Edited by: Kirit S Parikh, Indira Gandhi Institute of Development Research
Publisher: Oxford University Press
Pages: 300
Price: Rs 345

Want a comprehensive review of the current state of the Indian economy and its prospects? Your search stops with this book. Students of the Indian economy, looking for an up-to-date executive briefing on the subject, will find all they need in this book. Investors, both domestic as well as foreign, and policy-makers too will find the volume invaluable. The book is a sequel to the 1997 India Development Report, and it is to be hoped that Kirit Parikh and his associates make the report an annual habit.

Practically all aspects of the economy are covered, or at least those necessary for a broad overview. Kirit Parikh's introduction gives us the flavour of the book--the latest thinking on the subjects, made available in jargon-free language. The chapters are structured so that answers to some important questions are provided.The approach is pragmatic and adapted to Indian reality. On inflation, for example, Parikh points out that the effectiveness of monetary policy in controlling inflation is greatly reduced in a regime where it is mostly administered prices which contribute to inflation. Important trends in the incidence of poverty are brought out. One example is the fact that in the period after liberalisation, while urban poverty has declined, rural poverty has remained broadly unchanged. But perhaps the most interesting paper is that on second generation reforms by Kirit Parikh and Ajay Shah. After discussing the changes in the world economy, such as the IT revolution, globalisation, accelerating technological progress, and the decline of traditional mass production, the authors go on to discuss the reforms needed to make India face the new millennium. The paper is a blueprint on the direction we need to go from here.

Another interesting paper, one that rekindles hope for economic reforms stalled by politics, is that ofAshima Goyal. The paper discusses the political economy of reforms and concludes that it is not so much vested interests which are holding back the reform process but misplaced policies. She contends that it is the political necessity of lowering poverty coupled with cost shocks which initiated the decay in government finances.

Some of the most interesting information in the essays are provided in small boxes within the articles. For example, a box in the chapter on second generation reforms lists the ways in which telecommunications can spark a service revolution in the country. Or take the write-up on pollution management through social pressures in Indonesia. In this innovative programme, compliance levels were rated into gold, green, blue, red and black ratings, with gold being the best and black the worst. Firms were rated by the monitoring agency and awarded these colours. Extensive media coverage was arranged. The social pressures caused by publicity were responsible for improving pollution levelssubstantially.

Ajay Shah and Susan Thomas' article on Risk and the Indian economy points out that risks have increased after liberalisation, and corporates need hedging tools such as derivatives to enable them to take on the bigger risks. The concept of `value at risk' is explained in detail. Another article by the same authors on Rethinking Prudential Regulation offers a delightfully radical yet wholly logical view on the subject. Apart from pointing out the inadequacies of the Basle Agreement, Shah and Thomas conclude by quoting Nobel Laureate Merton Miller on the frailties of banking as a form of intermediation. KV Ramaswamy's article on exporting in a globalised economy underlines the need for India to become part of the global production chain and points to China's success in exports. The paper points to possible strategies for Indian exports.

Another practical paper thoroughly grounded in the latest theory is that on privatisation and auctions by PG Babu and Nibedita Das, which explores the best wayto privatise. The goof-ups in this field even by the governments of developed countries make for hilarious reading. For example, in 1990, the New Zealand government auctioned the spectrum for radio, television and cellular phone companies by using the second price auction method. One company that bid NZ $100,000 paid the second highest bid of NZ$ 6.

Apart from keeping oneself updated, the volume is also well edited, with sharp, analytic economic logic applied to Indian conditions.