Introduction

Production means activity by institutional units, as distinct from natural processes, intended to obtain a result in the form of goods or services. The process adds value to intermediate inputs with the help of primary inputs like capital and labour; this addition is gross value added. There was a time when agricultural activities were supposed to be the most crucial and there was a school of thought (the Physiocrats) that considered agricultural production alone to contribute to the national product. But this idea is not held by any significant group of economists today. Adam Smith distinguished activities in the categories ‘productive’ and ‘unproductive’ (Smith, 1776: 321). Most service activities, however lofty or revered (excluding those integrated directly with material production and distribution of the products), were classified as ‘unproductive’. The idea was that the level of material production determined availability of the basic necessities of life and resources needed for economic growth, while services were fleeting. The concept of net material product (Stone, 1970; UN, 1971) of the erstwhile socialist system, which counted only goods and (material) services directly associated with them, basically owed its construct to this idea. The broader concept of aggregate product, which has subsequently been formalized as the GDP, is now almost universally accepted as a measure of the extent of productive activity in a country (Beckerman, 1991; UN, 2009). Basically, GDP consists of gross value added (GVA) from activities of all kinds of institutional units resulting in production of goods and services using capital, labour and intermediate inputs of goods and services. This is identical to aggregate final expenditure in the absence of product taxes.

In the course of accumulation of knowledge manifested in technical progress, practically all productive activities undergo changes. Output per unit of labour increases, and over time this increment becomes phenomenal. Although production of most commodities increases in scale with growth of population, peoples’ consumption or other use (investment and export) of every commodity does not grow proportionately with income. This means the commodity composition of aggregate production changes.

Introduction

Over the past two centuries, the deep and multifaceted relation between statistics and statecraft has emerged as one of the defining features of states across the world. Modern states depend on statistics for the planning and evaluation of interventions. The growing size and complexity of operations undertaken by states have deepened their dependence upon statistics. Bureaucratisation and technocratisation of policymaking as well as the growing capacity of non-state actors to challenge government policies have also pushed states towards statistics.

The relationship between state and statistics is not merely instrumental though. Given their intimate relation with the origin and evolution of modern states, statistics are integral to the self-imagination of states and, also, to how they are imagined by people. In its earlier eighteenth-century sense, statistics was ‘a set of administrative routines needed to describe a state and its population’ (Desrosieres 1998: 16), a description of the state by and for itself (ibid.: 147). By the early nineteenth century, almost all Western countries had established statistical offices (Tooze 2003: 2; Urla 1993: 821) as ‘national statistics’ had come to be seen ‘as one of the vital attributes of the nation-states then under construction or seeking to assert themselves’ (Desrosieres 2013: 10). The quality of statistics produced by a country began to be seen as an attribute of its socio-economic and political development, with advanced economies and liberal democracies being associated with better statistical systems (Porter 1995: 80; see also Urla 1993: 821). Around the same time, statistics also began to be seen as enablers of public interest. And the census ‘became less concerned with what the people could be obliged to do for the state and more concerned with what the state could do for them’ (Coleman 2012: 335) amidst an emerging ‘shift towards willing participation [in state-sponsored data collection efforts] on the part of the respondents’ (Bookman 2013: 51; see also Starr 1987: 12; Prewitt 2010: 239).

Chapters 1, 2 and 3 explored increasing complication in the monetary environment. In Chapters 1 and 2, monetary change was depicted in terms of how traditional norms and theories by which state money is understood as money – its conditions of creation, its reliability, its pliability and plausibility as a policy object, its role amidst the myriad of financial instruments and its capacity to fulfil the traditional functions of money more generally – is being challenged by globalised markets. In Chapter 2, this was accompanied by a mapping of the monetary environment in the specific context of a frontier economy. Emphasising the importance of perceptions of stability, this mapping delineated economywide foundations on which trust in money stands and in which monetary contestation may conceivably arise. This framework served to inform the history of the rupee recounted in Chapter 3, which emphasised growing uncertainty within the monetary environment by drawing out instability, informality and increasingly visible anchoring issues as the post-liberalisation period progressed. These chapters have thus set out a macroeconomic context in which state money is revealed as suffering a deficit in the stability and reliability that credible money demands. This predicament suggests a potential reallocation of state money from its classic Keynesian function of the risk-free asset, to a subject of risk management, a reading that is consistent with Pakistan's ‘enigma’ of slow progress in financial inclusion (Rasmussen 2018).

