Why Read “Behold the Leviathan: The Unusual Rise of Modern India”?

On 21^st October, Penguin Random House is publishing Marcellus’ next book, “Behold the Leviathan: The Unusual Rise of Modern India”, authored by Saurabh Mukherjea and Nandita Rajhansa. There are three very good reasons why you should read our book on how India is changing and how you can profit from that change.

I have authored this book with my colleague, Nandita Rajhansa. Both of us studied economics at a postgraduate level. As we were doing so, we came across a body of literature on the Indian economy which either sees India as a broken economy or as a shining exemplar, a country on the ascent. Such polarised accounts of the economy, we do not believe do justice to the multifaceted nature of change playing out in twenty-first century India. To be specific, there are three different dimensions of change which we believe are neglected in the popular discourse on the Indian economy:

Two steps forward, one step back: No free-market democracy moves forward in a linear fashion. Periods of growth are typically followed by periods of economic hardship. Part of this is due to the nature of the economic cycle wherein periods of economic expansion typically result in inflation rising, as sooner or later demand outstrips supply. Rising inflation is then countered by policymakers by hikes in interest rates which then slow down the economy. If these rate hikes continue for an extended period of time and/or are accompanied by other shocks to the economy eg. rising oil prices, then the economy often enters a period of low or negative economic growth. However, distinct from the economic cycle, the other reason free market democracies go forward two steps and then go back a step is because vested interests step in to arrest the advancement of the economy if things are not playing out in their favour. So, for example, Japan’s unprecedented burst of economic growth in the forty years following the end of World War II was brought to an end by the Plaza Accord of 1985 which signalled the begin of an extended period of the yen appreciating relative to the US dollar (46% appreciation in real effective terms by the end of 1986 itself). American manufacturers had prevailed upon the Republican government to engineer this intervention which helped arrest the rise of highly efficient Japanese companies like Toyota, Honda, Sony and Panasonic. The sustained appreciation of the yen in the face of American coercion ultimately pushed Japan into a 20-year period of economic stagnation. However, just because Japan’s economic progress was arrested after four decades of progress does not negate the fact that those four decades transformed Japan from a country devastated by World War II to one of the most prosperous societies in the world.

Similarly, the ongoing bull run in the Indian stock market is now entering its fifth year with the BSE500 having more than tripled from its April 2020 low of 10,527. 33% annualised returns over more than four years have brought more than 120 million new retail investors into the Indian stock market. Given that only 80 million people file personal Income Tax returns in India, it is all but certain that many of the newcomers to the Indian stock market are low-income earners who are likely to see much of their life’s savings wiped out in the correction that tends to follow such breathless rallies. However, that correction – and its attendant downsides – do NOT negate the unequivocal benefits that accrue to the Indian economy from a rising stock market eg. the drop in the cost of equity capital, the shift in household savings from unproductive physical assets to more productive financial assets. Understanding the uneven nature of economic progress is essential for those who aspire to emerge from economic and financial cycles, stronger rather than weaker.

Winners & losers: Not only do free market democracies create winners & losers but the winners tend to be few, and their margin of victory tends to be huge. In contrast, the losers are numerous, and their losses tend to look enormous in comparison to the spoils which accrue to the winners. This, rather than being a bug, is a design feature of capitalism. (ii) The force behind this design feature is the Power Law which posits that in any competitive economic situation (eg. the stock market or a high stakes sports tournament such as Wimbledon), a very high proportion of the gains will accrue to a small minority of participants (eg. the Wimbledon champion’s prize money is 50x that of the player who loses in the first round). (iii)The nature of economic progress therefore creates inequality and India is no stranger to such an inequitable distribution of spoils. Understanding these inequalities helps not just investors but also other decision makers such as CEOs and policymakers make better decisions.

