How structural and policy reforms made most populous India better governed than small population West


Westerners, particularly the once mighty and ruling British, used to say, with a complacent and patronising air, that if India realised its potential, someday, it would be unstoppable.

Little did the West think that this day could arrive so quickly, just 75 years after an impoverished independence. That is why, even as significant parts of it professes to be allied to India as fellow democracies etc, it often fails to recalibrate its superior tone when speaking to, or about us.

After all, it takes a lot of getting used to, when an erstwhile member of the chronically deficient, if talkative, third-world, claims its chair at the high table and starts looking at one in the eye.

Hegemony has gone awry in a purportedly liberal Europe and America. Both are a little uncomfortable with the New India, with ingrained White racism that won’t stay down, and hope to subtly retard the rate of India’s progress wherever possible.

A junior and dependent partner is acceptable because it conforms to the Gunga Din image they have in their minds, but probably not one that has developed leverage and negotiates every point with nuance and variety.

India’s new attitude has influenced Saudi Arabia and the United Arab Emirates to also stand its ground and favour its national interests. Indeed, West Asia, including Western-ally Israel, has understood the new and emerging situation rather better, and has been quick to engage bilaterally, and with regional groupings and free trade agreements, with the New India.

Now IMF president Kristalina Georgieva, perhaps a little out of Bulgarian South Slavic warmth towards India, but mostly from hard-boiled analysis just said: ‘India deserves to be called a bright spot on this otherwise dark horizon because it has been a fast-growing economy, even during these difficult times, but most importantly, this growth is underpinned by structural reforms.’

Her Chief Economist Pierre-Olivier Gourinchas, looking ahead with Gallic aplomb, called India ‘a bright spot’. He thought India’s goal of becoming a $10 trillion economy by 2030 was certainly achievable. He suggested more structural reforms on top of what has been done already. He wants better health and education facilities, more social spending, digital literacy and access, investment in human capital.

Without striking a note of triumphalism, justified as it might be, it is most credible that a country with a population of 1.44 billion is food surplus. It is able to export wheat and rice to those who are suffering because of supply disruptions occasioned by the Ukraine-Russia War. We have come a long way from the days of Nehruvian India even in the 1960s, when we gratefully took in PL-480 food-aid from America.

India has become the fifth largest major economy, overtaking Britain, at over $3.50 trillion in GDP now. It will be the third by overtaking Germany and Japan. This will happen, it is estimated, by 2030.

Though India may not succeed in lifting 50 per cent of its massive population into the middle class by 2030, unless the growth rate accelerates to near double-digits, a measure of unprecedented well-being will nevertheless be experienced on a per capita basis as well.

The World Bank estimated in 2018 that India is growing its per capita income at 5.5 per cent annually, on a sustained basis, particularly since first stage reforms were carried out in 1991.

Figures of national GDP projected by 2030 are slated to be upwards of $10 trillion, a trebling of present circumstance. India will grow at a minimum of 6.1 per cent as per the IMF, contrasted with a recession-bound West in 2024, and 6.8 per cent in 2023. It is expected to close 2022 fiscal with 7.2 per cent growth in GDP.

India will grow at similar percentages compounded over at least the next decade, more likely three. These growth figures are the highest in the world, and far higher than China’s currently. China has little hope of reviving to its once spectacular double-digit growth. Its economic problems are in fact mounting by the minute even though it is a $15 trillion economy.

Its manufacturing and export-led growth for three decades from the 1980s has become an important illustrator and part of India’s present strategic thinking. India may have had a services sector led growth of over 50 per cent of its GDP pre-Covid as per 2019 figures but it cannot sustain without the underpinning of manufacturing.

India wants to seize the big manufacturing opportunity as the world wants to reduce its dependence on the Chinese supply chain. It is this emphasis in defence manufacturing, our largest import bill after fuel, plus a plethora of other products that will be largely consumed domestically, and be available for export, that will underpin India’s success going forward.

India is the fourth largest consumer of automobiles and two-wheelers in the world. It consumes millions of smart phones domestically and is turning into the new export hub as well.

The World Bank noted in 2018 that India already manufactured a wide array of goods, and that this insulated it from adverse effects in turbulent times such as the 2008 financial meltdown in Europe and America, and when the GST was introduced in India. Today GST, which is still evolving and being fine-tuned, is a proven success, and a long awaited major structural reform.

The West will experience little or no growth and even a sharp contraction in many instances for several years going forward. This, mainly because of its gargantuan debt, grown unsustainable except through an even wider fiscal deficit, when growth grinds to a near halt. Two back-to-back Black Swan events — Covid and the Ukraine War — have exposed the fragility of its economies.

China is scuppered also by massive debt, and the drastic slow-down in its overseas projects and exports. Its domestic market is oversold in multiple areas to the point of unrest.

In India, government-funded Covid vaccination inoculation for over a billion people was made possible not only by Indian-manufactured vaccines, but an efficient, government-designed digital delivery and monitoring system, that reached every eligible person. This eventually, over the two-year-plus period, meant not only adults above 18 and senior citizens, but also children above the age of twelve.

China is still experiencing Zero Covid Lockdowns of great severity. America, the richest country in the world, could only vaccinate 68 percent of the target groups. Efficacy of various expensive Western made vaccines were also found to be woefully low in many cases.

