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Indian Economy At 58:TOWARDS MODERN INDUSTRIAL NATION, by Dr. Vinod Mehta,18 August 2005 Print E-mail


New Delhi, 18 August 2005

Indian Economy At 58


By Dr. Vinod Mehta

The past 58 years have been quite fateful for the Indian economy.  Starting almost from a scratch, India has been able to lay foundation for the development of a modern industrial economy.  It has, however, not always been a smooth road and that we have still to realize many of the promises which we had made when we 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 the 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 the children below the age of 14 as per our Constitutional requirement; we have yet to realize the goal of doubling per capita income by 1975.  We have yet to provide housing and healthcare to people at the lower end of the society. 

If we compare our performance with some of the Asian countries which started on the course of development along with India almost at the same time, we find ourselves being left behind with regard to a number of socio-economic indicators.  Today Asian countries like China, South Korea, Malaysia, Indonesia have not only achieved a high percentage of literacy among its population but also have been steadily enjoying a rising growth rate along with rising per capita income.  Compared to India 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 polity, especially in the earlier phases of their development, while India has been continuously following the path of democratic polity. But still the country erred somewhere on its way towards economic development in the last 55 five years.  When India gained independence the Soviet path of economic development through planning was very important as it had assured not only the development of an industrial base but also high rate of economic development to most of the socialists countries.  Again after the second world war the Marshal Plan, developed by the USA for the reconstruction of war ravaged Europe also made its mark on the minds of Indian leaders and economists. 

Therefore, the country started on the path of economic development through planning in an earnest and in a very forthright manner.  The industrial sectors which involved massive investment and long gestation periods, especially in the capital goods sector, were provided impetus through the public sector investments.  India saw the establishment of modern steel mills and other heavy industries for the first time.

But after having established the public sector in a big way we did not pay any attention to the efficient running of these units.  Because of large-scale political interference an unholy bureaucratic stranglehold these public sector units instead of either ploughing back its profits for the modernization of its units or to contribute to the exchequer they started eating into the revenue resources of the Government.  Now for the past 13 years all the attempts at disinvestment in these units have miserably failed. The latest casualty has been the BHEL. The Government has also shelved disinvestment plans in the 13 other profit-making PSUs.

We also erred on the side of 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.  However, this protection was envisaged only for a few years.  But as things developed over the years the Indian industry faced vested interest in the continuation of these protectionist policies as it ensured them monopoly profits in the domestic market. 

Things have changed a lot in the past few years.  The licence raj has been abolished and competition within the industrial sector has increased. Still we are nowhere close to industries in terms of efficiency compared to industries in countries like Korea or Taiwan. We are capable of manufacturing more than 80 per cent of the products we need for our domestic market but the quality is so bad that even after 58 years the consumers of both consumption and capital goods still find the foreign made goods more attractive. 

The monopolistic tendencies and an urge to work only in an uncompetitive market is still very much reflected in the attitude of our people engaged in the financial sector, like banking and insurance.  This again is the kind of attitude which this country has developed over the past all these years and is finding it very difficult to shed it even though it realizes that it is paying a very heavy cost both in the domestic and international financial markets in terms of the lost business opportunities. Even though the insurance sector has been opened up and cap on FDI in private banks has been raised, the pace of reforms is very slow.

In the agricultural sector though we have achieved self-sufficiency in food yet we have to go a long way in achieving self-sufficiency in the production of oil seeds and pulses.  Even though 70 per cent of the population is still dependent upon agriculture.  Nothing has been done in the past fifty eight years to push the development of 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 the 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 was provided to the production of all other agricultural crops which are in demand not only in the domestic market but products which also fetch good prices in the international agricultural market.

Today when we have entered the 59th year of our independence, we must pause, think and make a critical assessment of our economic policies and come out with a package which is in keeping with today's developments the world over and which can ensure faster economic development and more jobs so that the citizen could be ensured a good standard of living.  The perception of India across the world has changed. India is no more being perceived as a developing country but as an emerging economy which will be a relatively well developed economy in the next 15-20 twenty years. – INFA

(Copyright, India News and Feature Alliance)


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