India: 9% growth forever?


Many seem to believe, especially many foreign observers, that India is here to match China in economic prowess. Probably we fall prey to herd mentality even as professionals.

There are vast differences Between the 2 countries. So far no democratic country (with universal voting) has succeeded in emulating the growth trajectory of China or South East India on a sustained basis. Would India rewrite this history?

Unlikely.

India’s savings rate is relatively lower, largely due to dissavings of the public sector. And we are not ready to run current account deficit to fund it. Bank credit as a fraction of the GDP is pittance when compared to South East Asia or China. You don’t expect IPOs to fund your investment.

At one level the exercise of comparison becomes futile. India is bad enough even at absolute levels. Majority of the world’s people living below $ 2 a day are India’s citizens. So are the largest numbers of illiterates. Remember, these are also the voters to the World’s Largest Democracy. Once home to world’s biggest forest lands, burgeoning mass of humans has decimated every available forest area and wild-life. A police force whose personnel are paid less than $ 2,000 a year for working 75 hours a week. Armed with outdated guns (some proportion of it being 19th century design and product) and often overseen by vested interests. Jessica Lal! A judiciary, which is sinking under the overload of pending trials. A judiciary, where those sitting on judgments are expected to examine probably 10 times the cases, compared to any successful judiciary in the world. They earn (inflation and growth adjusted) a fraction of what they earned in an earlier era (British) that was moderately successful. And so on, in every public sphere. Poor conditions ensure that the entire system’s output is mediocre. And there we are.

Infrastructure! We haven’t built roads. We have not really augmented rail tracks. We have not ventured into power generation. In any vibrant country, passenger vehicles criss cross the country in droves. Not in India. A cross country in one’s own car is an achievement. Freight carrying vehicles are harassed every 100 kilometers, in the name of taxes (whatever be the name and whosoever collects it). Trains are as bad as the British left it. Overcrowded and dirty. In the year 2007, major cities grapple with electricity cuts – every day. And the rural areas are not considered worthy of it anyway. Urban development seems marked for disaster --- transportation, lack of open spaces. Populism binds feet and preempts any industrial effort.

And yet India is growing. Fresh national survey (certainly more reliable than China’s) reveals that 9% growth in 5 years has not only brought about new upper middle class and rich, it has brought down levels of poverty. Tens of millions of people are enjoying higher income levels and ownership of things that they had not imagined a decade ago. A grand highway project that was energetically pursued by a former prime minister, has finally delivered the skeleton of a road infrastructure that any respectable large-thinking economy should have. Now personal vehicles are beginning their cross-country endeavors. An ongoing tax rationalization (VAT) is beginning to give some relief from harassment every 100 km. Much more relief needed. Some steps towards urban development, such as making it easy to get more land under development per project (rather than multiple tiny projects that harm infrastructure development and civic amenities) are underway.

Politicians have somewhat restrained themselves on fiscal front through FRBM. A bill on right to information is changing things for the 1st time in our history. It has the promise to involve the citizens in the act of governance. It promises to change how we govern and are governed.

But no one is talking of how a semblance of law and order could be brought in some northern parts of the country. Again, there is hope. Bihar is returning from its years in nadir. Finally, a new elected government, and roads are being built where none was built in 1000 years. There is an effort to control crime.

9% growth? It may well happen. We could become one of the 3 largest economies of world in a decade or two (economy would cross a trillion US dollars this year). But we could also simultaneously be the world’s most messy country. A large number of rich and much larger numbers of very poor will co-exist. The resulting dynamics is scary. Last year, 100 Indians catapulted to the world billionaires list. Every month, we add to the list. A huge mass of upper middle class is also emerging – with pay packets comparable to their counterparts elsewhere in the world. They will drive only luxury cars, live in luxury apartments and localities (also probably the costliest real estate in the world), visit (in 5 years to a decade’s time) some of the biggest & grandest shopping places in the world and employ lots of servants. It’s the have-nots that scare me. One has to only look at our cities and suburbs. Utter chaos is spilling on to the streets. Our pseudo social activists strain their vocal chords to halt new factories that will provide jobs to the people, who would otherwise end up as servants. These are the same people who don’t raise a voice when our forests are destroyed, and wild-life is annihilated. They don’t talk of population control either.

Then, no growth holds meaning.

3 comments:

Maneesh said...

Hey Man,
Now its turn to write some positives about the country.

Agreed the points you have mentioned are true.

Am sure, we are good on atleast some fronts.

Good article. There is a lot of content in this article. Less elaboration and more content. Thats rare.
Regards,
Maneesh

Maneesh said...

Hmm, column writing seems to have become your forte.

Rahul said...

But sometimes things do look so bleak!