Economic Highlights
New Delhi, 9 August 2007
The Economy At 60
MANY UNFULFILLED PROMISES
By Dr. Vinod Mehta
The past 60 years have been quite momentous
for the Indian economy. Starting almost
from scratch, the country has been able to lay the foundation for the
development of a modern industrial economy along with a democratic form of
governance. For the past few years India has been
enjoying a growth rate of around 9 to 10 per cent and the manufacturing sector
is booming for the last three years.
It has, however, not always been a smooth road as we have
still to realize many of the promises made when the country embarked on the
path of planned industrial development.
On the positive side we have been able to achieve self sufficiency in
food, bring down the number of people living below the poverty line, develop
and diversify our industrial base and accumulate a reservoir of scientific and
managerial skills especially through the development of scientific research and
management educational institutes.
On the negative side we have not been able to provide
free elementary education to all children below the age of 14 as per our Constitutional
requirement; we have yet to realize the goal of doubling the per capita income
and have still to provide housing and health care to people at the lower strata
of the society.
If we compare our performance with some of the Asian
countries which started on the development course almost at the same time as India, we find
ourselves being left behind in regard to a number of socio-economic
indicators.
Today, Asian countries like China, South Korea,
Malaysia,
Indonesia etc. have not only achieved a high percentage of literacy among its population
but have also been steadily enjoying a rising growth rate along with a rising
per capita income. More. Compared to us,
these Asian countries have emerged as major players in two or three important
commodities or services in the world market.
One may legitimately argue that the countries
mentioned above have had little respect for democratic norms especially in the
earlier phases of their development while India has been continuously
following the path of democracy. Having
said that, one can still assert in hindsight that the country erred somewhere
on its way towards economic development in the past 60years.
When we gained Independence
in 1947 the Soviet model of economic development through planning was very
important as it assured the development of an industrial base. Most of the other
socialist countries too boasted of high rates of economic development. Again, after the Second World War the Marshal
Plan, developed by the US,
for the reconstruction of a war-ravaged Europe
also made an impression on the minds of the Indian leaders and economists.
Thus, started the country’s journey of economic
development through planning in an earnest and forthright manner. The industrial sector, which involved massive
investments and long gestation periods especially the capital goods division were
provided an impetus through public sector investments. For the first time modern steel mills and
other heavy industries were established.
Sadly, after having established the public sector in
a big way we did not pay any attention to the efficient running of these
units. Thanks to large scale political
interference and the unholy bureaucratic stranglehold, these public sector
units instead of either ploughing back the profits for the modernization of its
units or contributing to the exchequer, started eating into the revenue
resources of the Government. Now for the
past 15 years all the attempts to disinvest these units have miserably failed.
The Left parties are not willing to allow the Government to dilute even a part of
their equity.
We also erred by giving too much protection for a
very long time to our industries. In the
earlier phase of economic development, the nascent Indian industries needed to
be protected from foreign competition as they were not in a position to face
competition. This protection was
envisaged only for a few years. However,
over the years as things progressed the Indian industry developed vested
interests in the continuation of these protectionist policies as it ensured them
monopoly profits in the domestic market.
Thankfully, things have changed a lot in the past 15
years. The system of licence raj has
been abolished and competition within the industrial sector has increased. But in
terms of efficiency we are still nowhere close to industries in countries like Korea or Taiwan.
Moreover, despite being capable of manufacturing more
than 80 per cent of the products we need for our domestic market, the quality
is so bad that customers of both consumer and capital goods still find foreign
made goods more attractive, even after 60 years.
The monopolistic tendencies and an urge to work only
in an uncompetitive market are still very much reflected in the attitude of our
people engaged in the financial sector like banking and insurance. Even though realization has dawned that it is
paying a very heavy cost both in the domestic and international financial
markets in terms of the lost business opportunities, the sector is finding it
very difficult to shed this attitude, nurtured over the past 60 years. Also,
the pace of reforms is very slow regardless of the fact that the insurance
sector has been opened up and the cap on FDI in the private banks has been
raised.
In the agricultural sector though we have achieved
self-sufficiency in food we have a long way to traverse before we achieve
self-sufficiency in the production of oil seeds and pulses. No matter that 70 per cent of the population
is still dependent upon agriculture.
Nothing has been done in the past 60 years to push the development of the
agriculture sector including agro-based industries to international
standards.
After the green revolution, which was limited to only
a few states in the country, nothing remarkable can be said to have been
achieved in the production of various crops.
In fact, the restrictions imposed on the movement of agriculture
products especially grain has worked against the high growth of the
agricultural sector as a whole.
It has been observed that the agricultural policy has
never gone beyond ensuring self-sufficiency in food. What the country needed was that along with
self-sufficiency in food production, a big technological push be provided to
the production of all other agricultural crops which are in demand not only in
the domestic market but which also fetch good prices in the international
agricultural market.
Today, when we have entered the 61st year of our Independence, we must
pause and think and make a critical assessment of our economic policies. We
need to come out with a package which is in keeping with the current
developments the world over to ensure faster economic development and more jobs
so that the citizens could be assured of a good standard of living.
We need to speed up reforms in the agricultural and
labour sectors. We also need to improve our infrastructure on a war footing, we
need world class communication systems, world class roads, airports, railways
etc.
The perception of India globally has changed. The
country is no longer perceived as a developing country but as an emerging
economy which will be a relatively well developed economy in the next 15-20
years. We should endeavour to live up to this perception. ---- INFA
(Copyright India News and
Feature Alliance)
|