The decade was the early 1980s. I was in my early 40s. I had gone to the Planning Commission, prepared a plan for self-reliance in foodgrains which succeeded, and was later recommended by Jeffrey Sachs for Sahel, but I insisted on going back to my research nest, resisting the ladoos as my friend Arjun Sengupta described them, and came back to my research job in Ahmedabad. My younger colleague Rohit Desai was working on diamond polishers of Surat and I, for fun and learning, would go to the field with him.
We discovered that diamond polishers in cottages were using the latest technology, since miniaturisation had begun and computer-fitted polishing machines where reaching cottages. Diamond polishers would buy ‘passas’, as the diamond roughs were called locally, from Antwerp, give them to the artisan, and get it back polished in a day. The system worked on trust. The Dutch didn’t have that social capital and lost out initially in the polishing finishing game. Later, diamond polishers bought them out and the factories shifted from Holland to Surat in Gujarat.
I was invited to the ILO to evaluate World Employment Programme and met Gerry Rodgers who was leading a team integrating population and employment in my first love, national econometric models. Around the same time MIT’s Michael Piore had written a classic on the changes taking place in industrial structures. This was the origin of the literature on Neo-Fordist revolution and lean production in Italy and Japan. The original book was his Second Industrial Divide. Modern communication, computerisation and new materials were reviving cottage production in Emilia-Romagna in north Italy in fashion garments, and the French were losing out to the Italians who were to become household fashion names. Piore served with me on the Board of a think tank in the ILO, and I insisted this revolution was happening in India and art silk fabrics, zari and diamond polishers in Surat, all of whom studied at Ahmedabad Mother Institute, were counter-factuals. Piore, Rodgers and others fell for the argument after their colleagues checked in to Surat.
The Gitanjali Group progressed, bought out diamentaries in Antwerp and went backwards to acquire retail trade in Europe and America. They integrated backwards into the market.
The NITI Aayog’s Vision Document for 2020 expressed the fear that China would take over diamond exports which would equal in the net software exports if not exceed them. I said we don’t need to worry, during my valedictory address to the centennial conference of the Indian Economic Association. NITI Aayog’s Vent for Surplus, as I called it, or a yen for large size was fine, but don’t tamper with the facts. Diamonds, gems and jewellery is our niche and the Chinese failed for decades because they don’t have social enterprise organisations. So the NITI Aayog’s fear of the small size of Indian firms, which they wanted to change by increasing their capital size, was unfounded in this case, although as an economist I agreed with the Vent for Surplus models that Arvind Panagariya and Rajiv Kumar were advocating. I was not too happy at their exclusive advocacy of large firms and did not agree on the so-called Chinese threat in gems and jewellery. In fact, a few years earlier, I had been critical of large corporates in jewellery.
Now, Mehul Chokshi and Gitanjali have changed the world in one stroke and we will have to start all over again. First is the study of systems as to how a few can completely hoodwink all the checks and balances. Second, what is the required mix for the future? The NITI Aayog’s next Vision Document will have to contain its reappraised policy stance on gems and jewellery as compared to what it wrote in its Vision document approved by the government and circulated in the country. All of us have to help the NITI Aayog in this difficult task. Economic policy, textbooks, politics, Surat, Gujarat and India—buy your new bifocals and get going. First digest, then understand and finally prescribe. We can’t let down the next generation while Chokshis and others get their just deserts. Satyamev Jayate.