India @ 74: Past imperfect, future charted out
August 23, 2020
India has tremendous unexploited economic potential; reincarnated Self-Reliance philosophy should help us tap that. — K.K. Srivastava
This year independent India has turned one short of the 75 years. But how has it performed? Well, India is a story of success, but remains a land of unfulfilled potential. Its democracy has stood up to challenges, yet it is miles away from being perfect. Its unity is increasingly under threat from internal and external forces. The quest for social justice often hits barriers. In brief a story of remarkable achievements, but intertwined with no less quantum of setbacks. Tremendous economic progress, but coupled with unmet promises. This is our beloved Bharat.
Mother India, the 1957 classic Bollywood movie, dealt with the post-independence socio-economic reality and focused on nationalism and nation building. Lagaan, Swades, Rang De Basanti, Border and many more movie inspired generations of Indians while confronting them with stark reality that is India. From the perspective of India’s economic evolution in the initial phase of post independence India, a rich businessman was the real villain in an Indian movie. Gradually, however, aspiring middle class took centre stage and the idea that it is not bad to be affluent gained ground. Then came Uri (2019) which encapsulated the can do spirit with its famous line – How is the josh. Reel life, however, does not necessarily mirror real life.
A survey by LocalCircles reflects the growing pessimism of citizens about the future of the country. They are pessimistic about employment and corruption levels. They feel that economic growth, which anyway will remain elusive in near future, and prosperity in India will benefit only a select few. But they believe that Indians clout in the world will improve Barclays apprehends that India’s GDP growth rate for FY21 will decline by 6% while RBI estimates that GDP will contract by 5.8%. All, however, predict a V shaped recovery. On August 2020 Modi has set a target of doubling farmers’ income by 2022, pucca houses and electricity connection for everyone, optical fiber network and broadband connectivity for every village. But then nobody could see the impending covid-19 and its ill effects. This, hopefully, is a short term blip.
In terms of nominal GDP India is the fifth largest economy in the world, and in terms of purchasing power parity the third largest. In 1950 its GDP was 30.6 billion dollar which had risen to 3.02 trillion dollar in 2020 ($ 11.32 trillion, in terms of PPP). The per capita income is abysmally low, at $ 2,338 ($ 9027, PPP). In 2019 India accounted for 8.5 percent of world GDP. It added 17% to it. Naturally, India is looked up to as an economic power house, elbeit with tremendous untapped potential.
At the same time, last year a World Bank report estimated that 176 million in India still lived in poverty. According to UNDP multidimensional poverty in India affected 369 million in 2015-16. A study in 2019, based on consumer expenditure data, suggests that between 2011-12 and 2017-18, India’s rural poverty rate may have actually increased by 4 percentage points. Naturally, in India there are only 120 million e-commerce shoppers, out of which only half are active users. Sins of past have led to this performance. In early post independence India there reined the license raj to curb concentration of economic power with handful of big industrial houses. This govt. control went awry, however, away. Licences, for example, were manipulated. Govt. merely acted as a regulator and not an enabler.
The GDP growth averaged 4.4% per annum during the 1970s and 1980s. Finally come the LPG (Liberalisation, Privatisation and Globalisation) policies of 1991. And the reform driven unshackled economy paced ahead unless and until corruption at large scale ate into it like a termite in early 2000 onwards. Still all was not lost. Now market forces are at play in commodity, financial, and foreign exchange markets. Investment is possible. The consumer is spoilt for choice. But the reforms remain incomplete. For example, RBI still influences interest rates, farm prices are set by the govt. and businesses still have to comply with a plethora of regulations. We are miles away from the credo of one country, one business, one compliance. What is really needed is the power in the hands of economic agents to drive the economy within a framework of market forces. India adopted the Nehruvian model wherein we had sarkarnirbharbharat. What we need ofcourse is Atmanirbhar Bharat, where the govt. will only act as an enabler. It will play the role to support the economic agents, hand hold infant industries, revive demand during down turn, build social overhead capital, and most importantly will stop acting like a doting parent. The current regime has decided to make an about turn and adopt self reliance as the guiding philosophy.
Self reliance is not a concept to be frowned at provided, we can ensure that domestic products match their imported counter parts in cost and quality. Minus that we will return to pre-Maruti age with products matching Ambassador and Premier Padmini. Atmanibhar Bharat is a strategy to reduce import dependence, produce products suited to Indian buyers, and gain market heft at the word mart. This will provide us added geopolitical leverage too. India always has had a trade deficit in recent years. Export growth has flattened since 2010, while imports have outpaced exports. While some imports may be inelastic (crude) in others (electrical and electronic equipment, pharma) imports can really be reduced. India needs to be particularly self reliant in relation to China which has proven to be an untrustworthy neighbor geopolitically and with whom Indiahas had a trade deficit ranging between $48 billion to $63 billion over the last three fiscal years. Second, given India’s larger market size reorienting domestic companies to cuter to domestic consumption can lead to more sustained growth that can be insulated from external shocks.
At the world stage India should exploit its market size to its advantage. India is the second largest mobile phone market, second largest importer of arms, the third largest for solar power equipment, beside being an enormous consumer base for social media and digital players. Self reliance can be used as a weapon, but of a kind Mohan Bhagwat has advocated wherein swadeshi need not mean boycott of videshi (foreign products) indiscriminately. So New Delhi should continue to supply Boeing and other with a steady stream of orders for defense equipments (in US) and seek trade gains while bargaining with America.
Finally, if we take the example of pharma and medical industry, while the situation may not be identical all around, most of the medical supplies needed for tackling the covid-19 pandemic are now being domestically manufactured, giving a boost to Atmanirbhar Bharat and Make in India campaign. If we wish to be world’s leading economy, there is a need to be vocal about local, adopting vaccine nationalism. It is important to generate local data and research since people have ethnic, genetic, environmental, dietary and other type of differences that could have a bearing on the effectiveness of a medicine. To be sure, it does not mean retracting from global cooperation; it is about becoming self reliant, global standard need to be met, while being cost effective. Let us give self-reliance an honest try.
The author is Associate Professor, PDGAV Collage, University of Delhi.