Book Reviews

ESCAP SSWA, Regional Cooperation for Inclusive and Sustainable Development: South and South-west Asia Development Report 2012–13, New Delhi: Routledge, 2012, 175 pages, `695.

South and South-west Asia is the least integrated sub-region in the world, though it is one of the fastest growing sub-regions in the world. The report highlights the importance of regional cooperation for inclusive and sustainable development in this sub-region. The report rightly postulates the gravity of regional cooperation as a development strategy, which will promote efficient-seeking intra-regional investment, regional supply chain, creation of employment, food and energy secu-rity and will also reduce the region’s vulnerability to natural disasters. Also, the report underscores the importance of better connectivity across the sub-region and beyond to harness the sub-region’s strategic location as the hub of Europe and Central Asia’s trade with East Asia.

The report has nine chapters. The first chapter provides an outlook on the glo-bal economic turmoil and the macroeconomic scenarios for South and South-west Asia. Compared to many regions in the world, this sub-region encountered lesser negative effects of global economic and financial crisis during 2008–2009. However, the recent slowdown in the West is exerting some profound effects on two growth centres in this sub-region: India and Turkey. Growth rates in these two countries have been reduced by some notable margins, leading to some important policy implications for the countries in the sub-region to guard their economies from further external shocks. The suggested policy implications include measures to contain rising inflation and financial and exchange rate instabilities. The report proposes that countries in this sub-region should rebalance their economies by putting greater emphasis on domestic and regional demand; follow a more cau-tious approach in case of financial and capital account liberalization; pursue greater regional cooperation to strengthen resilience against future crises; increase social expenditure and close infrastructure gaps which are critical for growth and poverty reduction; and promote larger remittances inflow by protecting the inter-ests of migrant workers though regional cooperation.

The second chapter focuses on issues and concerns related to inclusive and sustainable development in South and South-west Asia. In the context of the

South Asia Economic Journal 14(2) 343–375

©2013 Research and Information System for Developing Countries &

Institute of Policy Studies of Sri Lanka SAGE Publications

Los Angeles, London, New Delhi, Singapore,

Washington DC DOI: 10.1177/1391561413500180

http://sae.sagepub.com

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

344 Book Reviews

post-2015 development agenda, the report highlights the importance of broad-based and sustainable economic growth for eradicating extreme poverty and hun-ger in this sub-region. Against the backdrop of the fact that this sub-region still remains home to the world’s largest concentration of poor people, home to the world’s highest levels of child and maternal mortality, home to people without access to basic sanitation and electricity, and high inequality is holding back much of the progress towards inclusive development in this sub-region, there is a sol-emn need to balance the economic, social and environmental priorities in this sub-region. The report proposes comprehensive and universal social protection schemes through better education and health services. The report puts much emphasis on the growing ‘youth bulge’ of this sub-region and argues for facilitat-ing path from education to employment, and generating better quality and decent work opportunities with a view to fill the world’s skills deficit. The report also calls for required industrial policies to promote productive employment in sectors that provide decent work and incentivize improvements in the skill profile of the population. The report also makes a case for regional cooperation and joint research to address common challenges and enhance sustainability, and interna-tional support and cooperation to adapt and deploy environmentally sound tech-nologies as the region pursues low carbon and resource-efficient development pathways.

The third chapter discusses the role of countries in this sub-region in the global economic integration. Though countries in this sub-region have emerged as dynamic players in the international market with a rising share of the global trade in goods and services, the export structures of these countries, especially of the least developed countries, continue to be dominated by high concentra-tion in relatively few low-value adding traditional products and commodities, as well as raw materials. The report thus underscores the importance of strengthen-ing technological capabilities and competitiveness of these countries, and pro-motion of diversification across products and markets. In this context, the report takes the view that specifically targeted foreign direct investment (FDI) could be helpful. The report also emphasizes the role of regional cooperation to move up in the value chain in specific sectors where these countries compete, in addressing emerging sanitary and phytosanitary measures and technical barriers to trade, in launching of a regional eco-label and in the implementation of duty-free quota-free market access by developed countries for the least developed countries.

In the fourth chapter, the report evaluates the potential, challenges and the way forward for the regional economic integration in this sub-region. The report emphasizes that potential intra-regional trade in this sub-region remains largely unexploited though it has a high promise. Also, though there are some regional and bilateral integration cooperation arrangements, they are yet to generate the expected dynamism in this sub-region. Despite studies indicating high potential of the South Asia Free Trade Area (SAFTA) agreement, together with trade

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

Book Reviews 345

facilitation, to generate significant welfare gains for the South Asian countries, the share of intra-regional trade has still remained at a very low level. The report identifies poor connectivity and facilitation leading to high trade costs, poor sup-ply capabilities, especially in least developed countries, and a high proportion of unofficial trade at the borders as among the major reasons behind such low level of achievements so far. The report calls for expediting the implementation of the existing regional cooperation arrangements, harnessing the potential of intra-re-gional FDI and trade in services, strengthening banking and financial links and creating facilities for cross-border capital raising. In this context, the report pro-poses that the South Asian Association for Regional Cooperation (SAARC) Development Fund may be transformed into a SAARC development bank to cata-lyze key regional infrastructure projects.

The fifth chapter of the report stresses the significance of regional connectivity in this sub-region. This sub-region is marked by poor road and rail connectivity among the neighbours, which results in high intra-regional trade cost and bars the countries of this sub-region to reap the benefits of geographical proximity. Several studies indicated large welfare gains and significant expansion of intra-regional trade for the countries in this sub-region out of reduction in intra-regional trade cost. The report emphasizes on strengthening transport, transit and trade facilita-tion through a regional transport and transit agreement, investments in upgrading infrastructure at the land customs stations, adoption of a single-window approach to customs procedures and moving towards international standards and harmo-nized conformity assessment procedures.

In the sixth chapter, the report focuses on food security and sustainable agricul-ture in South and South-west Asia. This sub-region accounts for one-third of the world’s food-insecure people and more than one-half of underweight children. However, the progress towards meeting the basic needs that would increase food security in this sub-region is rather slow. Countries in this region are also vulner-able to the external shocks, and the rising food price during 2010–2011 resulted in large number of people falling into poverty in some of these countries. The report identifies a number of challenges for ensuring food security in this sub-region which include: shrinking and neglected agriculture sector; a demographic bulge coupled with rising consumption; increase in demand for more energy-intensive food products; increasing cost of fertilizers; competition for arable land and water sources; high oil and biofuel prices; commodity market speculation; and negative effects emerging from climate change. The report underscores the need for food trade and regional cooperation for food security with the aim of providing mutual protection and opportunity for more sustainable agriculture. The report suggests reducing food consumption taxes, favouring cash or food transfer programmes over food price subsidies, promoting weather-based crop insurance and invest-ments in infrastructure and greater focus on research and development as part of the food security policies in this sub-region. This report reiterates the significance of regional cooperation in agricultural research, given the geoclimatic similarities

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

346 Book Reviews

the countries have in this sub-region, and argues for wider uses of regional food, seed and fodder banks, and coordinated management of commodities futures markets.

The seventh chapter of the report underlines the issues and concerns related to energy security and cooperation in this sub-region. There is no denying that, in the face of high economic growth, demand for energy in this sub-region is growing at a rapid pace. Also, the countries in this sub-region, to sustain their growth momen-tum, need to increase energy use. However, except Iran, all countries in this sub-region are dependent on import of fossil fuels. Therefore, this sub-region faces a number of energy-related challenges. The report identifies that energy poverty, lack of available supplies, poor energy infrastructure and transport facilities and environmental externalities are among those challenges and re-emphasizes the need for regional cooperation in energy supply and consumption. The report also highlights the importance of pursuing a policy of clean and efficient energy, diver-sification of the energy mix and increase in the share of renewable energy to enhance the sub-region’s energy security.

In the eighth chapter, the report discusses regional cooperation for disaster risk reduction. This sub-region is highly prone to natural disasters, such as cyclones, earthquakes, landslides and floods. However, investment towards increasing dis-aster resilience is insufficient in this sub-region. The report suggests that regional cooperation can help in building resilience to disasters. Highlighting some of the recent progress in regional efforts, the report calls to further strengthen and inte-grate disaster risk management and comprehensive disaster risk reduction strate-gies in this sub-region.

Finally, in the ninth chapter, the report highlights the importance of the global partnership for development and calls for implementing the Istanbul and Almaty Programmes of Action in this sub-region. The report points out the weak produc-tive capacity of the least developed and landlocked developing countries in this sub-region and suggests a number of measures to be undertaken to overcome this. The report emphasizes that national measures such as stable investment-friendly macroeconomic framework, industrial policies focusing on building productive capacities, infrastructural development, domestic resource mobilization and tech-nological upgrading should be supplemented by expanding FDI inflows and technology transfer, effective market access, aid for trade and other forms of development cooperation.

This report is a very timely publication and touches upon a number of pertinent issues related to regional cooperation for inclusive and sustainable development in the South and South-west Asia sub-region. The rigorous analyses throughout the report and suggested policy measures will certainly provide rich food for thought to the academics and policymakers in this sub-region.

Selim RaihanDhaka University

Dhaka, Bangladesh

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

Book Reviews 347

Nihar Nayak (Ed.), Cooperative Security Framework for South Asia, New Delhi: Pentagon Press, 2013, `995, ISBN 978-81-8274-705-0.

DOI: 10.1177/1391561413500190

The past few decades have seen the concept of ‘globalization’ assimilated to nearly every aspect of a country’s economic, financial and social agenda. Given the increasing focus on government policymaking based on the dynamics of liv-ing in a globalized world, extending this concept to the security framework of a country only seems inevitable. While cooperative security is already practised in the European Union and Southeast Asia, forming a similar framework for South Asia has been in debate for decades. The book, Cooperative Security Framework for South Asia, edited by Nihar Nayak, revisits this topic by presenting a more contemporary analysis of the existing issues that restrict such a framework in South Asia, and subsequently attempts to provide suggestions on how the region can overcome these issues.

