Policies that Shaped Modern India
By Madan Sabnavis
Published by Rupa
208 pages ₹695
This book chronicles pivotal policies that have shaped India since Independence, covering fiscal and monetary policy, foreign direct investment, competition law, the Green and White Revolutions, forex, telecommunications, nationalisation, capital market reforms, and liberalisation. However, policies concerning social sectors such as education, health care, vaccination, Swachh Bharat, unemployment, the precarious nature of state finances, and the prospects of emerging sectors such as aerospace and defence are either absent or given insufficient attention relative to their impact on national progress. Consequently, it is difficult to agree with the author’s assertion that “policies covered in the book are the ones that have had a long-lasting impact on the economy”.
The book largely presents a faithful, at times laudatory, narrative of past and present policies. The critical analysis expected for a work of this genre is notably lacking. Readers would anticipate more in-depth analytical insights and suggestions for addressing the gaps and shortcomings identified through such analyses.
Among the well-presented points is the observation regarding the innocuousness of the 14th Finance Commission’s increase in devolution to states to 42 per cent in 2015, from the previous 32 per cent. Funds were devolved, but related programmes were also transferred, rendering the increase largely optical. This effect was exacerbated by a substantial increase in central government collections through non-divisible cesses, which rose from ₹6,212 crore in 2006-07 to ₹3.87 trillion in 2024-25.
The discussion on goods and services tax (GST) should have been more comprehensive, given its significance as one of the most substantial changes in the past decade. There is an undue focus on a single or fewer rates, despite the European Union employing numerous nuanced rates even for single products, such as automobiles and hotels, with constituent host governments routinely adjusting rates by 0.5-1 per cent annually through national budgets. The author’s contention that GST has failed to reduce inflation or promote growth appears contentious.
The foundations of India’s financial systems were laid by the Chakravarty Committee in the mid-1980s and the Narasimham Committee-I in the 1990s. Many of their recommendations regarding systems, macro-prudential measures, governance mechanisms, limits on the cash reserve and statutory liquidity ratios, key interest spreads, and the reach of priority-sector lending continue to shape current practice, even as some recommendations await full implementation. The Monetary Policy Committee receives less attention than it deserves, considering its permanent status and the potential suboptimality of its claimed key rate (4 per cent), which reportedly imposes “losses” on the system.
Industrial policies are covered from the draconian measures of the Monopolies and Restricted Trade Practices Act era to modern-day production-linked incentive (PLI) schemes. While PLI is discussed in laudatory terms, the author overlooks its significant skew — the restricted number of targeted sectors and the even more uneven distribution of benefits.
The wave of nationalisation eventually giving way to disinvestment, privatisation, and asset monetisation represents an important aspect of reforms in the financial and industrial sectors. While these receive due attention, the dramatic events surrounding liberalisation in the early 1990s and the impact of foreign direct investment could have been explored more extensively.
India has managed the technological and market transition in capital markets exceptionally well, with its trading and settlement systems and the introduction of new products in futures and options. The rapid evolution of mutual funds as a conduit for savings into capital markets has been remarkable. The success in futures and options could have been replicated in agriculture, enabling farmers to plan their cropping decisions based on market-specific futures prices rather than relying on all-India minimum support prices (MSPs). However, repeated interference in futures trading across several commodities has hindered its replication in commodities trading. This also demands solutions for utilising the extensive infrastructure built for MSP procurement and the public distribution system.
Beyond the rather truncated coverage of policies, some arguments presented may not resonate with all readers. Chapter 13 discusses areas where policies did not work as intended but confines itself to just two: demonetisation and the farm laws. The foiled attempts to alter land acquisition laws and the slow implementation of the labour Codes also merited significant attention. Subsidies for water, electricity, and MSPs without quality differentiation, along with direct benefit transfers for livelihood protection at a single rate across all states, should have received much more scrutiny.
It is difficult to agree with the author’s contention that equilibrium would be difficult without speculators, given that buyers would want the lowest prices and sellers the highest. The laudatory claim that the rural employment guarantee programme has set a benchmark for enabling workers to know what to ask for strains credulity in a country like India.
This book serves as a quick and convenient reference for anyone wishing to refresh their memory of India’s key policies. With its non-controversial narration and lack of overt ideological bias, its depth may appeal to the mass market. However, analysts, commentators, and even civil services aspirants would need to supplement their understanding with other works on this subject, several of which have been reviewed in this paper.
The reviewer is the author of Making Growth Happen in India -neutral norm
