Published on 14-12-13Ignoring for a moment the by-election results of last week, we Indians seem to have a sense of gloom and doom with respect to India’s economic situation.
Published on 14-12-13
Ignoring for a moment the by-election results of last week, we Indians seem to have a sense of gloom and doom with respect to India’s economic situation. “Has India has blown it?” many young people ask. The subject has so little merit that I find myself struggling, both for words as well as the time to express my thoughts. So I felt I would use this opportunity to view the subject rationally rather than emotionally.
The expression ‘blow it’ literally means ‘to spoil your chances’ or ‘to lose an opportunity.’ So the questions I address are:
I wish to explore these aspects in this speech.
The time frame over which you judge the question is important. Time is relative and is what is perceived by the viewer.
For example, even though you move your folded newspaper at great speed to swat a fly, the fly escapes with alacrity and speed. Why? Because the fly’s eye has a different CFF compared to the human eye: CFF stands for critical fusion frequency and is the frequency at which a flicker stands still. Humans have a 60 cycles per second CFF while flies have a five times higher CFF at 250 cycles per second. This means that to the fly, your speed comes through as five times slower than how you perceive it. A fly-eye view of an F1 Racing Driver is that of a comfortable week end driver, cruising through a country road. That is why your rapidly moving folded newspaper is perceived by the fly to be as slow as a wooden spoon moving through honey or treacle.
When you are reviewing the progress of a vast nation or society like India, there has to be some perspective of time, viz, use an appropriate CFF factor. It cannot just be last week’s SENSEX or the next month’s CHOGM meeting.
To emphasize the importance of the time perspective, imagine that you are examining the proposition “Sachin Tendulkar has blown it.” If you disagree with the proposition, you will find plenty in the full cricketing career of the iconic player to prove your point. But if you were to review only his last 20 test matches and compare his performance with his peers in their last 20 test matches, here is what you would find:
So did Sachin blow it? If you review only his last and recent performance, the answer is YES. But that is not true, you all know it! It is important to have a perspective of time.
Therefore I viewed India’s progress or lack of it over the 13 years of the new millennium. This has the added advantage that it covers an NDA as well as UPA period. I also benchmarked with non-China BRICS economies like Brazil and Indonesia to make the comparisons as relevant as possible. Please note that I am reviewing the country, not the UPA government, in my analysis.
I compared IMF data on the acceleration of annual GDP growth between the last 13 years of O.M. (old millennium, 1986-1999) with 13 years of the N.M. (new millennium,1999-2012). Europe decelerated by 102 basis points; Indonesia accelerated by just 10 basis points; Brazil added 95 basis points but India added 120 basis points, second only to China.
Urbanization is a good driver of economic growth. Since 1991, Indian urbanization grew by 250 basis points per year, matched by Indonesia, but both countries were far ahead of Brazil which was half the rate at 120 points. That is like a bullet train.
In the N.M, India’s real annual growth rate of disposable income advanced at a whopping 650 basis points, compared to Indonesia at 400, and Brazil at 360.In the N.M, India’s ranking in agricultural production improved enormously.
In the new millennium, India has emerged as the Number 1 global producer of milk and fruits, the Number 2 global producer of vegetables, cotton, wheat and sugarcane. India has surpassed Thailand as the number 1 rice exporter in the world.
India’s production of passenger cars grew in the N.M. by 1500 basis points per year, compared to Asia Pacific of 1200 and Brazil’s of 700.
The growth track record over the post independence period is as follows:
|Year||Real GDP Growth (%)||Population Growth (%)||Real per capita income growth (%)||Comments|
|1951-52 to 1979-80||3.5||2.2||1.3||Post independence initial year|
|1980-81 to 1991-92||5.2||2.1||3.1||Pre-reform|
|1992-93 to 2000-01||6.1||2.0||4.1||Immediate post-reform|
|2001-02 to 2010-11||7.6||1.6||6.0||Current period|
INDIA PER CAPITA INCOME CHANGES
So we have experienced the best 13 years in our 5,000 year history, and what do we do? We perpetually debate whether India has blown it! Rather odd!
Would you treat the serious business of economic and social progress of 1.2 billion people by the yardsticks of cricket, where a batsman is judged by his last few innings?
For sure, in the last few years the same indices that I have quoted declined compared to the immediate past period. There has undoubtedly been some effect of the global downturn. To use the tennis metaphor, you cannot compare grass court tennis with clay court tennis. As the world economy has become more VUCA in the last five years–volatile, uncertain, complex and ambiguous–India retained its position at Number 2 among fastest growing nations. It is worthwhile to note that when the tide rose in the first 8 years of the N.M., India accelerated and improved its position.
My audience might think that I have conveniently avoided talking about China. For many centuries, the Chinese economy has been bigger than India in total money terms. In per capita terms, China and India had the same per capita income in 1970. Today, admittedly, China has three times the India level on this measure. However, bear in mind that if Indians had, in the 1970s, let Sanjay Gandhi implement his measures to limit Indian family size (as China had done), the per capita income of China would not be three times India’s but only one and a half times!
Although China liberalized 13 years before India, India’s per capita GDP lags China by only 8 years, and in per capita private consumption, India lags China by only by 5 years. India’s per capita consumption of steel, cement, soda ash, soaps and many others—all lag China and the developed economies by a factor of 10-50%.
The headroom for growth should send anybody in a tizzy; it is unbelievable.
You have to view all this data as an opportunity rather than as a problem. In that case you will get “blown away” with India rather than debate whether India has “blown it”!
I should add a brief word about corruption, which is undoubtedly a distressing feature of India. Without accepting it as a necessary evil, I would respectfully point out that corruption is like a virus. It affects every society, it travels and its effects are disastrous. Every society has to keep vaccinations as a preventive and medicines as a curative. India is no exception.
But let us not forget that though India is 5,000 year old civilization, it is an adolescent, 22 year old in its incarnation as a capitalist democracy. When other countries were at a similar phase in their development–US, UK, Korea, Taiwan—history tells us that they faced similar crises. The British Parliament would not have despaired about its bleak future in 1893, nor would Teddy Roosevelt have done so for America in 1906.
Switzerland is generally regarded as a clean, corruption-free economy. Considering that it has recycled into dignity Nazi money, dirty money from African politicians, black money from Indian businessmen, it qualifies as the world’s biggest hawala operator. Is it right to place it on top of Transparency International ratings? It is worth pondering the subject.
So does all this mean that India has seized every opportunity and missed no opportunities? No, of course not.Life is all about missing many opportunities, but grabbing some others. The issue is whether you are grabbing your opportunities well enough compared to others in a competitive sense.
And India has done exactly that.
At the equivalent stage of India’s current economic development, Britain took 170 years from 1700 to 1871 to double per capita income; America took 50 years from 1832 to 1882 to do so. India, at the recent growth rates, since 1996, doubled per capita income in 14 years.
The Economist ran a lead piece a few weeks ago, entitled “Has Brazil blown it?”The magazine mourned the fact that Brazil, which peaked growth at 7.5% pa in 2009, had collapsed to below 1%. That seems more like blowing it than India!
As a citizen, I would have liked India to grab more opportunities. But I can, with sobriety, think of many opportunities I have failed to grab during my career and life. But I would staunchly refute any suggestion that with respect to my life, ‘I have blown it.’
The nation just needs citizens – young people, entrepreneurs, and business – to have the confidence that India will recover soon. This requires an acceptance from the political leadership that a new action agenda is required. This possibility is a real one.
The greatest obstacle to a recovery is having a population that does not expect it! I hope young people do not despair. If that happens, then I am sure that India would surely have blown it!
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