The book is divided into four sections. The first section looks at the current debate on forming a Cooperative Security Framework (CSF) in South Asia. The second section provides country perspectives on the topic, while the third section examines non-traditional security (NTS) threats in South Asia and the possibility of using a CSF to overcome these issues. The fourth and final section gives the reader an idea of the ways and means by which a CSF can be formed in the future. While the issue of security spreads across a wide range of subjects, the chapters by Shahid Javed Burki and Farooq Sobhan in the first section, and the chapters by Dushni Weerakoon, Chhimi Dorji, P.K. Gautam and Medha Bisht in the third sec-tion, provide the reader with an economic understanding of the topic at hand. This review will focus on these chapters that, either fully or in part, provide an eco-nomic insight into creating a CSF for South Asia.

The chapter by Shahid Javed Burki looks at the broader economic and political context of forming an alliance among a set of countries he refers to as ‘populous Asia’. The author begins by looking at the failure of the West as it exists today and moves on to an examination of how the ‘Rest’ (more commonly referred to as the East) can take advantage of the changes taking place in the Western world. The chapter focuses on four populous Asian countries—namely, Bangladesh, China, India and Pakistan—that consist of a combined population amounting to approxi-mately 40 per cent of the world population. In addition to having a large popula-tion, these countries also have a very young population. This is in sharp contrast to population trends in Western countries as these countries are experiencing the effects of a large ageing population. The chapter highlights two structural changes taking place in Western economies that populous Asia can take advantage of. The first is this demographic transition in the West and the second structural change refers to the increasing reduction of the state role in these countries. Given these circumstances, the impact on populous Asia can be positive if these Asian coun-tries can utilize their younger population to effectively fill in the gaps left by the West, particularly for high-skilled jobs. The author also notes that the relatively

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

348 Book Reviews

higher involvement of the public sector in South Asian countries will play a cru-cial role in gearing the younger generation towards this goal.

While the ideas presented in this chapter are interesting and provide a good understanding of the opportunities arising for Asia due to recent developments in the West, the four countries that constitute the author’s ‘populous Asia’, particu-larly Bangladesh and Pakistan, have many internal political and economic strug-gles to consider before being able to substantially contribute to any positive change as a collective. The author is optimistic that such an alliance will help solve the issues within and among these countries but the task at hand might be easier said than done. The inclusion of China, a country outside the South Asian region, should also be considered more carefully.

The third chapter of the book, by Farooq Sobhan, provides an interesting over-view of the traditional security and NTS threats persistent in the South Asian region. The author briefly looks at the traditional issues of security like the Indo-Pakistan dispute over Kashmir and the general mistrust between member states of the South Asian region. Other areas of concern such as food security, health secu-rity, environment security, irregular migration and energy security are also looked at in this chapter. The author discusses the measures taken by the South Asian Association for Regional Cooperation (SAARC) charter to address these issues and forms the logical conclusion that if a CSF is to be formed, it would have to be independent of SAARC.

However, the vast amount of content attempted to be covered by the chapter (ranging from threats faced by South Asia, a proposed CSF and finally, to lessons from around globe) does not allow the author to dig beneath the surface in some cases. For example, the generalized view of the threats presented in the chapter does not stress on the enormity of some of the challenges faced by the region. Nonetheless, the chapter provides engaging reading that allows the reader to grasp the overall threats in the region and learn from global experiences.

In the first essay in part three on ‘Cooperation in Non-traditional Security’, Dushni Weerakoon examines the prospects for regional integration in South Asia by examining the economic integration process thus far, and the extent to which this integration has been a catalyst of regional growth. The author states that while aggregate growth figures of the South Asian region are positive, growth prospects of individual countries, with the possible exception of Sri Lanka and Bangladesh, are not very promising when India is excluded from these calculations. The author draws a parallel between the economic disparities in South Asia and the lack of economic integration in the region. Given that India’s economic interest in South Asia is limited due to growing economic ties with East Asia, economic integration within South Asia would mainly involve smaller South Asian economies giving market access to Indian exports and Indian foreign direct investment (FDI). While the author is cynical about the occurrence of economic integration in South Asia similar to that in East Asia or the European Union, the author acknowledges the potential for smaller South Asian economies to latch to East Asian markets through greater market access to India. This would be mainly through bilateral or regional

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

Book Reviews 349

agreements, with India being at the centre of these agreements. The author con-cludes the chapter by pointing to institutional and governance-related shortcom-ings in South Asia as the key issue hindering development and economic integration in the region. This chapter manages to provide a comprehensive and stimulating discussion on the prospects for economic integration in South Asia.

The chapters by Chhimi Dorji and P.K. Gautam explore the issue of climate change as a NTS threat to South Asia. While Dorji’s chapter provides a Bhutanese perspective on the issue, Gautam extends his chapter to the South Asian region. The former begins by providing a rather extensive account of climate change and the effects of climate change globally. Although Bhutan is currently a carbon-neutral economy (with net carbon emissions being negative), the effects taking place around the globe are very likely to affect Bhutan in due course. The author states that it is in Bhutan’s best interest to remain carbon neutral. The chapter provides an insight into some of the measures taken by the government thus far to ensure that the country remains carbon neutral. These measures include: restric-tions on export of raw timber and minerals with no value addition; high-value, low-volume tourism; and subsidies on imports of steel to replace timber. While the chapter provides a refreshing insight into the environmental and economic policies adopted by Bhutan alongside an in-depth understanding of global climate change, an inclusion of the outcome of the government policies adopted thus far and the author’s suggestions on how Bhutan could further safeguard its status as a carbon-neutral economy would have provided a more enriching conclusion to the chapter.

The second chapter on climate change provides the reader with an understand-ing of the theoretical discourse surrounding environmental degradation. This dis-course is mainly divided into that of ‘regime complexes’ (somewhat narrowly focused regulatory systems formed to respond to climate change) and the need to focus on regional cooperation to solve these issues. The chapter highlights issues prevalent in South Asia, with particular focus on the lack of tools for research in South Asia (in natural and social sciences), which have culminated in slow progress in this area of climate change. The author argues that there needs to be a greater focus on research through regional cooperation to solve the issues con-cerning environmental degradation and climate change in South Asia. The chapter views the South Asian University (SAU) as a positive step taken to foster coop-eration among the regions as it allows a valuable platform for greater regional research into these issues.

The final chapter of the third section by Medha Bisht examines the potential for water-related conflicts in South Asia and the importance of a CSF to mitigate these conflicts. The author notes that many of the neighbouring Asian countries that are likely to have water-related conflicts—namely, Bangladesh, Bhutan, India, Nepal, Pakistan and China—have currently opted for cooperation, largely through bilateral agreements, on issues related to water. However, with the vari-ous changes taking place in the region, these states must be cautious. The author points out three possible occurrences that could potentially instigate inter-regional

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

350 Book Reviews

conflict related to water security. First, the author believes that locations with geopolitical significance (locations with large quantities of water assets) could become an area of contention among the region. The second factor that could cre-ate tensions, according to the author, is the supply–demand equation that could ultimately impact on regional stability. Impacts on the supply side, such as climate change and limited infrastructure, as well as impacts on the demand side, such as demographic pressures and food and energy-related concerns, will have inevita-ble spillover effects on neighbouring countries. This would most likely create regional tensions. The high dependency on water withdrawal in South Asia for agriculture will cause severe pressures on the quantity of water available and this will further exacerbate this issue. Third, the author points out that social inequal-ity within states, where the rich can afford to pay the price for water while the poor cannot, can also act as a catalyst to intensify tensions in South Asia. Given these possible areas of conflict, the author views a CSF as a rational and crucial preventive measure to ensure regional peace and stability. The chapter is well structured and provides the reader with a good understanding of the severity of these potential threats. The final case for the establishment of a CSF is well sup-ported by these preceding arguments.

The fourth and final section of the book provides recommendations for a CSF in South Asia. These recommendations were adopted with the consensus of the authors of the chapters themselves at a two-day conference organized by the Institute for Defence Studies and Analyses (IDSA) held in New Delhi in 2011. In its recommendations, the need for a formal document highlighting the definition of the concept of cooperative security and its limitations in the context of South Asia was an important suggestion made by the participants. Another vital recom-mendation was that the various issues in the South Asian region and the need for cooperative security to overcome these issues must be made more public. The participants also stressed on the necessity to exercise caution and careful thought when including extra-regional players as contributors to regional security. Although not mentioned in the concluding chapter, this point would be particu-larly important in such cases like that of creating a ‘populous Asia’ which includes China. The recommendations also propose a three-pronged approach for coopera-tive security. This approach tries to bridge the gap between government and non-government institutions when forming a CSF—a much needed measure as the existing regional links have a visible lack of communication between these institutions.

While this concluding chapter provides some useful recommendations, the overall chapter seems disconnected from the rest of the book. Most of the insights provided in each of the chapters are absent in the concluding chapter. For exam-ple, while the book covers various issues related to international relations, poli-tics, economics and other social sciences, the concluding chapter hardly captures any of the important and valuable insights provided by the chapters that offer an economic outlook on a CSF in South Asia. A concluding section that connects the main issues and/or ideas presented in the chapters and the final recommendations

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

Book Reviews 351

would have provided for a more cohesive conclusion to an otherwise well-pre-sented book.

