Restart Book Summary - Restart Book explained in key points

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Name: Restart
Author: Mihir Sharma

Mihir Sharma

The Last Chance for the Indian Economy

17 mins

Topics

Socialism & Capitalist Critique International Economics Culture

Table of Contents

Restart
Summary of 8 key ideas

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What’s in it for me? Peek into the economic situation of the world’s largest democracy.

When was the last time you heard positive financial news out of India? It’s probably been a while. India charged into the twenty-first century as one of the emerging BRIC economies (together with Brazil, Russia and China), but, today, the Indian economy is stagnant. How did this happen?

Well, that is exactly what these blinks explore. Where did India go wrong? How can the country regain the vibrant, dynamic and promising economy it once had? Is there even a way to restart the economy of India?

In these blinks, you'll find out

why 60 percent of an Indian truck driver’s day is wasted;
what changes need to be made to Indian agriculture; and
how the Record of Lime Washing and Painting effects India's economy.

India’s insufficient infrastructure stems from cultural beliefs and severely impacts the country’s manufacturing.

You might think the stories about Indian traffic jams that run over a mile long are just exaggerated rumors. When you step out of the Delhi airport and see it for yourself, however, you’ll feel differently.

These terrible traffic jams exist in spite of the newly built Rao Tula Ram Road flyover, a single lane bridge intended to absorb some of the traffic on the main road in Delhi. But it’s simply not big enough to accommodate the city’s traffic load. And the crazy thing is that, even before it was built, city planners knew it wouldn’t be big enough!

So why did they go forward with the construction? Well, in Indian culture, anything more complex or bigger than the bare minimum is considered a waste of money and resources. Indians are accustomed to living with shortages and delays, and people generally look down on anything they feel is excessive or superfluous.

This viewpoint is largely rooted in the socialist mindset promoted by Gandhi, who always rode in third-class train carriages. But it’s had serious repercussions for the country.

India’s insufficient infrastructure, for instance, makes it difficult for manufacturers to send out customer orders on time. Indian trucks only spend about 40 percent of their time on the road actually driving; the other 60 percent is spent waiting in the long queues for the various tax checkpoints.

Time is money, and this waste of time costs a lot for manufacturers. In fact, the cheapest way to send something from Bangalore, India, to Hyderabad, India, is to first send it to Europe, and, from there, back to Hyderabad! The traffic jams don’t just create stress and waste time for people going to work – they hurt the country’s economy, too.

Unemployment rates are on the rise because farms are unprofitable and there aren’t enough industrial jobs.

People in wealthier countries often assume that inefficient economies just need a larger labor force, but in India, where there’s an infinite number of potential workers, the unemployment rate is on the rise. Why is this?

One reason stems from problems with farms in the countryside. Farms are shrinking in size and their production output is relatively low, so farm wages are low. It’s just not an industry people want to get into anymore.

Government spending in the late-1980s almost led to a loan crisis.

Do you know the story of Joseph in the Old Testament? He interpreted the Pharaoh’s dream about seven fat cows that were almost starving, explaining that it meant there would be seven years of plenty, followed by seven years of famine. The story of India isn’t all that different.

In the late-1980s, Prime Minister Rajiv Gandhi thought India’s golden days would never end. India was doing well, but Rajiv Gandhi started overspending, thinking the country’s economy would only continue to grow and prosper. During his time in office, he increased military spending alone by 50 percent.

The reforms hurt many sectors of the economy, but some industries grew during and after the crisis.

Imagine you’re suffering from an illness. One approach is to treat the symptoms: you can take pills for the headaches or the nausea – whatever the symptoms may be. But, of course, curing the illness itself is more effective than fighting the symptoms. Unfortunately, this isn’t how India tackled its economic crisis.

Instead of addressed the root of the crisis, the Indian government implemented a number of reforms that were only half measures. When they devalued the currency, for instance, it didn’t speed up domestic production as they had hoped. However, if they had devalued it even more, it would have enabled manufacturers to competitively export, rather than stunting the industry.

The Indian government turned to the private sector to build infrastructure – with little success.

India’s lack of infrastructure was a serious problem, but the government, mired in debt, couldn’t afford to remedy the issue. So, in search of assistance, they turned to the private sector.

Private companies were asked to make infrastructural improvements – fixing roads, for instance – in exchange for money. The private sector would provide the capital and some expertise; the public sector would green-light and oversee projects.

The government shouldn’t put all the power in the hands of the private sector.

What happens when you have the same company overseeing the construction operations of a new building and also doing the construction itself? In India, it’s led to companies taking some shortcuts that save them money.

That’s why infrastructure projects should always be split between two companies: one that runs the operations and another that does the actual building. When two companies are in charge of a construction project, they keep each other in check.

Natural resources should be priced appropriately and kept away from the private sector.

What else does the government have to consider when they work with the private sector?

First, they need to recognize that allowing private companies to control natural resources – such as coal and land – poses a threat to the Indian people.

Farms don’t need to produce more rice and wheat; they need to be more productive overall.

Indian farms produce more rice and wheat than the country needs, and yet most farms insist on growing only these two crops. Why? The current system and the government’s intervention keep the farm industry stuck in place.

India doesn’t need greater overall food production, but it does need farms to be more productive. Hunger isn’t a serious problem for the country anymore. In fact, there aren’t enough granaries to store all the grain that’s produced. The government needs to stop and think. Instead of producing more rice and wheat, the farms need to become more efficient and start producing other crops.

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What is Restart about?

A few decades ago, India seemed poised to become a major player in the global economy. Today, a number of serious problems hold the country back. Restart (2015) explains what caused India’s decline and offers insights about what could be done to fix it.

Best quote from Restart

Its the Indian way, …: if you have created excess capacity in anything... then you have wantonly wasted money.

—Mihir Sharma

Who should read Restart?

Students of economics, political science and sociology
Anyone interested in India

About the Author

Mihir Sharma is a Harvard-educated economist who started his career as a journalist for the Indian Express. He serves as the Opinion Editor for the Indian broadsheet Business Standard.

Categories with Restart

Economics

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