What is significant about a time-frame of twenty five years? Well, a quarter century is more than enough to experience a catastrophic slide to failure and extinction or a steady upswing in fortunes, resurrecting from extreme straits to unbelievable success and prosperity. As with individuals, so with countries.
The last quarter century has seen India scripting her success from virtual penury to phenomenal progress and prosperity. I was among the millions of expatriates careering in the middle east during the 1990s, as the country was literally scraping the bottom of the barrel as a cumulative consequence of inept management of an economy, that had to grow from scratch, linked to complexities of a highly diverse, largely illiterate, poverty-ridden populace at the time of attaining political freedom. The economic policy during independence was influenced by exploitative aspects of colonialism, and by exposure of the leadership to the redeeming features of Fabian socialism. Hence policy veered towards protectionism, with strong emphasis on import substitution, industrialization under state monitoring, intervention of the state at micro level in all businesses especially in labour and financial markets, a large public sector, and central planning under a highly restrictive regulatory apparatus.
India’s Five-year Plans resembled central planning in the Soviet Union. Major industrial sectors such as steel, mining, heavy machinery, telecommunications and insurance, and public utilities like water, and electricity, transport modes such as railways and airline were all under state management since the 1950s. Private enterprise remained mostly stymied under stringent licensing regime between 1947 and 1990. The Indian economy remained virtually closed to the outside world. The currency, the Indian rupee, was non-convertible; high tariffs and import licensing prevented foreign goods reaching the market, and labyrinthine procedures of a bureaucracy frustrated any easy endeavour at entrepreneurship. The government also prevented firms from laying off workers or closing factories. The lurking memories of colonial exploitation and championing of socialistic ideals coupled with belief that the country could rely on its domestic markets, and not international trade, for development, were the guiding factors. Central planning and the state, rather than markets, would determine how much investment was needed in which sectors.
The story continued on these lines till the end of 1990, till the country became mired in serious economic crisis due to mounting fiscal deficits and burgeoning balance of payments. The government was close to default, with its central bank refusing new credit and foreign exchange reserves plummeting to a level where India could barely finance three weeks of imports. The government was constrained to respectively pledge two lots of forty seven tonnes and twenty tonnes of gold to Bank of England and Union Bank of Switzerland as collateral to get IMF to agree to bailout loan to discharge balance of payment obligations. The other negative fall-out was the string of conditions set by IMF as qualification for obtaining financial assistance. India had no option but to implement them and the same ranged from industrial de-licensing, sale of public sector equity, increase in prices of fertilizer and other regulated commodities, elimination of subsidies, to opening up of the economy to foreign investment, substantial devaluation of currency and easing of all controls. Being an expatriate, I was one of the beneficiaries of home currency devaluation but wondered how Indian agro products and industry would be able to counter the might and compete with the financial heft of multi-national conglomerates. It looked as if the country’s agriculture and commerce would be swamped by corporate behemoths from advanced economies. But later events proved that my apprehensions, as of thousands of others so used to a climate of state control and captive markets, were unfounded, as Indian commerce and industry not only flourished by competing quite capably with foreign products and registering its mark in world markets, but many Indian companies also scaled up to become multi-nationals themselves. While apples from Himachal Pradesh and Kashmir, and oranges from Nagpur and Punjab continue to hold their own against Washington Reds and Fuji’s crunchy apples, India’s Basmati rice and huge variety of mangoes and other agro products such as spices, tea, coffee and array of dry fruits command an impressive presence in shopping malls worldwide. The nation’s industrial successes manifest in the form of world-class players in IT and Software, small cars, auto ancillaries, textiles and garments, gems and jewellery, pharmaceuticals and healthcare services. In e-commerce, India’s Flipkart and Snapdeal are competing quite comfortably against Amazon and Ali Baba, as are app-driven taxi services like Ola and others against Uber. The rise in commodity prices and general cost of living have been offset to a great extent by substantial increase in income levels. The entertainment and hospitality industry are riding an ever rising wave of success with Indian TV channels and movies, arts, music and festivals, chains of hotels and restaurants enjoying unprecedented popularity in many countries around the world. Constituting a ratio of one Indian in every global headcount of six people, the Indian diaspora is virtually everywhere. Many of the corporate multi-nationals have Indians at the helm.