Security is undoubtedly an area of concern in South Asia. Regional answers to these issues of security are still in discussion. While individual governments attempt to provide as much security to its citizens, given the broadness of the term ‘security’ in today’s world, forming a cooperative security framework would be significant in ensuring better protection to all South Asian countries. However, if such a framework is not well planned and logically formulated, it could have severe consequences on the entire region. With the exception of the few short-comings discussed thus far, this book is undoubtedly a stimulating and timely contribution to this ongoing debate on collective security in South Asia.

Kaushalya AttygalleInstitute of Policy Studies of Sri Lanka

Colombo, Sri Lanka

Praveen Jha (Ed.), Progressive Fiscal Policy in India, New Delhi: SAGE Publications, 2011, pp. 461, `895, ISBN: 978-81-321-0558-9 (HB).

DOI: 10.1177/1391561413500191

Prudent fiscal management retains its importance as an integral component of economic policy in India as the country currently undergoes transition from a fast-growing developing economy to a leading emerging market in the world. Given the very nature of this systemic change in the economy that marks buoyant inves-tor confidence and increasing attention on the country as a source of demand for global commodities and services, India needs to heed the ongoing fiscal consoli-dation process that nests a radical overhauling of the nature, instruments and tar-gets of fiscal policy. One pertinent question relating to this debate is the efficacy of the existing fiscal management framework in the country. Has it ever failed in India? Probably not; but it seriously missed the link between growth and develop-ment perpetuating inequity, misallocation of resources, malnutrition and worsen-ing of poverty levels. The authors in this volume, titled Progressive Fiscal Policy in India, attribute this redundancy to the neoliberal orientation in the existing fis-cal management process. The book, with 17 chapters, identifies the ‘missing link’ and maps the elements that form the core ingredients of progressive fiscal policy in India. The biggest contribution of this book that one could notice is the harmo-nious blend of thinking on the theoretical underpinnings of fiscal policy with respect to tax, subsidy, public expenditure, centre–state relations, etc., and the real challenges of implementation in a federal nation like India, especially with regard to its developmental implications.

The central message that emanates from the book is that the existing system of fiscal management and infrastructure does not adequately address the issues of equity, sustainability and social justice, and is not people-centred. And, the

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

352 Book Reviews

macroeconomic policy under the neoliberal regime is based on flawed principles of strict adherence to conservative levels of inflation, budget and current account deficits with least attention to the basic needs of the people. As discussed widely in the book, these are probably the reasons for the slow or lopsided performance of development indicators in India. In view of this potential failure of fiscal pol-icy, the chapters in this book relate the fiscal framework to inclusive growth, mak-ing it more consistent with redistributive policies.

How to augment the so-called fiscal policy to ‘progressive’ fiscal policy? Does it require any change in the basic theoretical perspectives and approaches to fiscal management? There is probably some support to this proposition. Notably, there is serious misconception surrounding the choice between tax-financed and bor-rowing-financed public expenditure programmes. Likewise, the concerns for crowding-out due to massive borrowings by the government may be exaggerated for a country operating under less than full employment. Following the income-multiplier theory, an economy realizes more fiscal gains in borrowing-financed schemes compared to tax-financed programmes. While the fear of crowding-out of private investment is a theoretical outcome in an environment of excessive public borrowings, it may not be tenable in this case because of larger develop-mental impact that it generates in terms of higher employment, higher purchasing power and high savings. Further, in presence of higher access to finance, the capi-talists would gain more profits under the borrowing-financed programmes than under the tax-financed ones. Invariably, all the authors in this volume reject the idea of macroeconomic stability through contraction of government expenditure. This has links to the issue of raising tax revenues which could be possible only by hiking tax rates, rationalizing tax concessions and broadening the tax base. Is this regime of high taxation acceptable to development protagonists? The book claims that the present tax rates in India are not that high and thereby provide room to the policymakers for tax manoeuvring.

In this context, it is worth looking at the changes that took place in India’s tax regime over the past few years and the policy space available for introducing further reforms. Although the aggregate tax-GDP ratio (the centre and the states together) improved considerably in the successive years, tax-GDP ratio of the centre declined in the post-reform period due to reduction in customs and excise duties. To a great extent, revenue loss due to tariff cuts has been compensated by the increasing contribution of corporate taxes, other income taxes and services taxes in the recent years. Tax revenues of the centre grew significantly during 2002–2007 on account of healthy direct tax collection. In this period, the reforms in taxation mainly included lowering of tax rate, widening of tax base, gradual withdrawal of tax concessions and strengthening of tax administration and com-pliance. Inclusion of capital gains and dividend income under the purview of taxa-tion is also under consideration. Irrespective of notable improvements in tax compliance, the present level of tax revenue is far from meeting the resource demands of the country. In view of acute resource crunch in financing social sec-tor commitments, the Government of India needs to ensure the optimum utilization

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

Book Reviews 353

of tax revenue by eliminating tax concessions, shifting or downsizing unwar-ranted concessions and arresting tax evasion. Goods and Services Tax (GST) is expected to make some redistribution of tax revenues in favour of the states facili-tating achievement of equalization easier. Also, the ‘green shift’ in taxation is likely to be welfare-improving.

Fiscal policy in a country ideally corresponds to the structure of the economy. The pattern of taxation may differ from country to country based on the composi-tion of the production sectors. It is believed that tertiarization of Indian economy has caused unwarranted concentration of assets and income in the hand of a few whose contribution to material production is not significant and has led to stagna-tion in real income. The adverse implication of this asymmetric income distribu-tion got manifested in a skewed pattern of household consumption away from the basic necessities. A look at the trends in social sector spending reveals the preva-lence of wide disparity across the sectors as well as the states. The current pattern of social sector expenditure shows worrying trends. Compared to the 1980s, the share of expenditure declined in the 1990s, deteriorating further in the 2000s. For instance, health has been one of the most neglected sectors in India. Public expenditure on health has the lowest share in GDP. However, there is steady rise in allocation to the maternal and child health sector. The average costs per hospi-talization case have gone up almost three times in both government and private hospitals. Meeting these financial commitments requires re-examination of the role of state governments in the provision and financing of health care. Further, there should be provisions for medical insurance schemes for health care prima-rily by public financing.

Another crucial area of concern is education. In particular, investment in edu-cation by the states has remained quite low. Not only states need adequate finan-cial support from the centre, but need to be provided with incentives for prioritizing elementary education in their respective development strategies. Similarly, weak credit delivery mechanism has seriously affected capital forma-tion in the agriculture sector leading to decline in productivity and gainful employment. Instead of ‘development focus’ in government expenditure, non-plan expenditure accounts for a higher proportion in total public expenditure. Lack of resources as well as the absence of clear strategies to implement socially relevant development programmes on the part of the state governments is often highlighted as major loopholes in running the centrally sponsored schemes. Unrealistic budgeting, unspent provisions, paucity and underutilization of funds, etc., are some of the symptoms of paralyzed fiscal management in the Indian states. The situation is even worse for the poorer states.

Any reform in fiscal policy in India cannot ignore the importance of fiscal federalism. India’s fiscal policy since 1991 is broadly characterized by conserva-tism with regard to the scope of government interventions. Vertical imbalance exists between the powers of the centre and the states in raising taxes and duties. Given the challenges of financing and implementation of development projects, the centre–state relations require a thorough examination, especially with respect

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

354 Book Reviews

to identification of tax jurisdiction, shares of states in divisible pool, clarity on strategies and financing of centrally sponsored schemes and so on. Fiscal manage-ment at the state level is riddled with resource shortage and poor compliance. Despite surplus cash balances earned from investments in treasury securities, the states are not able to spend due to the existence of certain legal constraints. Many a time, the states operate under the dictates of the centre. The states were forced to enact Fiscal Responsibility and Budget Management (FRBM) Act. The centre often asks the states to meet arbitrary targets and confine to the requirements of various fiscal legislations that prevent them from undertaking socially desirable investments. The centrally sponsored schemes are largely populist in nature with overlapping objectives and jurisdiction. In most cases, the states fail to success-fully implement these schemes because of insufficient matching grants or lack of cooperation from the centre. Most of these grants made by the centre are meant for specific purposes and tied with several conditions restricting the states to incorporate the local demands. The states do not enjoy any control over the design and prioritization of those schemes. High-income states are observed to have lower shares in tax devolution from the centre. Equalization transfers should be made through grants rather than the devolution mode. The design of these trans-fers should be based on proper identification of the sources of inequality and the amount required for addressing those inequalities. Activity mapping would be quite useful in effective management of resources at the disposal of the states. One issue that needs to be given attention is the clarity on distribution of func-tional responsibilities between the centre and the states. The same applies to intro-ducing reforms at the sub-state-level fiscal systems also.

In addition to the measures needed for strengthening tax revenue, efficiency in resource utilization could be achieved through the legislative and bureaucratic reforms. This necessitates institutional reforms through political decentralization and administrative reforms. Panchayati Raj Institutions can be empowered through proper devolution of powers, functions and finances. Administrative reforms must cover all branches of the Indian Administrative Service, making the system more responsive to public requirements. Finance Commission (FC) plays a great role in ensuring proper and scientific utilization of national resources. The FCs must assess the productivity of the central government schemes after completion of the plan period. In addition, it must look into the equity and autonomy dimensions of the ever-expanding centrally sponsored schemes. From the Ninth FC onwards, the FCs have been running deficits, implying that the states as a whole started with negative balance in current revenue account to finance their plans. Besides reforms at the state level, local governments should be empowered with more taxing pow-ers and spending responsibilities. The State Finance Corporations (SFCs) must undertake quality review of all state-level government expenditure and make nec-essary recommendations. Horizontal equity can be only achieved through the efforts of local governments. As far as resources of the local governments are concerned, the most productive taxes at municipality and gram panchayat levels are property tax, profession tax and entertainment tax. In this light, the government

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

Book Reviews 355

must explore ways to raise the resource position of the municipalities and other local bodies so as to convert those institutions as effective tiers of development interventions.

