Economic reforms in India: Speed-breakers everywhere
We are 30 years from the 1991 liberalization of the economy which happened under the Congress-led Government of P.V. Narasimha Rao, with Dr. Manmohan Singh as the Finance Minister. The opening up of the economy has aided India’s long standing dream of moving towards being a super power, a vishwaguru and reclaim its centuries old position of occupying a lion’s share of the global economy. On the ground, this move has pushed up India’s GDP per capita from $303 to ~ $2000 in 2020, almost 7x in 30 years. In the 30 years preceding the 1991 economic reforms, our GDP per capita had increased only 3.8x from 1961 to 1991 (~$85 to $303).
A short comparison
When India was moving on from one of the bloodiest decades post-independence (the 80s), China too was changing under the economic reforms of Deng Xiaoping. To put it into perspective, in 1990 India’s GDP per capita was $368, higher than China’s GDP per capita of $318. Today, China’s GDP per capita stands at the threshold of $10,000 almost 30x in 30 years against 7x in 30 years for India’s. The last 30 years have been China’s miracle and some believe that the next 20 will be India’s. Not to say that India has under-performed in the last 3 decades but China’s economic success has over-shadowed our stupendous achievement as well.
India’s love for opposing reforms
While we are fretting over Rihanna’s and Mia Khalifa’s tweets on the new farm laws, while we are busy writing and reading Op-Eds by “blue-tick champions and activists”, China has announced that it will have 70,000 KMs of high speed rail network by 2035. Since the launch of its first bullet train in 2007, China has completed nearly ~38,000 KMs of HSRN by 2020. They plan to double this network in the next 15 years! India doesn’t have a high speed rail network yet. For a huge country with multiple pockets of high density population spread across, we still do not have a high speed rail network. Yes, we have started work on our first bullet train project but even that has come under opposition from many who question the profitability, the affordability and the need of bullet trains “when we have so many poor people”. They ask, why can’t existing trains be upgraded from the money that we are wasting on building a high speed rail network.
India’s desire for skyscrapers while romanticizing agriculture
Urban India occupies roughly 3% of the total arable area while being home to ~ 31% of the population. Agriculture lands occupy nearly 50% of the total arable area. While only contributing 20% to India’s GDP, agriculture employs nearly 50% of our work force, indicating under-efficiency. One could attribute India’s agriculture problems to low per capita land holding which continues to shrink and low mechanization (usage of tractors and other equipment). However, China has managed to gain success from an even lower average land holding per capita. This shows that instead of aping the western industrial farming concept, India can improvise the productivity of its existing lands. The reliance on agriculture for employment can also be reduced by generating employment elsewhere.
India needs more land to meet the growing (albeit, very slowly) trend of urbanization. For this, India needs to:
- Improve farm land productivity: China which has even lower per capita land holding has far better productivity (6% to 190%) for most crops apart from Soybean than India
- Increase urban land area: Our urban areas need more land to expand and meet the rising urbanization trends. This is only possible with better laws that make land acquisition fast at market prices.
- Develop smart cities: The infrastructure woes of our cities need policies which make the cities futuristic, environment-friendly and smart in true sense. Wider roads with proper layouts, more flyovers and under-passes, better drainage systems, parks and green covers, etc.
Easier said than done. Look at the slow pace of land acquisition for the Mumbai-Ahmedabad bullet train project. Look at the opposition to the Aarey metro car shed project. Look at the opposition to the land acquisition acts. it took our country more than a decade to frame and pass the GST act!
Democracy should enable growth and not create roadblocks
I believe that democracy is the best path to long term economic progress. However, our vibrant democratic system has some flaws which need to be addressed. Yes, we are the largest democracy and one of the first to give universal franchise to all adults. Yes, our election system is trust-worthy barring few outlier incidents and the occasional EVM tampering allegations by whosoever is in the opposition at any given time. But we LOVE OPPOSING any and every reform that comes along. All our developmental projects are marred with NGOs, activists, opposition parties and PIL hobbyists creating roadblocks that delay and hamper progress. Yes, a democracy allows for dissent but anarchy is in no way dissent! The very party that opposed FDI and GST once has passed laws on these matters. The very party that ushered in liberalization and privatization cries foul when loss making PSUs are sold after years of failed attempts to turn them around. Is the Opposition Dharma just to stage Dharna? And the constant interference of NGOs and activists reminds me of Margaret Thatcher’s quote on socialists:
“What the honorable member is saying is that he would rather that the poor were poorer, provided that the rich were less rich. So long as the gap is smaller, they’d rather have the poor poorer”
This quote holds true for the “blue-tick” activists of India who seem to have some romanticism for poverty, believing in a system that hasn’t worked for decades to somehow work in the future. India’s democracy should enable growing incomes and upliftment from poverty, as controversial as it may sound — Not letting the rich get richer shouldn’t be India’s concern.
Why did India miss out on growth for a decade after the 1991 economic reforms came in? A constant churn of collation Governments with political parties creating and collapsing alliances instead of focusing on growth. We had 8 Prime Ministers between 1989 to 1999. In this period when our GDP per capita went up from $349 to $442, China saw its GDP per capita increase from $311 to $873.
Raising fingers at India, not China
No one questions China. Everyone points fingers at India. If we were to believe international media and celebrities then India is the only human rights violator in Asia. The blind eye that China gets and the criticism that India gets at all stages FOR NO REASON is beyond my understanding. No one questions China’s policies on Xinjiang or Pakistan’s treatment of Balochis. But India’s internal matters on Kashmir and farm laws get attention of international celebrities. In my view, this is nothing but plain hypocrisy. Why should India be bullied by celebrities who will never raise fingers on other countries?
But on the other hand, as a democracy we should be proud that atleast we let others question us. It makes us the vibrant democracy that we are. Thode anaadi hai thode khiladi, ruk ruk k chalti hai apni gaadi.
Nationalism, Capitalism, Socialism, Communism. If you had to choose one for India, what would it be? Here is leaving you with a quote I like from a man I admire:
Reference reads:
- China’s 70,000 KM HSRN plans: https://www.globaltimes.cn/page/202101/1213426.shtml
- Farm size and productivity: https://www.financialexpress.com/archive/farm-size-and-productivity/820977/
- Urbanization trends in India: https://www.worldbank.org/en/country/india/brief/leveraging-urbanization-india#:~:text=Urbanization%20has%20been%20relatively%20slow,a%20year%20from%202001%2D2011
- Urbanize fast for high growth: https://timesofindia.indiatimes.com/blogs/toi-edit-page/urbanise-fast-for-high-growth-indias-land-policies-are-at-the-bottom-of-its-economy-failing-to-take-off/
