think that current economic crisis is a result of less regulation where as it probably is the creation of central banks and the governments.Kandpal has rightly said the book is written straight from heart. I was surprised to see the amount of research he has done for the book.I was expecting a different kind of book.I liked the focus on education he has put in the book. Once we have more educated people the vicious cycle of bad governance, government intervention in every economic activity will be broken.The million dollar question is how to get education get going.The government will never allow its control to get away from education so easily.Vishal

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