As we understand, fiscal fundamentalism refers to the two corner positions: (a) a regime that keeps fiscal targets independent of the development objectives (restrictive fiscal policy); and (b) enlarged public expenditure programmes that rationalizes tax revenue allocations and emphasize on development expenditure (expansionary fiscal policy). The book contains an in-depth coverage of issues relating to the inherent fallacies in fiscal policy orientation and the failure of exist-ing fiscal management framework in meeting development goals. A good number of chapters in the book have attributed the poor development outcome in the country to ill-conceived public expenditure plans (centrally sponsored schemes), inadequate allocation of resources from the centre (matching/equalizing grants/transfers to the states) on subjects mentioned in the concurrent list and asymmet-ric distribution of tax revenues between the centre and the states. While most of those lacunae identified in the book are already in the literature, the roadmap envisaged for operationalizing progressive fiscal policy does not really seem to be radical. Barring a few, the set of fiscal prescriptions emerging from the debate is conventional and quite dependent on political willingness. Three major rec-ommendations of the book that seem pretty consistent with the proposed over-hauling of the current fiscal policy regime in India include: the intuition behind the relevance and applications of borrowing-financed government expenditure programmes; suggestions for revamping the centrally sponsored programmes; and measures for correcting asymmetry in distribution of divisible pool between the centre and the states.

Priyadarshi DashResearch and Information System for Developing Countries (RIS)

New Delhi, India

Handbook on the India–Sri Lanka Free Trade Agreement, Colombo, Sri Lanka: High Commission of India, 2013, pp. 101.

DOI: 10.1177/1391561413500192

The opening message of the High Commissioner of India in Sri Lanka states:

Since the operationalisation of the India–Sri Lanka Free Trade Agreement (ISFTA) in 2000, trade alone has multiplied by as much as 8 times, crossing the milestone of US$ 5 billion in 2011–12. During this period while Sri Lanka’s exports to India multiplied by over 16 times, India’s exports to Sri Lanka went up by less than 7 times.

The message further underlines an important dimension of bilateral trade between the two countries, namely, while over 70 per cent of Sri Lanka’s exports to India

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

356 Book Reviews

are covered under the free trade agreement (FTA), only 30 per cent of India’s exports to Sri Lanka avail of the preferential route of the FTA. The message thus states that ‘while there could be no doubt that the FTA brought significant benefits to both sides, but more to Sri Lanka’ (p. 3).

The message is followed by a Foreword by Saman Kelegama, the Executive Director of Institute of Policy Studies of Sri Lanka (IPS), which partnered the High Commission of India to bring out the publication. The IPS has played a key role in dissemination of information on the ISFTA via publications, policy briefs and seminars over the years, in some of which I had the pleasure of participating. The Foreword echoes the positive sentiment on ISFTA as brought out in the mes-sage. The Foreword rightly states:

While there is quite a lot of information on ISFTA, however they remain scattered. This handbook attempts to bring this scattered information together to assist the business community and other stakeholders to obtain a better understanding of the ISFTA. In addition to a brief analysis on what has happened so far under the ISFTA, the handbook reproduces the Free Trade Agreement and technical details relevant to the Agreement such as negative lists, rules of origin, etc., and agencies dealing with ISFTA. (p. 6)

The process of registering a company to export under the SAFTA agreement and acquiring the Certificate of Origin in both the countries, as well as the docu-mentation requirements for both exports and imports, is neatly laid down for the convenience of traders in both the countries. The modalities of a dispute settle-ment mechanism have also been laid down (pp. 16–20).

The utility of the handbook is appreciably enhanced by including it in the Indian High Commission’s website as this type of information has not existed in either country’s Department of Commerce websites earlier.

In a background to the agreement, the handbook brings out the rationale for a bilateral FTA. Existing preferential trading arrangements (PTAs), such as the Asia Pacific Trade Agreement (APTA) or the South Asian Preferential Trading Arrangement (SAPTA), did not prove to be effective in stimulating India–Sri Lanka trade as these arrangements were based on the slow-moving positive list approach, with ‘skin-deep’ tariff preferences. While SAPTA/SAFTA recognized asymmetries between least developed countries (LDCs) and non-least developed countries (NLDCs), it did not recognize asymmetries that existed among NLDCs. The ISFTA, based on the negative list approach, provided for special and differ-ential treatment among the two asymmetric trading partners. Besides, right from its inception, ISFTA provided for a time plan for attaining an FTA, with India committing to phase out its duties in three years since the commencement of the agreement, and Sri Lanka being given eight years to attain the same. In contrast, SAPTA did not set any time line to attain an FTA. While SAFTA set a time frame for attaining an FTA, on a differential basis, the contracting states could, if they wished, still retain tariff levels from 0 to 5 per cent at the end of the liberalization plan.

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

Book Reviews 357

The handbook brings out the advantages of South–South trade that ISFTA could generate. But this can apply to all South–South FTAs and is not limited to the ISFTA. The handbook is however justified in suggesting how the ISFTA could bring in some of the informal trade into the formal trading network by means of trade and tariff liberalization. Nevertheless, the impact is likely to be muted unless accompanied by advances in trade facilitation measures to address non-tariff bar-riers or to ensure that non-tariff measures do not take the shape of non-tariff barriers.

The handbook is silent on political constraints that have inhibited the expan-sion of trade under regional trade agreements (RTAs). The ISFTA provided an opportunity for both India and Sri Lanka to move on a faster track of mutual trade liberalization, uninhibited by the political constraints under which the RTAs were functioning in the region. The bilateral agreement enabled the two countries to exchange concessions and design their negative lists much more flexibly and much more attuned to their special needs.

The handbook could have done better in terms of sequencing of offers made by India. For instance, it mentions that ‘The negative list for Sri Lanka with regard to India under SAFTA is 865, which is significantly higher than the 431 tariff lines under ISFTA’ (p. 12). In the subsequent paragraph, it states, ‘India has reduced the number of tariff lines under its negative list for SAFTA Non-Least Developed Contracting States (NLDCs) by 264 items or 30 per cent as of September 2012’. That this translates to only 614 items is what could have been mentioned. Also to be mentioned is that of the 155 textile lines notified for removal in its sensitive list by India for NLDCs, Sri Lankan textiles exports would attract a duty of 5 per cent, against the earlier 11 per cent.

Similarly, Table 2 (p. 13) indicating broad agreement on tariff concessions under Indo-Lanka Free Trade Agreement (ILFTA) states that ‘all eight million pieces would be allowed at zero duty with no fabric conditions’. This should have been stated later as an update on ISFTA concessions rather than in the previous page under the heading ‘Garment Quota’. It follows that 50 per cent tariff conces-sions would apply for garment imports above the quota.

Considering trade in goods as an outcome of the ISFTA, the handbook states how Sri Lanka’s trade with India changed dramatically following the implementa-tion of the FTA (Table 4, p. 21). The data given in the table, however, present a mixed picture. A close scrutiny of the same reveals two stages in the growth of bilateral trade: Stage 1, covering the period 2000–2005; and Stage 2, covering the period 2005–2010. During Stage 1, the picture was truly optimistic with the trade imbalance (export–import ratios) declining in favour of Sri Lanka. Since the inception of Stage 2, the trade imbalance has started deteriorating, even though not to the extent as in the early 2000s.

One major criticism of the ISFTA is that at the peak of Sri Lanka’s exports to India, only two products, namely, copper and vanaspati (hydrogenated vegetable oil), contributed to nearly half of Sri Lanka’s duty-free exports to India. Sri Lanka is not naturally endowed for mining copper ores, or in growing plants for refining

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

358 Book Reviews

vegetable oil. However, taking advantage of nil or low external tariffs on these products in the country, investors (mainly from India) shifted their manufacturing base to Sri Lanka and with minimal processing, shipped back the finished prod-ucts, namely, vanaspati and copper/copper products, to the duty-free Indian mar-ket. This type of investment flow from India to Sri Lanka can easily be characterized as no more than ‘investment diversion’, with minimal backward linkage with the rest of the Sri Lankan economy.

However, with the onset of the global financial crisis in 2007–2008 when glo-bal commodity markets boomeranged, the Indian government, in order to soften the impact on its domestic consumers, drastically cut down its import tariffs on copper ore and vegetable oil (mainly crude palm oil) imports. At the same time, alerted by its domestic stakeholders of the unprecedented surge in imports of cop-per products and palm oil from neighbouring countries, the Indian government adopted measures for stricter compliance of rules of origin criteria on these products.

Given these two developments, manufacturers/exporters of these two products in Sri Lanka found that they had lost their cost advantage, based primarily on their border tariff arbitrage. As they downed their shutters, Sri Lanka’s bilateral exports to India fell drastically. This illustrated how the two major Sri Lankan exports to India, being based not on their inherent comparative advantage, failed to be sus-tainable in the longer term.

A closer scrutiny of more recent data obtained from the Indian sources show, quite possibly, that a third stage in India–Sri Lanka relations is emerging. In 2011–2012, India’s imports from Sri Lanka increased to US$721 million, an increase of 44 per cent over the previous year. During the first six months of the Indian fiscal year 2012–2013 (April to September), India’s imports from Sri Lanka was US$529 million. On a pro rata basis, one could expect this figure to touch around US$1 billion this financial year, the largest value that India would be importing from any country in the region, notwithstanding the near total eclipse of vanaspati and copper imports from Sri Lanka!

The growing penetration accompanied by diversification of Sri Lankan exports to India may be illustrated with respect to a few products. For instance, India’s imports of textile products (HS 50–63) almost doubled from US$35 million in 2010–2011 to US$69 million in 2011–2012. In the first six months of 2012–2013 (April–September), these imports aggregated US$50 million, reflecting future sustained access of these products of Sri Lanka to the Indian market.

