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ECONOMY
The
most commonly used clich about India is that this is a country of crazy
contrasts. The one generalisation, it is said, that can be made about
India is that no generalisation India’s biggest achievement since it became politically independent in1947 is that it has remained united despite innumerable prognostications to the contrary by doomsayers. The fact that India has remained undivided is significant since this is arguably the world’s most heterogeneous — and at the same time deeply divided – nation-state. How can such a country become an economic power? Author, economist and former American Ambassador to India during the John F Kennedy years in the early 1960s, John Kenneth Galbraith, famously described India as a functioning anarchy to "attract attention" and emphasise the point that India’s success did not depend on its government but on the energy and ingenuity of its people. Uneven progress
A report prepared in April 2004 by US financial services bigwig Goldman Sachs observed: "India is often characterised as a country of contradictions. This idea is exemplified by the popular phrase that India accounts for close to a third of the world’s software engineers and a quarter of the world’s undernourished". Coexisting in the country is a range of political and economic systems, including different forms of feudalism, capitalism and socialism. India’s first Prime Minister Jawaharlal Nehru wanted a "mixed" economy for the country, one that would include the best elements of both capitalism and socialism. Nearly six decades later, the verdict is almost unanimous: we took the worst of both worlds. Private enterprise (the hallmark of capitalism) was stifled by excessive bureaucratic controls. At the same time, the state could hardly provide healthcare and elementary education (that socialist societies sought to provide) to the majority of its people. Even if certain sections of the population have made considerable progress in recent years, economic development has, by and large, been uneven. The overall nationwide picture of growth indicators conceals sharp and increasing inequalities in income and social development. Ironically, what was historically considered the most fertile area of India – the plain of the mighty river Ganga that includes the two states of Uttar Pradesh and Bihar together accounting for nearly a fourth of the country’s total population – has become its economically and socially most backward region. At the south-western tip of the subcontinent, Kerala has an amazingly creditable record in providing elementary education and basic healthcare. The Human Development Report 2003 of the United Nations Development Programme (UNDP) states: "The state of Kerala, India, has health indicators similar to those of the United States — despite a per capita income 99% lower and annual spending on health of just $28 a person." By any yardstick, this is a considerable achievement, particularly if one takes into account the fact that Kerala is not even among the most prosperous Indian states. Yet, Kerala has one of the highest rates of unemployment; it is a state where entrepreneurship is conspicuous by its absence. At least one out of four Indians is steeped in poverty. That’s one-fourth of one billion people, more than the population of the United States. Nearly half are denied basic education and healthcare. Nearly two-thirds of India’s girl children do not receive any education worth the name. Nearly one-third of the country’s citizens still suffer social discrimination on account of the caste system. In the coming years, can India hope to regain some of its past stature in the comity of nations? Consider the fact that the East India Company was set up four centuries ago, to be precise, the year 1600. Less than a half century earlier, Emperor Shahjahan had ascended the throne of the Mughal empire. The lanes of Chandni Chowk outside the Red Fort were truly paved with silver those days; the city was arguably among the wealthiest parts of the world. If, only four centuries back in time, India was considered one of the most advanced parts of the world — in the arts, in science, politics and in commerce — is 50 years too short a time for India to regain some of its lost prestige? It isn’t. Two recent reports by Goldman Sachs have argued that over the next 50 years, four countries – Brazil, Russia, India and China (or the BRIC economies) – would become a much larger force in the world economy than the Group of Six (G-6) developed countries, namely, the United States of America, Japan, Germany, France, Italy and the United Kingdom. It is contended that India could be a bigger growth story than China in the long run. The real rate of growth of India’s gross domestic product (GDP) could be higher than five per cent over the next 30 years and close to five per cent as late as 2050. India would be the only country among the BRIC economies recording growth rates significantly above three per cent annually, it is claimed. Obstacles to growth At the same time, the Goldman Sachs reports have highlighted various deficiencies that have hampered (and will certainly continue to constrain) rapid economic development in this country. Even if India grows faster than all the BRIC economies and G-6 countries mentioned half a century down the line as is expected, the fruits of this growth may not be evenly distributed. Thus, even as the country’s economy expands in size, income per head will continue to lag behind the levels in other countries. By 2050, India’s economy would be the third largest after China and the US. However, in terms of per capita income measured in US dollars, India would come last among the 10 countries (G-6 plus BRIC) being compared. China’s per capita income could be similar to where the developed countries are now (about $30,000 per capita per year) for, by 2050, the per capita income in the US would roughly reach $80,000. By way of contrast, India’s per capita income