Interplay of social and economic change: Literature on the Indian economy which discusses issues such as unemployment, income inequality and budget deficits without reference to the rich interplay between society and the economy is incomplete at best and misleading at worst. Although India is the world’s fifth largest economy, it is only the 136^th richest country in the world when ranked on its per capita income of around Rs 2.4 lakhs or $2,700. When such a country, ranked amongst the sixty poorest nations in the world, makes a transition from grinding poverty to second world status, it is but natural that social and economic change will go hand in hand. As the economic historian Joel Mokyr describes in his outstanding book on the origins of the knowledge economy, ‘The Gifts of Athena’ (2004), the industrial revolution and the subsequent multi-century growth surge of the West owed much to rise of social networks comprising universities, publishers, scientists, guilds, trade bodies and kindred institutions. Through these networks knowledge was generated and disseminated and that in turn drove technological change and economic growth. The networking of India is driving a similar cycle of ideation, innovation and growth in the most unexpected corners of Indian society. One of the privileges of living and working in India today is to witness these networks and these cycles in full operational flow on a daily basis.

In this book, we have tried to bring alive these three dimensions of change in the Indian economy. Written across two years in which we criss-crossed India hundreds of times and interviewed over fifty of India’s leading minds in business, policymaking, media and academia, ‘Behold the Leviathan’ has been hailed by the cognoscenti as ‘a firecracker of a read’ which will ‘will challenge decision-makers, policymakers, and opinion leaders to reevaluate their long-standing perceptions of India’s development.’

We hope that our book will help you make informed judgement calls regarding India.

Please join us and Penguin Random House’s publisher Milee Ashwarya at the book launch webinar on 18^th October at 6pm using the following registration link:

Advance Praise for ‘Behold the Leviathan’

“Neither standard economic metrics nor stock market valuations can do justice to the remarkable dynamics underpinning India’s revival as a country that matters in the global scheme of things. ‘Behold the Leviathan’ captures succinctly the multi-dimensional nature of, both, India’s progress and its challenges. If you are invested in India, financially or emotionally, you should read this book.” – Ashish Dhawan, Founder-chairperson of the Central Square Foundation, and a Founder-trustee of Ashoka University

“To successfully invest in India, it is important to understand the nature of economic and social change in this vast country. ‘Behold the Leviathan’ is therefore an essential read for anyone who is putting money to work in this rapidly growing economy.” – Harsh Mariwala, Chairman, Marico Ltd

“‘Behold the Leviathan’ sheds light on hitherto unexplored aspects of India’s remarkable ascent. To get a thorough understanding of modern India, with all its twists and turns, you must read this book!” – Nandan Nilekani, Chairman and Co-founder Infosys and Founding Chairman UIDAI (Aadhaar)

“The economic transformation of a complex country such as India can never be told as a linear narrative. ‘Behold the Leviathan’ does a wonderful job of analysing the different dimensions along which India is changing. I found the book to be a riveting read.” – Niranjan Rajadhyaksha, Executive director, Artha Global

‘“Behold the Leviathan’ is that rare compelling read on the Indian economy which you can read for pleasure or for profit. It explains in clear terms the economic success underway in India today and highlights several fascinating sub-plots within the master narrative.” – Pirojsha Adi Godrej, Executive Chairman, Godrej Properties

“‘Behold the Leviathan’ skillfully maps out just how dramatically conditions in India have changed over the past two decades in favour of enterprising small business owners.”- Sanjeev Bikhchandani, founder and executive vice-chairman, Info Edge (India) Ltd

“‘Behold the Leviathan: The Unusual Rise of Modern India’ is a groundbreaking exploration of India’s rapid economic and social transformation over the past decade. This compelling book will challenge decision-makers, policymakers, and opinion leaders to reevaluate their long-standing perceptions of India’s development. It provides a profound understanding of the country’s unexpected ascendancy and social progress, making it an essential read for anyone seeking to grasp the true dynamics of modern India.” – TV Mohandas Pai, Chairman, 3one4 Capital

“Going beyond the quotidian matters which tend to characterise daily economic discourse in India, ‘Behold the Leviathan’ explores India’s evolution through the lens of social AND commercial change. The result is a firecracker of a book packed with interesting analysis and striking conclusions.” –Vellayan Subbiah, Executive Vice-Chairman of Tube Investments of India (TII) and Chairman of Cholamandalam (Chola) Investment and Finance Co. Ltd.