Figure 8 in the handbook gives an illustration of how high-value items have emerged in Sri Lanka’s export basket for trade with India, such as insulated wires and cables, intimate garments, value-added tea, furniture, tableware, machinery, rubber gloves and refined copper products. The illustration however misses a major non-traditional capital good export of Sri Lanka to the Indian market, namely, ships, boats and floating structures (HS 84). India’s import of these prod-ucts increased from US$55 million in 2011–2012 to US$120 million within the

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

Book Reviews 359

first six months of 2012–2013, accounting for a little over one-fifth of India’s total imports from Sri Lanka during the latter period.

The handbook further brings out the potential area for trade in services and for investment cooperation, even though there have been no formal agreements in these areas. Enhanced activities in these areas have been either due to unilateral liberalization by the two countries or as an indirect impact of the operation of ISFTA. Tourism is an area offering potential for services trade. In recent years, India has begun to attract a growing number of Sri Lankan students in tertiary education. There is also considerable scope for collaboration between India and Sri Lanka in construction and financial services (pp. 23–25).

Even though special and differential provisions were being incorporated in the services negotiations between the two countries, the absence of an adequate regu-latory mechanism in Sri Lanka, as well as apprehensions of Indian dominance, has precluded an agreement on services trade to take shape.

Following the signing of the ISFTA in 1998, Indian investment in Sri Lanka has increased substantially from LKR 916 million in 1999 (18 projects) to LKR 94 billion in 2011 (119 projects). Indian buy-back in duty-free sectors such as rub-ber has played its part. During this period, the pattern of investment has also changed from predominance of manufacturing investment to investment in serv-ices. It is important to note that Sri Lankan investments in India have also increased considerably over the past decade in sectors such as confectionery, apparel and furniture, making investment flows between the two countries a two-way process.

The handbook is silent on the need to pursue negotiations beyond trade in goods and services to include services and investment under a Comprehensive Economic Partnership Agreement (CEPA), stalled since 2008 after 13 rounds of negotiations. In my view, this has been a pragmatic approach, given that reserva-tions have been expressed by certain stakeholders in Sri Lanka on trade in goods.

Now that bilateral trade is based on Sri Lanka’s natural comparative advan-tage, it is likely to be more sustainable and balanced. India must nevertheless play a proactive role in addressing the incidence of non-tariff barriers on Sri Lankan exports, both perceived and real. I believe a constituency for deeper bilateral integration with India will evolve once the benefits of win-win advan-tages of bilateral trade becomes apparent and lessons are learnt from the con-straints of the past.

I.N. MukherjiFormerly Professor of South Asian Studies and Dean, School of International Studies,

Jawaharlal Nehru Universityand former Senior Consultant, RIS

New Delhi, India

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

360 Book Reviews

Veena Jha, India Emerging: The Reality Checks, New Delhi: Academic Foundation, 2012, pp. 374, Paperback, ISBN-13: 978-81-7188-909-9.

DOI: 10.1177/1391561413500193

The growth miracle of India, as experienced during 2004–2009, promises much optimism not only for India but also for its neighbouring South Asian counter-parts, as the spillover effects of India’s growth momentum have the potential of improving economic prospects even in neighbouring countries. However, the much celebrated growth dividend of India has had its own perils. The period has been known to be one in which inequality raised its ugly head and in which the shackles of poverty tightened, frustrating the already vulnerable poor sections of the Indian society. In this context, the need for exploring ways of making India’s growth inclusive cannot be overemphasized. Thus, India Emerging: The Reality Checks, which investigates how growth has trickled down in India, remains a timely effort aimed at uncovering the issues of India’s growth dynamics. The book analyzes the agents of trickle down of India’s recent growth process and offers a road map for achieving inclusive growth in the country.

The trickle-down effect of growth has been analyzed through three main sec-tions in the book. The first section explores how growth can trickle down through the information and communication technology (ICT) sector and through inter-state migration. The second part of the book deals with how growth can be trick-led up through the informal sector and through improving gender parity. The third section focuses on how the trickle down can be assisted through philanthropy and public policy and good governance.

Following an introduction to the book, the first chapter examines the role of India’s two major sources of growth, the information technology (IT)/information technology-enabled sector (ITES) and the telecommunications sector, in promot-ing the trickle down of India’s high growth rates. The first section of the chapter elucidates, using an extensive literature review, how IT/ITES could act as general purpose technology (GPT) to fuel India’s growth process. The author, through the use of two comprehensive regression models, ascertains that the use of ICT will lead to improved productivity and reduced levels of poverty in the context of India, thus enabling the trickle down of growth. Further, through a thorough lit-erature review, the author underscores the importance of the mobile telecommu-nications sector in trickling down growth in India. However, the findings of the chapter reveal that the relative contribution of the IT/ITES and telecommunica-tion sectors to overall employment in India remains miniscule compared to its large share in GDP. This is reflected by their share in overall employment, even using employment multiplier being as low as around 1–2 per cent of the labour force, while their combined share in GDP is said to be as high as 10 per cent. Hence, it is highlighted that the trickle-down effects of accelerated growth in the two sectors have been limited in the short run, while the sectors appear to be promising in trickling down growth in the long run once they are more widely used as GPTs in India. Policy considerations in the light of improving IT-related

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

Book Reviews 361

educational attainment of the Indian population, together with continuous attempts to harness the e-readiness of states, are recommended as measures that will facili-tate the trickle down of growth through the ICT sector. In conclusion, it is stated that the spread effect of India’s growth has been limited in the short run, while measures to transform ICT into a GPT will enable India to improve the trickle down of growth. The methodology used in the chapter, ranging from the use of extensive literature reviews to the comprehensive regression analysis, not only augments the credibility of the findings but also adds to the attractiveness of the chapter. However, the use of tabulated formats in presenting sectoral data, includ-ing annual average growth rates of the two sectors, contributions to employment, GDP and exports, etc., as opposed to the paragraph format deployed, would have made the chapter more comprehensive to the reader.

The second chapter explores how inter-state variations in growth, recorded after 1980, resulted in an influx of inter-state migration thereby facilitating the trickledown of growth to the poorer states. A gamut of knowledge on inter-state migration is offered in the first few sections of the chapter through an exhaustive literature review. An important observation brought to the forefront by the chapter is that increased inter-state migration has led to a trickling down of growth to poorer states. The findings of the two regression analysis used in the study high-light that growth has trickled down to poorer states through inter-state migration, since inter-state migration has acted as an intermediating variable leading to con-vergence in the state domestic product (SDP) per capita to the national average, and also since inter-state migration was noted to make a positive impact on human development. Further, the exploratory case study approach deployed by the author, covering 193 migrant workers across several states of India, also provides further evidence to the notion that inter-state migration has helped in trickling down growth to poorer states, as the findings suggest that inter-state migration not only led to an increase in migrant income (bringing a large proportion of migrants above the minimum wage level) but also resulted in a subsequent increase in migrant asset formation. However, the author asserts that the negative conse-quences of such a high level of inter-state migration should not be overlooked on account of the significant role that inter-state migration has played in alleviating poverty in the context of India. In conclusion, the author recommends that nega-tive consequences of high inter-state migration, such as overcrowding and regional factionalism, could be circumvented by directing government policies towards developing tier-II towns. Moreover, the importance of implementing government policies aimed at enhancing migrant remuneration and well-being is emphasized by the author as these are policy measures that are critical for accelerating the trickle down of growth through inter-state migration.

Part two of the book focuses on the growth dynamics of sectors of the Indian economy which have largely been bypassed by the growth process. Chapter three includes a detailed review of the informal sector of India. The informal sector of India, despite its contribution to total employment being as high as 89–93 per cent, has been known to be a sector with the highest level of poverty on average.

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

362 Book Reviews

The chapter highlights that the informal sector has benefited from the recent growth spell as growth has trickled down to the informal sector. A survey con-ducted by the author covering 500 informal sector workers across India under-scores that the trickle-down effect to the informal sector during the high growth period of 2000–2007 was much higher than the trickle down during the low growth period of 1994/1995–2000. These findings are in line with the existing literature which suggests that high growth acts as a prerequisite for the trickle down of growth to the informal sector. The chapter identifies government efforts in improving physical infrastructure of the informal sector, including transporta-tion, electricity, etc., and government efforts in melding skill formation with for-mal education to be the key policy recommendations of accelerating trickle down of growth to the informal sector. However, policy recommendations have largely been based on the findings of the survey conducted by the author. Hence it would have been better if the author had linked the recommended findings to existing literature on ways of eliminating informal sector poverty, rather than limiting its recommendations to the findings of the survey alone.

The fourth chapter examines how growth can be trickled up through gender parity. The findings of the chapter reveal that gender disparities have not reduced substantially in line with India’s buoyant growth momentum. The author, through a comprehensive empirical analysis, reckons that social indicators for women have been sticky upwards and are less sensitive to growth (p. 233). Nevertheless, the author ascertains that a significant reverse causation is to be noted between SDP and wage differentials. It is established that education remains the key policy variable that needs to be dealt with in accelerating the trickle down of growth through gender, as it was found to have a strong positive correlation with both health and per capita income. Hence, the author concludes that government policy should be directed towards improving educational and vocational training of women, as such policy measures, in the backdrop of high growth rates, will lead to an acceleration of the trickle-down effect of growth on poverty and gender parity.