Drawing the focus down to the level of microanalysis, the next two chapters shift the focus onto ordinary people and their utilisation of money in the everyday economy. This chapter lays out the terms in which household money use is explored in the study and Chapter 5 applies these terms through a household survey. At issue is the identification of changing money use patterns that might reflect the shifting status of the rupee from risk-free asset to subject-of-risk, and thus point towards everyday acts of monetary contestation that might reveal the kind of distrust in money that is so central to sociological theories of money. If changes in daily economic transactions – amongst households and in bazaars – can be identified in connection with financial conditions that have undergone change with the liberalisation of money and markets, then substantive meaning attached to the liberalisation of money on the ground, amongst ordinary Pakistanis, can be pinpointed.

Restraining the Leviathan, Part 2: Private control of the means of production renders it necessary for those with power to bargain those with wealth.

Money and monetary governance in Pakistan have radically transformed since partition. Through four distinct periods – the pre-liberalisation era that lasted up to the late 1980s, the years of liberalisation through the 1990s, the boom years of the early to mid-2000s, and the post-liberalisation period from 2008 onwards – the economy has shifted from a developmental state into an economy open to global markets. This radical restructuring of the economy has redefined the rupee.

Guided by the analytical framework outlined in Chapter 2, this chapter undertakes a brief history of the rupee that emphasises the development of instabilities and opacities under the liberalisation of money and markets. The chapter tracks the twists and turns of SBP policy to show how the hostile conditions surrounding the rupee in the 1990s – including the new inflationary dynamics of liberalised markets and the seemingly unmanageable threat to rupee stability in the lead-up and aftermath of its float in 2000 – were only relieved when the War on Terror prompted a repositioning of the economy in global markets. With abundant inflows and stable commodity prices in global markets, the SBP was able to accommodate the new patterns of payments that arose with liberalisation while protecting the rupee's value.

Yet beneath the benign macroeconomic conditions, two key issues remained unaddressed. One was informality, which was growing across the economy, and its monetary transactions, presenting an increasingly menacing threat to the capacity of the state to implement policy. The other was the liberalisation of key commodity prices, a process which the state appeared ultimately unwilling to carry out in respect of certain key prices. This led to a series of last-minute policy U-turns on the state's commitments to multilateral donors to let prices float.

Building on the analysis proffered in Chapter 2, this chapter presents these issues as issues of money and monetary management. Not only is informality a hindrance to monetary policy forecasting and transmission, but key commodity prices, such as those for wheat and electricity, are crucial to the stability of the monetary environment because they function as anchor prices. While never clearly spelled out as problems of economic governance, let alone as monetary issues, this chapter shows how the actions of the state with regard to both informality and commodity prices reveal their importance in maintaining stability in money and the economy at large.

The hallmark of a modern economy is technological change that continuously transforms the existing order. Measurement of economic variables in such a dynamic backdrop poses great challenge to the economic statistician. The nature of the product has been changing as has been the technique or the use of factors of production. That impacts prices of products, but not uniformly. The different sectors of the economy are interlaced but we have the concept of monetary value added by each sector. Value added is easy to measure, but does that quantity show the level of activity of a sector as reflected in its output? The question presumes that we know what real output is; apparently simple concepts with respect to a firm become quite tricky when applied to aggregates. Nevertheless, the question is important for understanding the changing structure of an economy, and that motivated the present study.

Economic growth is essentially a quantitative idea and growth comes hand in hand with changes in industrial structure. So, an analysis of structural change is inevitably data intensive. I have tried to be careful, taken care to go into the nature of data and its consistency with the overall national accounting framework. In a sense, the analysis in the book gives data precedence over prevailing ideas about the development of the Indian economy. Some simple frameworks have been devised to explain the observed trends; the findings, in large part, go against mainstream ideas. Further research will resolve any lingering doubts about my findings.