would be a much lower $18,000 against around $50,000 in Russia and over $26,000 in Brazil. India fares particularly poorly as far as its track record on education is concerned. The Goldman Sachs reports highlight the fact that although India "has witnessed well-known success in tertiary education on the back of public investment in higher education", its pathetic performance as far as elementary and secondary education is concerned has acted as a "major obstacle to achieving long-term growth potential". In 2000, the proportion of the country’s population over the age of 15 with no education was as high as 44 per cent – though this proportion was an even higher 72 per cent in 1960 – compared to 18 per cent in China, 16 per cent in Brazil and one per cent in Russia. According to UNESCO, in 2000-01, only half the children in India who entered primary school went on to study till Class V. This is mainly on account of the fact that elementary and primary education in the country has inadequate public funding, including dispensation of resources for implementation of mid-day meal schemes. India’s student dropout rate at 53 per cent is the worst in the whole of South and East Asia. There is all-round consensus in all sections of Indian society that the country’s healthcare system is in a pretty sad state. The government used to spend more per head on healthcare during the 1950s and 1960s than it does at present. The governments of India’s less well-off neighbouring countries have better healthcare facilities than large parts of the country (especially the north). If Indian doctors can make it big in the US and the most developed nations of the world, there is surely nothing that is drastically wrong about the quality of education provided in the country’s leading medical institutions. India’s pharmaceuticals manufacturing industry is one of the few industries which is bigger than its counterpart in China. Yet, the fact is that the Indian pharmaceuticals industry produces and sells huge quantities of the kinds of drugs the country doesn’t really need: cough and cold mixtures and digestive aids. Many drugs banned in different countries of the world are freely sold in India — there is a plethora of even what doctors call "irrational" formulations. There are thousands of small and medium-sized pharmaceuticals companies, most of whom have become increasingly dependent on multinational corporations. Indian companies export bulk drugs all over the world and some like Ranbaxy, Dr Reddy’s and Cipla have expanded the frontiers of medical science with their research. At the same time, the country has until not very long ago, faced periodic shortages of essential drugs required to check commonly-prevalent water-borne diseases. The Goldman Sachs reports state that despite inefficiencies, "India has the institutional building blocks in place to sustain growth in the private sector: a functioning independent judiciary, stronger property rights than in the rest of the BRIC, and public efforts to support market competition". Whereas India has been and continues to follow conservative monetary and foreign exchange policies, its fiscal policy is "loose". The high deficit at around 10 per cent of the country’s GDP hampers growth by diverting much needed resources for interest payments, instead of healthcare, education and infrastructure. If India could match China’s infrastructure as well as primary and secondary education standards, its average annual rate of growth of GDP over the next five years would jump from just over six per cent at present to over eight per cent, that is, above the target specified in the Tenth Five Year Plan (April 2002 to March 2007). Anarchic democracy India and China together account for nearly 40 per cent of the world’s population. Both have witnessed strong growth over the past decade, both have surplus labour and both countries have diasporas to contribute to economic development. The Goldman Sachs reports point out the differences in economic orientation but do not mention the political differences — India is a heterogeneous, noisy, anarchic democracy while Chinese society is far more homogeneous, regimented and wary of granting its citizens excessive political freedom. For most of the 18th century and till the beginning of the 19th century, Asia was considered to be the most developed part of the world in every respect — economic strength, political sagacity, social tolerance and cultural effervescence. As the pendulum of development subsequently swung in the opposite direction, the poor and the miserable came to be concentrated in the East while the West prospered rapidly. The balance of power is shifting once again, but India has a long way to go before it can truly claim to be a developed country. While there may be no consensus within and among political parties about the merits or otherwise about economic policies relating to LPG (or liberalisation, privatisation and globalisation), there is another side to the coin. Cutting across the political spectrum, there is complete consensus about the need to improve BSP (or bijli, sadak, paani). No politician or bureaucrat can today disagree with the contention that India cannot progress unless the country’s physical and social infrastructure improves dramatically. It is hopefully becoming "politically profitable" for our netas and babus to build primary schools and healthcare centres, instead of diverting the attention of people on emotive issues, including those relating to caste and religion. We can disagree on whether the Employment Guarantee Scheme will work effectively or how corruption in welfare programmes can be minimised. But nobody doubts that jobless growth would only lead to more social upheaval. The NDA learnt this lesson the hard way. The UPA government, too, will meet a similar fate during the next elections unless it gets its act together. —The writer, a senior journalist, is Director, School of Convergence. |
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