The fifth chapter focuses on how trickle down of growth can be accelerated through philanthropy. The author ascertains that the ability of philanthropy to address poverty has been limited in India, despite its prehistoric existence. It is also highlighted that total philanthropic contributions in India account for as low as 0.6 per cent to 1 per cent of GDP. However, the findings of a regression model included in the chapter reveal that higher philanthropy leads to greater trickle down, while the trickle-down effect of philanthropy are likely to be higher in poorer states. Hence, philanthropy could act as a vehicle of accelerat-ing trickle down. The private sector, including high net worth wealthy individu-als of India, is said to play a fundamental role in improving the philanthropic contribution to GDP, as its current contribution to philanthropy is known to be at a minimal. The chapter concludes that philanthropic contribution to trickle down growth can be enhanced by improving social investment. Policy meas-ures such as improving philanthropic infrastructure by way of establishing new

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

Book Reviews 363

institutions or developing the capacity of existing organizations and investing in philanthropic human resource development in order to build a second tier of resource persons in philanthropy, advocating an enabling legal and regulatory environment for philanthropic giving and building a strategic diasporic philan-thropy via positioning, communication and fund raising, etc., are recommended by the author as ways of improving the trickle down of growth through philanthropy.

The focus of the sixth chapter is on governance issues and public policy in trickling down growth. At the outset of the chapter, it is noted that several devel-opment challenges still hamper India’s growth prospects, albeit its miraculous growth sprouts. Lower levels of human development in comparison to its Asian counterparts is said to pose a significant challenge for India in sustaining its buoy-ant growth momentum. Other fiscal challenges, including persistent inflation, fis-cal and trade deficits, etc., are said to still linger in the Indian economy. Hence, effective public policy aimed at overcoming such formidable challenges remains vital in the context of India. In this context, the role of good governance is recog-nized to be of paramount importance. The chapter reveals that the level of good governance in India remains worryingly low, as India is said to have a little above minimal level of governance required to deliver social development (p. 305). Furthermore, the author also points to the inadequacy of government spending on social services. As highlighted in the chapter, fostering internal and external accountability in conjunction with sound competition policy and strong regula-tion across the board through efficient and effective management systems and transparency in decision making is highlighted to be the means of achieving good governance in India (p. 346). Measures such as the establishment of e-governance across state offices and strengthening the development-related schemes and pro-grammes are also said to be imperative in improving the governance framework of India, while establishing public–private partnerships in the delivery of social services has also been recommended to be a significant cornerstone in facilitating the trickle down of growth.

Chapter seven of the book summarizes the findings of the previous chapters and highlights that though high growth rates of India have trickled down to the poor, it remains questionable if this trickle down has been sufficient in addressing the issue of poverty in India. Hence, the author concludes that the trickle-down effect of growth can only be enhanced if relevant government policies, recom-mended by each chapter of the book, are adopted systematically without further delay.

To sum up, the book provides an important framework for improving the trickle down of growth in India. A key strength of the book remains that each chapter of the book has been meticulously designed in order to stand on its own, offering an in-depth analysis of a crucial dimension of inclusive growth. Further, the book provides a well-rounded, profound view of making growth inclusive and serves the purpose of a road map for achieving inclusive growth, not just for India alone, but for all developing countries that are facing similar challenges.

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

364 Book Reviews

However, it should be noted that references drawn from examples of best prac-tices in other countries would have enriched the findings of the book. The refer-ence to the Swiss education system in the third chapter as a benchmark for India in improving informal sector education is a clear example of an instance in which the author linked best practices from other countries to the recommendations of the book. Bringing in such examples of best practices adopted by other countries would definitely have helped to improve the credibility of the recommendations and would have widened the scope of the book.

Additionally, small and medium enterprises (SMEs), which can be regarded as a major agent of trickle down, have been given little emphasis in the book. Even though growth issues related to SMEs have been touched upon in the third chapter as part of the analysis on the informal economy, a separate chapter allocated for understanding the trickle down of growth through the SME sector would have added value to the findings of the book as SMEs are known to be major agents of trickle down in India as well as in other developing parts of the world. Further, the macroeconomic aspects of growth, including inflation, exchange rate movements, etc., have been left unexplored by the book. Moreover, a more detailed account of India’s development indicators and recent poverty profile, if included at the begin-ning of the book, would have made the book more comprehensive to the reader.

Despite these limitations, India Emerging: The Reality Checks provides a com-prehensive framework for developing countries to achieve inclusive growth. It acts as an eye-opener to policymakers and investigates some of the underlying realisms of growth which are, more often than not, overlooked on account of rapid growth. Hence, the book is undoubtedly a ‘must read’ for all development econo-mists, policymakers, scholars and students who believe inclusive growth to be the crux of equitable growth and development.

Nipuni PereraInstitute of Policy Studies of Sri Lanka (IPS)

Colombo, Sri Lanka

Marco Ferroni (Ed.), Transforming Indian Agriculture: India 2040—Productivity, Markets and Institutions, New Delhi: SAGE Publications, 2013, pp. 398, `995.

DOI: 10.1177/1391561413500194

For quite some time now, Indian agriculture, it is claimed, is at cross-roads. Today, with the economic reforms reaching a critical phase, agriculture can no longer remain at arm’s length of the purview of the Indian economic reforms. Perhaps the time is ripe to embrace a new outlook towards agricultural planning which can now be done only with a vision of what the targeted future is likely to hold. It is this position taken that makes this book stand out as contemporaneous in its approach, although you might like to dispute the ideas put forward.

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

Book Reviews 365

The book is a result of several studies conducted by different scholars tied together by a deft synthesis. The involvement of multiple organizations lends var-ied dimensions to the combined work. The book is organized in two parts that follow the Introduction. The first part of the book consists of four sections pre-sented as the ‘Overview’ where a clear and comprehensive visualization of the future comes. The second part consists of six substantial ‘Chapters’ that are devoted to six different aspects of Indian agriculture outlining the tendencies and contradictions in the respective domains as observed by concerned experts.

The first part of the book is stated to be based on a project led by eminent scholars in agriculture summarized by Harinder S. Kohli. These sections also bring together the insights gained from the subsequent chapters but indeed, they manage to go even beyond that. This is what makes these sections thought-provoking and highly deserving of perusal. The statements they make are bold, worthy of debate or possibly refutation but cannot be disregarded. For official planners, these sections are a ‘must read’ and in this perspective, a foreword written by a most eminent planner of Indian economy is both pertinent and exhilarating.

A Vision

The transition in India’s agriculture is marked by an expansion of food demand but with major shifts in composition. The key to overcome the challenge inherent in this change vests in the productivity and efficiency of agriculture, although the role of the rural non-farm sector (RNFS) cannot by any means be underrated. In view of the targets that seem to loom large, ‘doing well’ might not be good enough. Much more needs to be done than what the celebrated Green Revolution offered.

With this word of caution, the authors move ahead to foresee major transfor-mations in the Indian agricultural economy. An image of three clear constituent pillars of transition is patent in the overview and is also implicit in the entire book, namely: (a) diversion from traditional to high-value crops and products; (b) waste-ful to efficient uses of resources, more specifically water; and (c) a transition to modern supply chains from the regulated trader-based marketing system that links farms to users. Commitment to research and extension, institutional innovations in water management and a gradual shift of the support and supply systems from the public to the private sector are accompanying ingredients.

As expected, the chapters that follow the overview sections are much more specialized and focused, but their contents draw on recent experiences from India and other similarly placed countries as also, partially, from long period historical tendencies. These chapters evidently provide the building blocks on which the overview rests but while they are themselves restrained by the past and the present, happily, as befits a dynamic situation, the latter is rather unbound in visualizing the future.

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

366 Book Reviews

Structural Aspects

India’s structural transformation is described as ‘stunted’, especially in light of a comparison with China where the rural–urban migration was phenomenal. However, an answer to the employment crisis is sought in the RNFS in Chapter 1 because it appears to have successfully blunted the income and poverty disparities between the sectors in relation to much sharper contrasts seen in farm and non-farm productivity differentials. The rise of rural wages observed in India, in recent times, also finds no better explanation. While factors like higher prices, global and domestic volatilities, economic growth, procurement policies, withdrawal of labour force for educational engagements and even the MGNREGA could be added rea-sons for the developments in the labour market, not all of them being controllable, sustainable and even desirable, they can hardly be relied upon as stimulants and this has drawn the author’s attention to the promising role of RNFS. That wages and employment are covariate not only between the rural farm and non-farm sec-tors but between the rural and urban sectors as well is however conceded, as also the fact that the movements in the total factor productivity has been important in this context in China. Thus, the chapter leaves the reader to explore other linkages in the entanglement such as the evidently expanding urban boundaries of India, the seeds of accelerated urban development already sown, the attempts at reviving manufacturing, especially food processing, and the restructuring of the RNFS itself with the advent of the mall culture and growing affluence in rural India.

With agrarian technology moving slowly, the significance of structural shifts within agriculture too arises due to similar reasons. Moreover, because the small farmers may not have much food to sell to the market, growing more of high-value crops can be more lucrative. Farm diversification, signifying a departure from old farm habits, finds an outlet in the now obvious shifts in food habits of Indians. Certain spatial pat-terns in this context and potentials worth noting are also illuminated in Chapter 2. The dominant agriculture of the northern India is shrugging off its obsession with rice–wheat systems to embrace new crops like cotton, sugarcane and horticulture, while the southern and western parts naturally and historically inclined towards crop diversity are tending to move away from millets to pulses, oilseeds and maize. In the east, the place of rice remains substantial, but more space is given to vegetables. Apart from crops, dairy, fisheries and poultry are gaining ground in different parts of the country and except the west, Indian agriculture seems to be moving away from crops. Discomfiture that small farmers may not be able to fit into the new chains for perish-able goods finds a silver lining in the distributional equity evident in animal-based agriculture and the promises shown by new institutions like contract farming.

