How Early Policy Choices Shaped India's Growth and Growing Inequality

In their newly republished volume, Devesh Kapur and Arvind Subramanian chart India's economic evolution from the post-independence era to the present, emphasizing how initial policy choices limited growth and equity. They dispute the view that India fully embraced import-substitution industrialization, showing instead that excessive regulation and a bloated public sector hampered private sector development. The narrative links the fiscal crisis of 1991 to the adoption of market-friendly reforms that spurred a roughly 7 percent annual growth rate, yet also to deepening inequality and a weak tax base.

The authors critique populist actions by Indira Gandhi in the late 1960s, which entrenched deficit spending and benefitted a narrow elite, fostering today’s crony capitalism. They further note chronic neglect of primary education, public health and basic infrastructure, factors that have amplified youth unemployment and sparked movements like the Cockroach Janta Party. While the book offers limited policy prescriptions, it warns that upcoming geopolitical, technological, climate and demographic shifts will test the Modi government's ability to address these longstanding challenges.