BY THE EDITOR
In Service of the Republic: The Art and Science of Economic Policy by Vijay Kelkar and Ajay Shah presents itself as a sober, technocratic intervention in India’s policy discourse. The authors, both esteemed former senior civil servants and professional economists, argue that India’s economic trajectory, particularly the marked deceleration after 2011, reflects a failure of institutional capacity rather than intent. Their diagnosis is rooted in public choice theory, viewing the state as a coercive apparatus that must be deployed with extreme caution.
The book’s framework is deceptively simple. Before any government intervention, policymakers must ask three questions:
Is there a demonstrable market failure? Can the government effectively correct it? And crucially, does the state possess the capacity to implement the intervention without causing more harm? This third question—state capacity—is where the book finds its analytical footing.
Kelkar and Shah argue that India’s policymaking suffers from systemic weaknesses in execution. When the stakes are high, as with tax enforcement, arbitrary power becomes law unto itself. Where transparency is absent, accountability withers. They illustrate this through vivid examples, from failed schemes to control rat populations to the paralysis in addressing Delhi’s air pollution (for foreign workers, Delhi is considered a ‘hardship’ location due to air quality and augmented salaries are commonplace). The authors introduce useful concepts like the ‘Marginal Cost of Public Funds,’ arguing that (at time of writing in 2023) for every rupee of public spending, the cost to Indian society is approximately three rupees—a framing that shifts debate from what government can do to what it should do.
The book is clearly written, with concise chapters and summarised takeaways. It draws on the classical liberal tradition, arguing that the good society is not centrally planned but emerges from individuals planning their own lives. This is not a novel position, but the authors ground it in India’s own history of dirigisme, which for forty years after independence stifled growth and failed to lift millions from poverty.
Yet a critical reading must press further. The book’s foundational assumption—that India is a “$3-trillion economy on her way to becoming an economic superpower”—rests on GDP figures that deserve serious scrutiny. These numbers are constructed through methodologies repeatedly revised, often in ways that flatter growth narratives. The statistical apparatus of the Indian state is itself a questionable institution, yet the book treats its outputs as reliable inputs for analysis.
The bright lad at the back of the class might ask: if the state lacks capacity in tax administration and regulatory enforcement, why should we trust its capacity to measure itself?
More troubling is what the book does not address. Consider a fundamental reality: the entire annual product of India—every good produced, every service rendered, every wage earned—passes through the foreign exchange desks of London approximately every 32 hours. This is not a minor detail. It speaks to the structure of global finance, the continuing colonial architecture of currency settlement, and the extraction of value from the high inflation Indian economy and other similar economies by financial intermediaries located thousands of miles away, often operating obliquely out of tax-free, multiple trillion-dollar jurisdictions like the Isle of Man or Guernsey.
Who benefits from this arrangement?
Not Indians.
In the case of London, at a traceable level, the rents accrue to British banks, British clearing houses, British law firms, and British accountants. Every dollar earned by an Indian exporter, every remittance sent by a worker in Dubai, every foreign portfolio flow into Mumbai—all settle through the financial infrastructure of foreign first world nations. This is not an accident of geography. It is a deliberate structure, well preserved and defended, that siphons value from the real economy of India to the financial economies and well-established capitalists of the predominant capital markets.
The forex arrangement is not merely a contemporary financial abstraction but a modern iteration of a much older pattern of economic control. Britain’s post-independence hold on India’s economic levers was maintained not just through financial infrastructure but through powerful corporate entities. The story of ITC, founded as the Imperial Tobacco Company in 1910, exemplifies this continuity. For decades after 1947, it remained a bastion of British commercial power, an enterprise whose deep distribution networks and market dominance were built during the colonial era. It was only in the late 1960s, with the appointment of the first Indian chairman, that the company began its slow, arduous journey of “Indianisation,” gradually diversifying beyond cigarettes into hotels, paper, and agri-business to truly become an Indian institution. Likewise, the oil sector was long dominated by British firms like the Burmah Oil Company and Burmah Shell, who had to navigate a complex post-colonial transition with the Indian state, seeking to adapt their imperial-era dominance to the new reality of sovereignty. These corporate footholds, alongside the financial infrastructure in London, represent a dual system of extraction—one channelling value through the real economy via legacy enterprises, the other through the financial economy via settlement systems, both preserving a structure of dependency that continues to shape India’s economic sovereignty.
Kelkar and Shah, for all their attention to institutional capacity, have remarkably little to say about this, or the skewed realities of global finance. Their policy prescriptions focus on domestic reforms: improving tax administration, strengthening regulatory frameworks, building bureaucratic competence. These are worthy goals, but they operate within a system whose outer boundaries are determined by forces far beyond India’s borders. The authors treat the global financial architecture as given, as weather to be adapted to rather than a structure to be questioned.
The 32-hour fact is not a curiosity; it is the elephant in the room that the book’s liberal framework cannot see or, let us be fair to these noble Indian patriots, chooses not to see.
This is the deeper limitation. The book operates entirely within the framework of liberal political economy, accepting the existing distribution of power and wealth as the backdrop against which policy must be made. The state is to be restrained, markets are to be trusted, and the goal is efficiency within a system whose fundamental inequalities are never examined. The authors are former civil servants, and this shows. Their vision of reform is one of administrative competence—better trained officers, more transparent procedures, clearer rules. There is no questioning of whether the civil service itself, as an institution inherited from the colonial state which preferred potentially mutinous hands to be busy shifting papers, might be fundamentally unsuited to the task of building a republic in the twenty first century. There is no examination of how the interests of the policymaking class might diverge from those of the broader population. Might not the legions of life-tenured apparatchiks be more efficiently replaced by AI? And might not artificial intelligence, properly deployed, burn through the endemic corruption that pockmarks this otherwise wonderful country—corruption whose daily residues are broken pavements, gridlocked cities (most often the product of developer bribes and planning kickbacks), and police forces whose vision conveniently blurs when their back pockets are filled? The irony is that the technocratic liberalism Kelkar and Shah champion offers no answer to this question, for it does not wish to highlight the Satya of the the corruption it pretends to solve.
The book’s treatment of poverty reduction is similarly circumspect. It notes that between 1991 and 2011, there was ‘a substantial decline’ in poverty, but does not probe the quality of that decline, the precariousness of those who escaped absolute poverty, or the extent to which growth benefitted particular regions and castes more than others. The middle-income trap is discussed as a technical problem to be solved rather than a condition shaped by global power relations. There is little on the imminent implosion of the heavily indebted contractor class whose jobs will be replaced by AI and likely entail an increase in urban violence in India. The authors write as though India’s fate is entirely a matter of domestic policy choices, as though the global order does not systematically constrain and extract from the periphery.
In Service of the Republic is, however, a very useful book. It offers a clear framework for thinking about policy, a sober assessment of institutional weaknesses, and a valuable corrective to naive statism. Its emphasis on state capacity, transparency, and accountability is well-grounded and important. For those who want to understand how Indian economic policy works in practice, this book provides genuine insight, written by eminent individuals who have been there and worn the t-shirt during the failed Marxist years, the boom times, and the consequent years of unnecessary sclerosis.
But it is also an incomplete book. It accepts as given what should be questioned. It treats India’s GDP figures as reliable, global financial structures as immutable, and the liberal framework as the only possible horizon for policy thinking. The reader is left with the distinct impression that the authors are describing the rules of a game whose fundamental structure they are unwilling to examine. The real questions—about who benefits from the current arrangement, about the structures of global extraction, about the cunning colonial inheritance that continues to shape economic life—remain unasked. In this silence, the book reveals more than it intends.