The Future of Irrigation

Chapter 3, devoted to water issues in agriculture, is extremely well researched with attention to technical and institutional details and comparative experiences

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

Book Reviews 367

from around the world. Attributed by the author largely to the supply-driven nature of planning, the outcome of the pouring in of public resources for decades on irrigation now comes out as rather poor. Irrigation projects are described as overdesigned but poorly executed, resulting in prolonged execution carried over from plan to plan, poor maintenance of existing projects and wide gaps between potentials and reality.

The preoccupation with canals and reservoirs continues alongside the call for a ‘new start’ in the wake of growing trends in groundwater use and current appre-ciation of more complexities in the water sector than previously realized. Inadequacy of benefits created even after the closure of surface water pro-grammes in peninsular south, silting and the perplexing upstream–downstream issues of the Himalayan rivers, wastages in the surface water basins, the lack of any celebration-worthy success of flagship programmes like Accelerated Irrigation Benefit Programme (AIBP), the Sardar Saovar Project (SSP) and even institutional experiments like the Water User Association movement point out that much more has to be done than conventional top-down and segmented way of planning backed by large allocations but devoid of the right incentives. An interdisciplinary approach coupled with an integrated view of the water sector to cover irrigation, power and other relevant central schemes, including the giant public works programme in operation in India, replacement of the usual com-petitive view of surface and groundwater irrigation by a conjunctive perspective and lessons from success stories and best practices even in India show the way to the future.

Linkages

Agriculture’s linkages in both forward and backward directions have always attracted attention. Research has been a most precious element of all past suc-cesses but worldwide, its relevance waned in the aftermath of the Green Revolution. Worse, there is a perception that its quality, even relative to many other countries, has deteriorated in India. ICAR’s dwindling engagements with modern seed breeding techniques is a concern as much as the growing weight of salaries imposed on public research expenditure budget. Chapter 5, however, observes a growing presence of the private sector in the entire value chain, including its backward segments. The Patent Act amendments, the promise shown by the Bt seed varieties and the rise of customized fertilizers are indica-tive of progress. The chapter also highlights the potential of small entrepreneurs and non-profit entities joining the movement along with the public sector and corporate bodies. At the same time, the ‘coming back’ of agricultural extension in a pluralistic and locally oriented form is lauded as a breakthrough in Chapter 6, though the underachievement of the Agricultural Technology Management Agency (ATMA) due to the shortage of qualified personnel is stated to be a

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

368 Book Reviews

concern. India yet faces the challenges of bridging yield gaps even in staples, a far cry from what is required at the new frontiers. On the downstream end, urbanization associated with consumption of processed food, the rise of modern food retail and its symbiotic relation with processing, and above all the de-res-ervation policy related to small enterprises are seen as harbinger of far-reaching transitions in Chapter 6.

Looking Ahead with Aspiration

In sum the author sees Indian agriculture of the year 2040 as one constituted of modern and diversified small farms. These farms are operated by part-time farm-ers who have their other feet in non-farm jobs when labour is a much more paying occupation than known so far. They are strongly linked to supply chains in mar-ket. The private corporate sector has a more intimate relation with the farms than ever seen by way of input supply, product marketing, research and extension. Irrigation is vastly altered, with a water market operating to meet ‘just in time’ demand for water. Farmers are anticipated to be using both surface and ground water without making a sharp distinction between the two sources because the water is delivered to them in pipes. The recharge of the groundwater basins also becomes a more common practice.

The vision is hardly a fantastic construct but is an outcome of assessments based on evidences. Nonetheless, this vision is only one of the innumerable pos-sibilities that the future can hold depending on the path of development chosen. The possibilities outlined actually leave many others to be imagined or conjec-tured. The finality of the small farm as a unit is unresolved when stabilizing popu-lation, urbanization and the gains from mechanization can work against the trend of land fragmentation. The character of the emerging RNFS may be deserving of greater interest than its rise especially when urbanized and industrialized develop-ments are possibilities. The political and budgetary implications of the sweeping changes envisaged in the water sector, the acceptability of India turning into a large food importer if so be the case and the overwhelming impacts of climate change on agriculture are aspects that are comparatively less explored in the book. Technological innovations such as the GM crop, if it makes its way into Indian agriculture as the authors advocate, could be an onslaught on any vision formed under present conditions. Leaving aside issues cursorily brought up along the way and those not raised at all for the readers to figure out, the vision that the authors have chosen to showcase is worth considering.

Nilabja GhoshInstitute of Economic Growth (IEG)

New Delhi, India

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

Book Reviews 369

Vipin Sharma (Ed.), State of India’s Livelihoods Report 2012, An Access Publication, New Delhi: SAGE Publications, 2013, pp. 232, £14.99.

DOI: 10.1177/1391561413500195

The State of India’s Livelihoods Report, 2012 (edited by Vipin Sharma, An Access publication) comes at a crucial juncture when the Indian economy is passing through a difficult phase. While the Indian economy was fairly insulated from the global financial crisis in 2008 in terms of not experiencing a similar crisis in her banking and financial sector, the indirect consequences of the subsequent global recession, particularly in the US and Europe, have made themselves felt in the slowdown of the economy and employment generation in the last couple of years. Sectors dependent on export markets like textiles, gems and jewellery, IT serv-ices, etc., have clearly faced a lower growth of demand for their products. In this context, the report correctly identifies and underscores the challenge of inade-quate livelihood generation that the country is presently facing.

SOIL, 2012, identifies a linkage between the lower growth rates and the mount-ing challenge of generating larger number of jobs in the economy. While sectors like finance, insurance, real estate and business services have been growing at a fast rate and generating high per capita incomes (`864,648 in 2009–2010), the share of employment in the same is a meagre 2.1 per cent. On the other hand, agriculture, forestry and fishing, which provide livelihood to 53.2 per cent of the labour force, generate a per capita income of only `29,371 (2009–2010 figure). This is coupled by a lack of structural transformation in the economy from the point of view of employment. In the rural areas, the percentage of employment in the primary sector has reduced inadequately from 76.3 per cent in 1999–2000 to 68 per cent in 2009–2010. The implications are clear. There is an overcrowding of the labour force in a sector which generates low incomes and livelihoods which are not sustainable.

While the report flags the contention that growth is not translating into employ-ment, it leaves it at that. It would have been enriching and meaningful if there was a further engagement with the dominant growth paradigms that are being observed in the economy for the last two decades. The new economic policy introduced in the country in 1991 put a thrust on export-led growth, which shifted the focus from domestic demand to export markets. The success story of this new paradigm of growth has been the veritable IT revolution, whereby the country has emerged as a global giant in this sector. Finance, real estate and insurance followed. The flip side of this success has been the low employment intensity of these sectors and their incapacity to lead any transformation of livelihoods.

Moreover, this particular growth trajectory has been exclusive in the sense that apart from the export markets, these sectors have been thriving on the domestic demand that is largely generated from the top 5–10 per cent of the population. The link between such growth in the economy and mass welfare has therefore remained weak. At the same time, the ridiculously low levels of welfare among majority of the population have not hindered this growth process. The central question that

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

370 Book Reviews

faces the country is whether more of such growth will be capable of generating jobs commensurate with the growing labour force in the country or is there a need to radically revisit the existing paradigms of growth. The reader does not find much light on this aspect in this report.

While discussing the factors hindering agricultural growth, the report largely discusses climate change and the constraints of dry land agriculture. Consequently, the study goes on to engage with sustainable solutions required to address these new challenges for Indian agriculture. Without diminishing the importance of these discussions, an important aspect which has been overlooked is the policy-induced nature of the agrarian crisis. In contrast, an earlier version of the report, SOIL, 2010, had delved in detail on this issue.

The shift to export-oriented agriculture that accompanied the liberalization process in the early 1990s had led to veritable price volatility, which the majority of small and marginal farmers could not cope with. Simultaneously, the shrinking of institutional banking from rural areas and rising indebtedness, often to private moneylenders, played a vigorous role in crippling agrarian livelihoods. The exter-nal market conditions created barriers to a simple reproduction of peasant cultiva-tion, one grave manifestation of which has been widespread farmer suicides. Needless to say, the new policy regime rendered unsustainable the livelihoods of a sizeable section of the rural population.

The important implication of this phenomenon is that technological improve-ments and ecological innovation, though necessary otherwise, will alone not pull the agricultural sector from the ongoing crisis. Without an alternative vision for agrarian development, which will support and empower economically the mil-lions of small and marginal farmers rather than displacing them, the current dol-drums for the sector are likely to continue.

The experience of transition in livelihood or employment structure in India, and in many other developing countries, has been different from the experience of the early industrializers. Whatever little shift of the workforce has occurred, it has been from the primary sector directly to the tertiary sector. The secondary sector has played a rather marginal role, with manufacturing industries growing at a slower rate and absorbing even lower proportions of the workforce. The bulk of the grow-ing employment in the services sector is in low-paid services with unfavourable working conditions. This kind of a transformation in livelihoods naturally does not augment the standards of living to desirable levels. The result is the perpetuation of underdevelopment in rural areas and spilling the same over to the urban sectors.

In this context, a unidimensional strategy to move the labour force out of the agricultural sector may not address the development question. Rather, there should be a parallel focused policy in the economy to expand the frontiers of agricultural production, which can absorb more sections of the labour force meaningfully with higher productivity. Favourable marketing, investment and technological condi-tions are therefore essential for small-scale farmers. The constructive and sup-portive role of the state also becomes imperative if such goals have to be set and achieved.

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

Book Reviews 371

Linked to this is the issue of land acquisition and land-use changes that has attracted significant attention and spurred controversies in recent years. Surprisingly, the report does not cover the issue from the perspective of livelihood changes. This is perhaps so because the authors seem to believe that a concerted strategy to move people out of agriculture, whether forcibly or not, can suffi-ciently put the country on the pathway of development.