For all its glory, has liberalization, and globalization, been an unmixed blessing? It is not, as like most things in life, it has come with much smooth and some rough edges cutting at sections of societies. The skeptics claim that it has benefitted only the upper crust. Facts, however, are otherwise. Concluding presentation of path-breaking budget on 24th July 1991 in the parliament, against the background of economically dire straits in which the country was in at that point of time, Dr Manmohan Singh, India’s then finance minister, commented, ‘India is now wide awake. We shall prevail. We shall overcome’. Those words rung true as, going forward from then on, statistics reveal that 138 million people have been lifted out of poverty line, a commendable record by itself. Yet it pales in comparison with China, which started the liberalization process way back in 1978; China achieved a more impressive poverty reduction feat by lifting 800 million people above poverty line between 1978 and 2012, also transforming itself into the world’s factory churning out goods at low prices, and making enormous strides in infrastructure development.
Nonetheless, India’s progress post liberalization carries considerable lustre given the country’s size and diverse polity set amidst the demanding pulls and conflicts of a parliamentary democracy. All through the 1960s, 70s and 80s, India was probably the world’s biggest mendicant, a bottomless barrel for foreign aid, soaking up forty percent of the funds of International Development Association, the soft-loan window of World Bank. A major feature of my earlier career years in shipping was having to handle relief ships, vessels carrying food-grains donated by international relief agencies such as CARE (Co-operative for American Relief Everywhere) and CRS (Catholic Relief Society). I recall my school years in the 1960s, when India faced successive droughts in 1965 and 66. The country literally sustained on steady supplies of grain from America. It would be no exaggeration to say that those years meant a ‘ship to mouth’ existence for the country. In sharp contrast, India was in a position to successfully tackle drought years in 2014 and 15 drawing from buffer stocks of grains generated through high-yielding farming practices developed by India’s agro-scientists. In 1991, India was a member of G77 group of developing countries. In 2016, India is a proud member of G20, the group of most powerful countries in the world. Even though India is still a recipient of international funding, borrowing on commercial terms, it is also more of a donor to world’s financial institutions. The country was a net food importer earlier but today it is a net exporter of food-grains. Where the country was hardly an economic entity by global reckoning in 1991, today India is the world’s third largest economy in terms of PPP (Purchasing Power Parity), with only the USA and China ahead of it. It is also the world’s fastest growing economy.
Many challenges still remain in a country of 1.25 billion people deriving strength from the unique diversity of its culture, and the almost absolute freedom constitutionally guaranteed to all citizens of what is authentically the world’s largest democracy. It is also the youngest democracy, both as a nation riding its seventh decade of independent sovereign status and in terms of demographic component of nearly 800 million people below the age of thirty years. Hitherto, the private sector was the main engine of growth in a market driven economy, averaging a GDP growth of 7.7% per annum over last thirteen years. The social impact across all sections of societies has not been to the desired extent, which is indicative of failure of successive governments in the form of tardy implementation of appropriate measures, bringing about policy changes and speeding up pace of reforms. India holds the potential of a USD 20 trillion economy if committed and strongly dedicated leadership can deliver efficient governance to productively tap the capabilities of her 800 million young citizens. With right effort, the world will see a USD twenty trillion economy emerging in the next twenty five years. It is not really necessary that it should happen only under a democratic system of government. It may even be a benevolent dictatorship, as in Singapore. The end result matters regardless of the type of government. As Alexander Pope observed in an earlier era, “For forms of government let fools contest; / Whate’er is best administer’d is best: / For modes of faith let graceless zealots fight; / His can’t be wrong whose life is in the right”.
Such passionate espousal of liberalization and globalization may appear to be a little inconsistent especially in the context of recent events playing out in various parts of the world arising from Brexit and the resultant convulsions across Europe and America, creating a backlash against easy movement of goods, services and people. There is regressive leaning towards conservative policies, protectionism, right-wing ideologies and a mindless fetish with identities, all of which are bound to balkanize and destroy societies. Irrespective of the value attached to identities and traditions, the hard fact is that growth is not possible by operating within its confines or blindly clinging on to it, as it is not viable in a strongly interconnected, interdependent and globalizing world that will keep growing through trade, travel and migration. Societies and communities opting to remain cloistered do so at their peril. There is no stopping, or even regulating the speed of cultural fusion and economic interconnection, the juggernaut of technological innovation and global communication. These are, as generally believed, not driven by the forces of capitalism or the momentum of progressive and beneficial change. Actually it is merely a socio-economic phenomenon that has been relatively dormant at certain times and hyperactive at other times throughout history. Presently we are witnessing an acutely volatile phase of the aforementioned recurrent phenomenon, which, on the whole, has led to decreased poverty and increased prosperity over the last quarter century of its hyper-active phase around the world, as exemplified by the progress of China, India, South Korea, Singapore and other Asian economies. The velocity of events across regions ultimately trends towards expansion of a cosmopolitan culture, tolerant and accommodative, eventually enveloping the globe in its sweep.