India refused to import these Western vaccines and used its own manufacture and the Astro Zeneca vaccine made here under licence. It also donated millions of doses along with other India-made medicines to many countries that requested it. This included medicines sent to America.

Though misinformation has been directed at India by the China-controlled WHO and other motivated quarters, it is clear that no country could match the scale and success of India’s Covid response.

Corruption-free Welfare payments have been made a reality from much before the hardships of the Covid lockdowns. This was done by a massive drive to bring in the unbanked poor into the banking system. Millions of new accounts were opened with almost zero balances, and the campaigns to cover the population with the ubiquitous Aadhaar Card made sure they were authentic and not duplicated.

The income tax payments and verifications have been almost totally digitised and operate exclusively online.
Water to every tap in the country, electricity to every dwelling, toilets in every home, LPG cylinders to cook with, rural roads, digital mandis, solar power, ethanol production to blend with petrol to the extent of 30 per cent and soak up the sugarcane surplus too, liquid urea and neem-infused urea, are some of the many structural initiatives.

5G services have been launched in five cities and will ramp up quickly to 11 even as communication towers are being built so that the entire rural hinterland is covered rapidly. The government has already announced its intention to introduce 6G services. Internet connectivity, digital access and knowledge is a key thrust area for empowerment of the population, speed and efficiency.

More and more cities are now being connected with Metro services. The Indian Railways, its rolling stock, stations, and all infrastructure is modernising and being qualitatively bettered to match international standards in front of our eyes. Almost all of the immense railway network, replete with new bridges and tunnels wherever required, has now been electrified. With extensions in the network to hitherto unserviced areas, it is well on its way to becoming the largest in the world. Most of the related manufacturing takes place here in India. Exports of Railway expertise and hardware are also rapidly growing.

The aviation sector is growing both in terms of new and revived airports as well as more airlines. India is now also manufacturing a small 19 seater passenger aircraft based on Dornier designs. This is servicing areas that do not need larger passenger services such as Arunachal Pradesh.

The thrust towards electric vehicles and buses is growing afoot along with the charging infrastructure.
ISRO is now launching its heaviest satellites, and routinely launches private and international payloads on a commercial basis.

The defence sector is manufacturing fighter planes, helicopters, howitzers, tanks, armoured vehicles, rocket-launchers, a variety of missiles, bullet-proof vests, night-sight equipment, ammunition in revamped production facilities, radars, machine-guns, aircraft carriers, submarines, frigates, patrol boats. A full 68% of the defence purchase list is being manufactured or developed in India currently both by the private and public sectors. Talks are on with several countries for joint development of high technology naval and aircraft engines that can be upgraded to keep up with the times. Quite a lot of what India makes is already evincing export queries and sales.
Infrastructure by way of highways, bridges, high-altitude tunnels for all weather connectivity, and ports, inland waterways, and ro-ro shipping, are being developed at a frenetic pace. Special railway freight corridors crisscrossing the nation are being commissioned.

Logistics via multi-modal connectivity are being improved to cut some 5 percent off the 14 percent costs it accounts for. Commerce Minister Piyush Goyal thinks it will cut Rs 10 lakh crores in expenses in short order.
The government’s target overall is to arrive at a $30 trillion economy by 2047 when the Republic of India will be 100 years old.

Of course, like China, India will have to drastically ramp up its investment in fixed assets, partially in association with its partners such as Japan, the UAE and Saudi Arabia, all keen to work with India now.
The semiconductor industry, replete with machines that make machines, while being both capital intensive and extremely high tech will bring relations with Taiwan and South Korea into tighter relief. A first is about to be made with the multi-billion dollar Vedanta/Foxconn project in Gujarat.

India wants to create 100 million skilled new manufacturing jobs by 2025 and double the contribution of the manufacturing sector in due course, with 25 percent of GDP from around 16 percent in 2019. This should be doable given the geopolitical breezes that are blowing in India’s favour.

India’s young work-force will surpass China’s in just another couple of years, based on 2019 statistics.
Indian output per worker is currently very low, and this is a great minus point, but with accelerated skilling and higher education access this will improve.

Urbanisation of the population will increase to 43 per cent by 2035, almost half, increasing income levels and consumption of more middle-class goods and services.

India is concentrating on supply-side reforms, said Economics Affairs Secretary Ajay Seth recently. ‘India is focusing on infrastructure-led capital spending aimed at enhancing productivity and employment while ensuring fiscal prudence’.

This fiscal prudence, particularly on external borrowings which are both modest and manageable, as opposed to India’s large domestic debt, is another reason why it is ahead of the developed country pack and still growing decently. It is also what has sunk both Sri Lanka and Pakistan to the point of bankruptcy. India was tempted to borrow more extensively from the much cheaper international market but didn’t overdo it.

Meanwhile, UPI transactions, representing a triumph of India’s digital payments policy, have hit an all-time high of Rs 10.7 lakh crore in August 2022.

Who would have imagined such a modernist can-do outlook in India even a decade ago?

The author is a political and economic commentator based in Delhi. Views expressed are personal.

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How structural and policy reforms made most populous India better governed than small population West
How structural and policy reforms made most populous India better governed than small population West
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