The developments regarding land acquisition and the resistance to the same have pointed out the weaknesses of this strategy quite emphatically. Whether Special Economic Zones or specific industry hubs, the employment generated, or expected to be generated, has been abysmally low compared to the displacement and destruction of livelihoods. This is not surprising as the capital intensity of any modern industrial project has to be sufficiently high if such a project has to com-pete in the global markets where advanced technology from the developed coun-tries predominates.

In a tropical country like India, particularly where the land–man ratio is very low, livelihoods destroyed by land-use changes barely get regenerated elsewhere in the economy. The result is the emergence of a ‘precariat’, a dispossessed work-ing class with precarious work conditions and employment situations, in the neighbouring urban areas and metropolitan cities. The large volumes of in-migra-tion into the few urban growth centres of the economy also threaten the sustaina-bility of overall urban development. Thus, corporate-led economic development model, which is the currency of the day, and the consequent destruction of liveli-hoods, is something that no study on livelihoods can afford to ignore.

The case studies of various government development programmes and civil society initiatives that the report presents are very informative and provide a pan-oramic view of micro-initiatives of development in India. However, a systemic critical assessment of these initiatives can help one understand the adequacy and effectiveness of such programmes and identify the challenges that need to be tran-scended in order to tackle persistent underdevelopment. The chapter on corporate social responsibility (CSR) is much more illuminating as through the process of assessing CSRs, the author correctly identifies the fundamental problems in the approach of the corporate sector towards CSR, where they treat the poor exclu-sively as ‘consumers’. The obvious consequence is the temporary, unsustainable and ineffective nature of most CSR projects in the country.

While SOIL, 2012, has attempted to cover large number of development projects and approaches to the generation of livelihood, there is an inadequate engagement with the fundamental development contradictions that have emerged in recent times and the lessons that lie therein for macroeconomic policymaking and sustainable development such that meaningful livelihoods can be generated for the vast Indian labour force.

Arindam BanerjeeAmbedkar University

New Delhi, India

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

372 Book Reviews

Gurudas Das, Security and Development in India’s Northeast, New Delhi: Oxford University Press, 2012, pp. 200, `595, Hardback

DOI: 10.1177/1391561413504840

There is an abundance of literature on India’s North-east. Over the past four dec-ades, various perspectives from academics, policy-makers, as well as grass-root workers have strengthened the body of work available on various issues concern-ing the region. There has been a plethora of subjects including art, music, handi-crafts, ethnicity that has found focus in the various contemporary writings on the North-east. But given its geographical location, sharing over 5,000 kilometres of international border, its strategic importance can never be over exaggerated. Thus, the problems of governance, security and development have been a constant pre-occupation with not only those who belong to the region but also outsiders who have spent substantial years trying to understand the problems that besiege the region.

Since independence the north-east region of India has become synonymous with insurgency and militancy. At one time or another, every state in the region has been a victim of the protracted political violence. It has been argued that underdevelopment is an important factor in the sustenance of conflict in the region apart from the historical, geographical and cultural factors that are at the root of the myriad conflict in the region. The prolonged political alienation and geo-graphical isolation of the region has intensified the assertion of ethnic identity and ethno-nationalism. Migrant flows from outside the region as well as from outside India have aggravated the complexities of the region. Moreover, the region suffers from poor governance, corruption, and misuse and mismanagement of public funds. Even though these malaise are prevalent in other parts of India, they com-plicate problems of the North-east because of inherent backwardness and pro-longed lack of development. The political-security challenges in the North-east derive from these factors. Clearly there exists both a physical and psychological distance between the region and the rest of India. Similarly, author Gurudas Das has been for several years studying these issues that people of the region continue to grapple with. His latest book Security and Development in India’s Northeast is both a scholarly perspective that reflects the ground realities and also attempts to unravel, and throw light on, the problems which have held the region from fully enjoying the immense economic potential that it is endowed with.

The book examines two intricately related issues of security and development in India’s North-east. As the author has argued in the introduction, both insecurity and underdevelopment are causes and consequences of each other. The book has attempted to examine the dynamics of the security-related issues and underdevel-opment. The three-pronged strategy for breaking the vicious cycle of insurgency and underdevelopment in the north-east is incumbent upon the following: (a) inte-grating the north-east economy with the neighbouring region, (b) community-based development model, and (c) improving governance through the practice of

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

Book Reviews 373

politics of inclusion. This book is divided into five chapters with several subsec-tions within each chapter.

The first chapter focuses on the implications of India’s external security con-cern in the eastern border where the author has highlighted the various initiatives undertaken by the government of India to increase its engagement with the eastern neighbours. The various governmental initiatives—the Look East Policy, BIMSTEC, Mekong Ganga Initiative and the Bangladesh–China–India–Myanmar (BCIM)—has also been discussed in some details. Indeed these initiatives were seen as measures to not only deepen our engagement with the neighbouring regions but also as ways to create and develop economic linkages and transport corridors with Bangladesh, Myanmar and beyond through the North-east region, which the author correctly notes has not been fully developed. The potential thus remains largely unexploited. The threat perceptions, however, that emanated from these countries and the measures that the governments undertook to address the issues has been skimmed over. This, in fact, for very long held up any meaningful growth and trade expansion plans. One may also like to point out that the trade route has not seen substantial growth of formal trade, given the non-tariff barriers and other infrastructural barriers, but has given way to unbridled informal trade including the substantial passage of small arms and drugs that follow the same route into the region. To a large extent, the success of these policies to bridge the geo-graphical barriers is dependent on the extent of bilateral cooperation on the borders. The author stops short of fully examining any of this.

In fact the region’s strategic vulnerability and its impact on the process of inte-gration or cohesion within the region has been dealt with in the subsequent chap-ter, ‘Integration, Social Dynamics and Strategic Vulnerability’ (second chapter), that highlights the problems of integration within the region, state and society. This region is a curious amalgam of cross-cutting societies. What compounds the problem of this plurality is the high tendency of ethno-political assertion among almost all the groups. This is primarily because in most cases the political bounda-ries do not coincide with the existing social, cultural/ethnic/tribal boundaries. The North-eastern units of the Indian federation, in spite of several political permuta-tions and combinations, have not been able to cater to the demands of all the eth-nic categories clamouring for recognition of their distinctive identity. The disappointment and discontent with the perceived lack of solution has led to demands for autonomy and separate states, and this further aggravated in anti-government movements and armed conflicts. This aspect has been dealt with in some details in the next chapter on ‘Insurgency Development and Fragility’ (third chapter).

Das pertinently raises the question about the inability of the states, even after three decades of reorganization, to improve their position with regard to resource mobilisation. Evidently, this criterion was not a reference point in the reorganiza-tion of the North-eastern states. Starting with Nagaland and ending with Mizoram, which became a state in 1987, the entire region with just 255,000 sq. km has been

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

374 Book Reviews

parcelled into seven states. As the author argues, none of them met the require-ment of internal resources needing to meet the obligatory non-developmental expenditure. The author cites the lack of ‘penetrative power’ of the small states to be one of the main causes for their dismal economic performance. This section on ‘Strength on North-eastern States’ however, while raising expectation also disap-points the reader with the lack of depth and clarity. The examples of Arunachal Pradesh, Manipur and Nagaland which have no district councils are cited to aug-ment the arguments of lack of penetrative power but without a complete analysis of the political arrangement, the readers are left asking for more. This author undoubtedly given his vast experience in the subject was in a position to offer.

The section that deals with how the vicious cycle of interlocking of economic and political power has given way to a class of ‘lumpen local elites’ also makes for interesting reading. The focus on the symbiotic relation that has developed between the political players and insurgents is a natural corollary of the ground reality that has led to the conflict trap in the region as pointed out by Das.

The fourth chapter on ‘Inter-linkages between Security and Development’ besides other issues, discusses the economic costs of Insurgency. This clearly can be seen in the steady flow of central funds into the hands of the local elite and has indirectly discouraged local initiatives, which could have been otherwise har-nessed to raise the financial resources of the different states in the region. Moreover, in many cases, it has given rise to a political leadership more interested in grabbing funds coming from the centre than in actually using them to uplift the economy of the states. The prevailing economy also, in many ways, through its back-door channels makes the insurgencies possible and in fact sustains them. The fallout on human security, health and education has been well brought out too. As contemporary statistics reveal, the state unemployment rates and school dropout rates are significantly higher than the national average. The exception of Tripura which has shown a positive shift from more corrupt to less corrupt prac-tices perhaps deserved greater attention.

The author having discussed the various problems afflicting the region in the concluding chapter focuses on Breaking the Conflict Trap in India’s North-east. The author seems cognisant of the growing argument that interlinkage with the neighbouring regions is not necessarily a remedy for the ethnic issues that this region is fraught with. He highlights issues of breaking the physical isolation through investing in connectivity and infrastructure, improving governance through politics of accommodation and anti-corruption measures, security-enhancing approach, building inclusive enough coalition, with a final section on engaging the neighbours. This makes for an apt conclusion having traversed the entire gamut of issues that needs to be addressed to develop the region into a strong and vibrant economic and political entity. Quite clearly the state has not been able to deliver the solutions too. As is being increasingly evident in other parts of India too, civil society has a larger role than it has given itself in the inter-vening years. While the state is liable to provide for a secured atmosphere, the

NOT FOR COMMERCIA

L USE

South Asia Economic Journal, 14, 2 (2013): 343–375

Book Reviews 375

stakeholders of economic growth and development are the people, the civil soci-ety. This book is a scholarly contribution of a perspective from the region which reflecting the vivid disappointments with the lack of economic progress neverthe-less, holds out hope for its turn around to maximise its inherent potential.

Sreeradha DattaDirector, Maulana Abul Kalam Azad Institute of Asian Studies

Kolkata, India

NOT FOR COMMERCIA

L USE

NOT FOR COMMERCIA

L USE