A 'myth-buster of a book'.

• Author: Krishna, Pravin

A review of

Why Growth Matters: How Economic Growth in India Reduced Poverty and the Lessons for Other Developing Countries, by Jagdish Bhagwati and Arvind Panagariya, Public Affairs, 2013

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The freeing of India's economy from the shackles of governmental restrictions, through a process of market-oriented reforms initiated in the early 1990s, constitutes a momentous turning point in modern economic history. Despite the failures of the prior economic regime to bring any real progress and the obvious chokehold that the accretion of socialist policies had exerted on the Indian economy, the reforms were born out of neither an intellectual consensus nor a political one. Instead, they had been occasioned by the 1991 balance-of-payments crisis that necessitated International Monetary Fund support with its associated pro-market conditionalities.

More surprisingly, even today--despite the two decades of robust economic growth that have followed the reforms--no consensus view prevails. Instead, we are witness to a high-decibel discourse awash in myth, ossified ideologies, and an often-willful ignorance of the facts. Central to the anti-reform narratives runs the conceptual claim that economic growth is neither necessary nor sufficient to alleviate poverty and that what is needed instead is a redistribution of incomes from the rich to poor. In parallel runs the complaint that, in practice, the Indian reforms have lacked any "human" element: that they have not reduced the ranks of the poor, that they have bypassed and possibly worsened the condition of socially disadvantaged groups, and that they have led to a widening inequality of incomes and wealth.

Enter Professors Jagdish Bhagwati and Arvind Panagariya, two major scholars specializing in international economics and development, with Why Growth Matters: How Economic Growth in India Reduced Poverty and the Lessons for Other Developing Countries. In this splendid myth-buster of a book, the authors, both widely regarded as the leading intellectual forces behind the Indian reforms, provide a comprehensive list of popular anti-reform and anti-market myths, which they then systematically demolish using an impressive array of statistics, economic reasoning, and fact-laden discussions of the economic and institutional history of modern India.

First, some numbers. As Bhagwati and Panagariya point out, the annual growth rate of GDP increased significantly in the years following the...