Breaking the Mould review: A blueprint of realisable Utopia for Indian economy

The title of the book might sound iconoclastic, even subversive but the authors do a great job persuading everyone to wean them away from stereotypes and shibboleths of the conventional thinking on the Indian economy, identify opportunities — some of them already present — and give them expression and scale by creating an enabling ecosystem. This ecosystem — in their view — must be democratically inclusive and tolerant of dissent, protest and freedom of speech, ecologically responsible, capability-enhancing, employment-generating and able to turn people and voters into citizens. All the same, the authors caution against premature celebration of India having arrived on the world stage. A sense of shrill triumphalism could be counter-productive.

Which are the existing moulds the authors are not comfortable with? For one, they are very clear that India need not be faux China. The Chinese strategy of cheap labour- powered, manufacturing-based, exports-led growth could not be replicated in India partly because India came late to the manufacturing exports game but mainly because labour is still cheap but more skilled in China and countries like Vietnam. Two, subsidies and doles like Production Linked Incentives (PLIs) to spur manufacturing could only go a certain distance and could not be game-changers.

Three, India should refrain from vanity or prestige projects like chip manufacturing as the scale of investment could be prohibitive and business viability suspect. Four, even when many Western MNCs are developing their China+1 strategy, India is not the obvious choice with reshoring and near-shoring emerging as substitutes to offshoring. Five, the authors debunk the notion that authoritarian leadership is an essential condition for robust economic growth. In their view, economic growth today is about interplay of ideas, start-ups, upscaling, creative chaos and conducive milieu which a democracy could very well provide.

New Ways of Doing Things

The authors suggest that India should not think of manufacturing exports-led growth as the only way to develop fast because services, either delivered directly or as embedded in manufactured goods, offer an alternative means of exports. Compared to manufacturing, services have been less exposed to competition so it could still be profitable. This strategy also plays well to the Indian strengths as reflected in our software prowess. Besides, India boasts of a large domestic market for services, especially services like education and healthcare that can improve its human capital, allowing it to climb the value-added ladder for services. For them, there is no turning back on manufacturing because both manufacturing and services are highly intertwined today.

They cite the example of Lenskart to prove how services (free eye-check, eye counselling, raising awareness, etc.) are an increasing input to manufacturing and vice-versa. Another example of Tilfi — which sells Banarasi saris to the world — proves the same point. New designs, trained and well-paid weavers, standardised products, online-assisted commerce, online campaigns to build awareness, and the physical store to clinch the deal — it has been the story of Tilfi brand, which aspires to build a truly Indian luxury brand, with Indian roots and ethos but global appeal.

Smile Curve and India

Very pertinently, the authors talk about the ‘Smile Curve’ of value added in a product’s global supply chain. While the early segment comprising the R & D and design and the end segment of the supply chain, consisting of branding, marketing, advertising, sales, financing and product content, constitute a lot of value added, the middle segment — actual manufacturing — adds only a modest amount of value. It is high time India sought to leverage these high-end opportunities. Rajan and Rohit suggest that it would require determined interventions in an ‘all-of-country approach’.

The capabilities of the Indian workforce need to be improved significantly so that global manufacturers find it attractive and our workers could move up the jobs ladder. To move from incremental innovation to path-breaking innovation would require changes in the structure and process of governance on the one hand and enhancing human development indices of its people on the other.

Reimagining structure and process of governance and enhancing capabilities

In structural terms, the authors’ ideas are well-placed: a functioning Parliament with a functioning opposition, accountability of institutions with appropriate checks and balances, space for civil society organisations to substitute for the government when it is weak and missing. As economies develop and become more complex, centralisation becomes problematic so they pitch for genuine decentralisation with the centre ceding substantial powers to the states and the states to local bodies which need to be strengthened and empowered in the true sense.

For streamlining processes of governance, their emphasis is on both efficiency and effectiveness: universalisation of quality education and quality health care instead of wasteful subsidies, creating enabling frameworks for business, especially start-ups to get embedded and thrive, striking right balance between regulation and innovation, fostering robust competition by eliminating crony capitalism.

Dipankar Gupta, the eminent sociologist, argues that most western countries didn’t begin by being rich, but became wealthy because of the universalistic policies they adopted. With passion, persuasion and perseverance, the authors argue about fixing the childhood challenges of nutrition and schooling. In their scheme of things, there are no holy cows and private schools at local levels should be supported by the government if they outperform government schools. For higher education, we need more public-funded high-quality research universities at the frontier of research and development. These universities must train first-rate PhD students, who can fill many faculty positions at other such universities. At the same time, the deterioration of public universities needs to be reversed.

The book ends with an interesting imaginary dialogue between an inquisitive reader and a patient Editor à la Mahatma Gandhi’s Hind Swaraj (1909). The reader — opinionated but also curious — asks questions which the Editor tries to answer — gently, logically and persuasively. It is a remarkably persuasive book that exhorts readers to challenge stereotypes, upend holy cows, think anew, think out-of-the box, explore creative possibilities and bat for institutions and processes which are nimble-footed and are invested in enhancing human capabilities to take the Indian economy to the next level.

In Ideology and Utopia (1929), Karl Mannheim argues that a utopia is a projection of future that is eminently realisable and, therefore, quite in contrast to fantasies. It is something that can be put to work on the ground. Rajan and Rohit suggest ways to realise this realisable Utopia for India.