The basic results of the study have been published in several journals – Applied Economics, Money and Finance, Structural Change and Economic Dynamics (SCED) and Journal of Asian Economics. My teacher Mihir Rakshit read one of my core working papers and suggested a number of improvements that I have incorporated into the work. Improvements have also been suggested by some editors and anonymous referees of the above-mentioned journals and the Cambridge University Press. Soumyen Sikdar provided encouragement at different points in the course of my work. I am grateful to all of them.

The study started, without a conscious plan of a book, with a project and then carried forward by another project, both granted by the Indian Council of Social Science Research (ICSSR).

Introduction

In the run-up to the February 2018 Assembly Elections, the website of Nagaland's chief electoral officer hosted two different types of constituency maps. One was legally correct with regard to the external borders (Maps 3.1 and 3.3[b]), and the other was factually correct with regard to constituency borders and the location of polling booths in the disputed territory between Assam and Nagaland (Maps 3.2 and 3.3[a]). This is not the first time though that the Nagaland government has published mutually inconsistent maps of constituencies (Agrawal and Kumar 2017a: Map 5). Moreover, election maps are not the only conflicting maps released by the state government. Maps published by the Census (Maps 3.8 and 3.10E) and the Nagaland GIS and Remote Sensing Centre (NGISRSC) (Maps 3.5–3.7) also differ with respect to the external borders. In some cases, even maps published on the same sheet are mutually inconsistent (Map 3.4). The diversity of government maps is supplemented by a wide variety of maps published by civil society organisations, non-governmental organisations, insurgent groups and partisans of independence, which are often displayed in government offices as well.

When we first visited Nagaland about eight years ago, we were struck by this multiplicity of inconsistent maps and estimates of area of the state. Unable to find any authoritative estimate of area, one of us interviewed a senior official incharge of border affairs in Kohima (25 June 2013). Initially, the official denied the cartographic diversity, but later argued that maps released by different departments varied with their footprints. So, the education department's map of schools differs from the health department's map of dispensaries. This can at best explain the differences within the borders of the state but not the differences between maps in terms of the external borders. The official finally admitted that there might be discrepancies due to border disputes but expressed an inability to share the estimate of Nagaland's area as the matter was sub judice (SoA vs. UoI & Ors. 1988) and referred the interviewer to existing government publications. Another official argued that geographic information system (GIS) maps were not entirely accurate for forested, hilly terrain (interview, 19 September 2012, Kohima). However, the maps of Nagaland are more erroneous around the Assam–Nagaland border that runs through plains and foothills, where the vegetation is not dense.

Introduction

Stories abound about how India treated its private enterprise before the comprehensive reform was launched in 1991. Entrepreneurs, who were pioneers in their own fields, used to get the feeling that they were being treated as greedy pursuers of monetary gains; they had to run from pillar to post wasting time, energy and money, to get sanctions for crucial business matters. The public sector emerged to provide a good foundation of basic and heavy industries, but in this process, the animal spirit of the private entrepreneurs was caged in a network of license and permit legislations. Inadequacies of the public sector became increasingly evident as time wore on and presumably the first real step to break out of the public sector mindset was allowing the entry of Suzuki Motors in India in 1983, in an eloquent declaration of intent to let the caged animal spirits fly.

Development under successive Five Year Plans over the past decades was, however, quite significant though below potential. By the turn of the 1970s, the industrial sector achieved some depth by developing the basic and heavy industries, as is evident from their being comfortably placed by international comparison of sectoral weights (Chapter 3). The Green Revolution of the 1970s reduced the extent of agriculture's dependence on weather and resolved the problem of recurrent food crises. The service sector was not very dominant at this stage; rather, it was an underperformer by the K-CT norm, as already discussed. During the 1980s, the GDP growth shifted to a higher trajectory and the private sector started showing animation with signs of change in government attitude. The three-year averages of gross fixed capital formation (GFCF) as a percentage of GDP were similar for the public and private sectors during 1977–80 (a little below 9 per cent); but just before the reform, during the three years to 1991, the private sector investment surpassed that of the public sector by almost two percentage points (12.3 versus 10.5).

Shaping the Path of Growth and Development. How political conflict and violence shapes the trajectories of economic development.