India’s Imperatives vs Immediacy of Actions
India’s economic independence, after several scattered
attempts, came to fruition in 1991.
While the trigger was India’s plunging forex reserves and impending
default with IMF, the malaise was clear for many. India’s socio-economic policies locked the
poor into poverty and stifled the middles class from bettering themselves and
generating surpluses for the country which could in turn more opportunities for
the poor. 1991 changed much of
that. After the initial shock in the
form of a depreciated rupee, and a spike in interest rates, as well as
austerity measures, the policies to stoke the private sector began to bear
fruit. India began to see GDP growth
rates approach 6 to 7% per annum through the 1990s. The market for cars grew from 1 lakh (100,000)
per year in 1990 to 1 million in 2000 and to 3.6 million by 2012. Similar explosive growth was seen in the two-wheeler
industry. With cheaper cell phones,
greater employment opportunities in the formal and informal sectors, widening
of the social net through programs like MNREGA, more than 140 million people grew
out of poverty. The traditional bugbears
for the upper middle class in the form grungy airports, poor shopping options, dirty
public transport systems became history, with even Tier 2 towns having
airconditioned shopping malls, modernization of most airports by 2010, and functioning
of metro in several cities by 2015. The
question that was being asked at the cusp of the new decade in 2010 was whether
India could break free from poverty within a generation. With Tata Motors offering the Nano for One
lakh, it looked like India was going to deliver for all – the poor to find
their way out of poverty, the aspirational classes who could stretch their wallets a bit and get a car and
for the upper middle classes too. The
Lokpal movement in 2011 took on corruption and brought in new political
players. While a new leader who had been
making waves since 2002 from Gujarat, apparently shaking off the communal
baggage assumed centre stage in 2014, with the promise of governance and a
laser like focus on economic growth. With the foundations laid in 1991 for economic
growth, and the surge from the 2000’s with dividends form liberalization, and socio-economic programs, and the promise of governance
in 2014, India could take off emerging as a nation without poverty and run-away
economic growth.
The truth is that the promise of 2014 remains just a promise. India’s vehicle sales in 2021 has slid back
to the levels seen in 2014 (18.5 million in 2014 to 26 million in 2019 and back
to 18.5 million in 2021). The textile consumption
in India peaked in 2015 and has started to slide down again. India’s per capita GDP after having increased
by 300% between 2000 and 2010 ($443 to $1358), has increased by only 40% from 2010
to 2020 ($1358 to $1912). With
plummeting interest rates for savings and deposits, and an unavoidable surge in
fuel prices, stagnating wages, and disruptions to the economy from 2018, and
most notably since 2020 due to COVID, India is getting stuck. India went through a slow-down in growth (we
still grew at 5% and not decline) in 2012 and 2013. When India was faced with a growth blip the
entire media was focused on the growth slow down – decision paralysis became a
watchword, and the government quickly tried remedy the situation, with notable
results. Poor economic growth translates
into poor Human Development Indices. The
HDI of states such as UP, MP, Bihar remains below several Sub-Saharan African counties
such as Kenya, Ghana, or Gabon, today in 2022.
If one were to view India today from the promise of 2010, when it seemed
to have learnt how to show rapid economic growth between 2000 and 2010 and
poised to fix its governance issues from 2014 from a leader who could get
things done, the truth is that India has not lived up to its promise. The disruption caused by COVID to livelihoods,
income, poverty levels is barely captured.
There are pressing reasons to fix the economy and ensure that the tens
of millions of Indians are climbing up the economic ladder every year while providing
continued growth and security to the middle- and upper-income groups.
India is faced with this situation while it is negotiating
some pressing challenges – both internal and external. India’s biggest internal challenge apart from
poverty, poor HDI of several states and growing inequality is combating climate
change. Emissions from developed
nations such as USA and Europe have already started to drop. India’s emissions per capita has gone up by
150% between 1990 and 2018 and continues to rise. India’s emissions per square kilometre is
higher than USA. India is losing old
growth forests to mining, power projects and highways, and getting increasingly
replaced by monoculture plantations. While
India has correctly embarked on an aggressive capacity addition in the form of
renewable energy, barely 13% of its energy comes from wind and solar. India’s reliance of thermal power is nearly
70% and comprises of ageing power plants with outdated carbon inefficient
technologies. India is faced with extreme
rainfall events and scorching summers, milder winters which can adversely impact
its citizens. India’s neighbourhood continues
to remain hostile. While India is well
equipped to deal with Pakistan, the borders with China remain contentious . The disparity between China and India in
terms of economic might has widened over the last 6 years, which China’s
economy being nearly 6 times larger in size of India compared to four times
over a decade ago. As recent world
events have shown, such a status quo is hardly advisable, and India needs to double
down on economic growth.
Given the gravity of challenges facing India, one would
think that the country and its populace are focused towards facing the future
with a laser like focus. Unfortunately,
the political parties, significant sections of the country and the media are
utterly distracted. The excessive focus
on religio-cultural issues has skewed the debate in several parts of the
country. Kerala and Karnataka are in the
frontline combating climate change in the form of extreme weather events that have
hit the state three years in a row. Portions
of northern Karnataka are significantly underdeveloped compared to southern Karnataka. States like UP have remained largely
agrarian. As a result of new rules on
how bovine cattle are handled, a seamless rural economy has ben impacted, while
stray cattle roam the streets and raid the farms. With a per-capita income which is one third
of that of Maharashtra, and limited
investments in manufacturing and services, UP could remain poor for years to
come unless policies change.
The government is making earnest attempts to propel the
economy forward. Its tax collection
machinery is very efficient. When the
crude prices were low, the government refrained from passing the benefits to
the common man; rather it used the resources to drive infrastructure spending
and keeping the safety net for the poor in place. The government needs to realize that the
large infrastructure projects are not yielding the results anticipated. Large corporates have been the only ones to
benefit. Economic policies would need to
be reconfigured. Ways need to be found
to leave more spending power in the hands of the common man – starting with
better minimum support prices and covering more crops under the MSP
scheme. Agro-waste needs to be converted
into fuel and energy while rewarding the farmers more handsomely. By allowing ethanol blends to rise to 20% at
the fuel pumps and ensuring at least 20% of agro-waste ends as thermal power,
the nett emissions footprint can be improved significantly, while enhancing rural
incomes significantly. The country
recognizes that at least 33% needs to be under green cover. Ecological restoration of degraded forests
needs to become a government program.
These are unchartered territories.
The government needs to enlist NGOs and academia in ecological
restoration efforts. With over 50,000
square kilometres of degraded forests, and at least another 65000 square
kilometres of agricultural lands lying fallow, the opportunities to green are
tremendous. If this is handed over to
the forest department and corporates a golden opportunity to convert this into
an economic opportunity would be lost.
Greening the country could arguable employ at least 25 million people
across the country and add to the economy.
Reducing the carbon footprint of the energy sector and greening the
country could be the next major economic activity. The surpluses generated would clearly boost
GDP growth, improve India’s coffers, help it strengthen its defence and help it
counter the might of its northern neighbour by standing up.
The question is are the citizens, politicians, and the media
truly aware of the challenges and the opportunities ahead of the nation and the
need for everyone to step up. Or are we
so distracted that we are only focused on the divisions that we have created in
the country.
