Remembering TN Srinivasan: A towering figure in Indian economics who embraced 1991 liberalisation with passion
Srinivasan will definitely be remembered for his contribution to the opening up of the economy, though admittedly a lot of what has happened is due to external pressure (IMF) or political dictum.
The name T N Srinivasan resonates well with all students of economics, especially those who studied the subject in the eighties. The Indian economy was closed at that point of time which euphemistically was called a mixed economy. To read about someone who espoused free trade went well with students who were used to reading the micro and macroeconomics part of the story where the Ricardian theory of comparative advantage held.
A theory was simple, but fighting for the same in a system which was closed and believing in import substitution was more challenging. This was a hangover from colonialism where the country went out with a curious vengeance to negate anything foreign. Given that Srinivasan had also spent time with the Planning Commission, it was useful in so far as building the case for free trade, which materialised finally in the nineties.
Srinivasan has several books to his credit which were useful for the policy-maker, practitioner as well as student. As far back as in 1983 he had made a strong case for developing countries to back up GATT (which is the modern World Trade Organisation -WTO).
This was a hit with the liberals as in those days it was felt that free trade would only lead to exploitation of mineral-rich developing economies which were called under-developed countries or the Third World. Today when we look back at India’s position in these trade agreements as well as our participation quite positively in WTO, Srinivasan’s contribution cannot be ignored.
Quite interestingly, he also had ideas of what we call ‘universal basic income’ today which was put forward as minimum income to meet basic needs. This was a hit with politicians also as it was coincidental with the planning system which looked at a change in strategy from starting from the top to working from below, which was a change in paradigm that came to typify India’s growth stories. This idea is still to be implemented in full spirit though several apologetic attempts have been made in the past at reaching out to the poor.
His contribution to development economics was significant and the study of the models used in the developing economies was insightful as they provided approaches that could be emulated by others. Based on various case studies the thrust has been on privatisation, opening the economy more to foreign trade and investment and allowing market forces and the private sector to guide resource allocation to a much greater extent.
Therefore, it was of great satisfaction to him when India went in for reforms in 1991.
Most of the reforms in the area of industry, trade and investment were espoused repeatedly by Srinivasan from the seventies and seemed to be taken up with urgency in 1991 though there were limited doses of liberalisation witnessed in the interim period.
He has collaborated a lot with Jagdish Bhagwati, who has also been at the forefront of current day policy formulation under the NDA regime, in areas of international trade. Quite a bit of seminal work has been done jointly by the two of them, though Srinivasan has been the relatively quiet economist compared with the latter. The fight for freer trade, especially for developing countries is compelling and something which has been pursued by them in the last two decades. Quite clearly the theory of comparative advantage holds if all follow the rules of the game. It would, however, be interesting to have known how he would have viewed the current wave of protectionism being pursued in the last five years or so ending in the trade wars between the two major trade powers USA and China.
Trade goes well with investment and the opening of the frontiers to foreign investment has made the Indian economy look very different in the last two decades. These flows of funds have helped all countries. The western powers benefited from exploring new markets after reaching a plateau given their high levels of living and minimum upside growth prospects, while the recipients have gained through a flow of funds, technology know-how and better consumption patterns.
Did he have detractors? In the seventies and eighties, there were two different schools of thought and those on the Left or leaning towards this angle were not enthused by free trade as it was widely believed that colonialism was a result of free trade. Also, today when we talk of Make in India, there is some debate on whether this means going back to import substitution. Most countries are looking inwards when the chips are down as every nation wants to protect its domestic industry and employment. So while freer trade works in good times, there will be skepticism when the cycle turns around and countries look inwards. Therefore, no theory is absolute and should be looked at in the contextual.
Srinivasan will definitely be remembered for his contribution to the opening up of the economy, though admittedly a lot of what has happened is due to external pressure (IMF) or political dictum. He was never really in the so-called advisory role as we have economists today to really guide policy as he lived at a time when ideology triumphed over reason. His views carry more weight as they came out of the belief of an economist rather than any political compulsion.
(The writer is Chief Economist, CARE Ratings; and author of Economics of India: How to fool all people for all times)
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