Prime Minister Narendra Modi and former prime minister Manmohan Singh
Prime Minister Narendra Modi and former prime minister Manmohan Singh | File photo: Vijay Verma /PTI
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Over the past 50 years, India’s GDP growth has improved every 10-15 years, though it hasn’t really had many economically enlightened leaders steering it.

Two hundred years ago, Scottish writer Thomas Carlyle popularised the theory that “the history of the world is but the biography of great men”, talking about the influence of men like Muhammad, Shakespeare, Martin Luther, Rousseau, Napoleon.

So influential was Carlyle’s theory that most of us have grown up believing that without heroes, we are lost. In India, there’s a desperate need for a hero who will take us to the promised land, be it business, sport, or politics.

But the “great man” theory is wrong. A century ago, American physician-philosopher William James pointed out that individuals shape their environment and, in turn, are shaped by it. To say a great man defines his country or his cause is to misread the world, and misunderstand cause and effect.

Unfortunately, this fact has been lost on generations of political analysts in India, who continue to believe that specific decades have been defined by specific politicians.

Nowhere is the “great man” theory more glaringly wrong than in the context of the Indian economy.

India’s hero-less growth

Over the past 50 years, India’s GDP growth has improved decisively every 10-15 years. One would be hard pressed to say that over this half a century India has had economically enlightened leaders who have, with their sagacity, steered the country to increasingly high levels of GDP growth.

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So, how – in the absence of heroes running the show – has India pulled this off?

As highlighted in our 9 January thematic “India: A Billion Splendid Suns”, India has a competitive political system. Hence those who aspire to lead India have to provide an incrementally better deal to the voters. In the 1960s and 1970s, when the country used to be racked by famine every three or four years, the politicians provided an incrementally better deal by planting Mexican dwarf wheat in northern Indian and calling it the ‘Green Revolution’.

Agricultural productivity improved (between FY61-81, wheat productivity almost doubled from 851 kg/hectare to 1,630 kg/hectare) and by the late 1970s, India was self-sufficient in food.

Similarly, in the last 20 years, as the Indian government has become wealthy enough to build infrastructure and as the voters have demanded better roads and electricity, Indian politicians have delivered on both fronts. Between FY01-16, road total length in India increased 1.7 times. Similarly, electricity generation increased 2.4 times during FY01-16.

In spite of the institutional nature of economic reform in India, the tendency is to attribute economic success to certain heroic individuals. So, in the popular discourse, P.V. Narasimha Rao/Manmohan Singh are responsible for the 1991 reforms, and Atal Bihari Vajpayee is responsible for the Golden Quadrilateral (the fifth-longest highway project in the world, launched in 2001, completed in 2012).

Whilst there is nothing wrong in overemphasising the role of Prime Ministers of years gone by, as soon as one starts doing that in a forward-looking context, one makes India’s economic growth prospects seem more fragile than they really are. In specific, one starts believing that if this or that leader is not elected, an economic abyss awaits us.

In reality, very little in India’s history suggests that economic development in India is so dependent on heroic leaders. India’s institutions are more dependable than our leaders like to give them credit for and, conversely, India’s leaders are less important than they like to seek credit for.

In fact, looking back at the post-1991 period, almost every economic policy of note – GST, road building, telecom liberalisation, banking reform, the opening up of the power sector – has been implemented by successive governments. It is hard to identify a single important economic reform which was kicked off by ‘Government X’ and then blocked by ‘Government X+1’. In the competitive context of Indian politics, a politician who blocks extant policies which deliver results does not stay in office for too long.

Investment implications

Just as India’s GDP growth has stepped up decisively every 10-15 years over the past 50 years, there is every reason to believe that over the next decade, growth will step up again. In specific, there is every reason to believe that over the next decade, we can register real GDP growth of 8 per cent per annum and, assuming 4 per cent CPI inflation (in line with the RBI’s target), 12 per cent nominal GDP growth per annum.

Given that we are a $2.4 trillion economy today, a decade hence, our GDP will be around $8 trillion and our per capita income will be around $5,000 (up from $1,600 today). As explained in “India: A Billion Splendid Suns”, India’s superior growth over the next decade will be characterised by PAGE:

Policies: (1) Given that the central government’s tax-to-GDP ratio is an anaemic 11.5 per cent (compared to around 25 per cent for South-East Asian economies), we expect Indian governments to continue focusing on tax collection and, by implication, cracking down on the black economy. That, in turn, will continue driving the formalisation of the economy; i.e. the transfer of economic activity from millions of small, tax evading businesses to larger, more efficiently run, tax paying firms. (2) The extra revenue that the government collects will have to be spent on continuing to build infrastructure for the masses.

Aspirations: What cable TV did for the middle classes in the 1990s, cheap smartphones are doing for the masses today — giving them a medium through which they can aspire to a better life. Those aspirations in turn are leading them to demand better services and better infrastructure from the politicians. The Finance Minister’s Union Budget speech on 1 February is a vivid demonstration of just how much pressure the polity feels to deliver on these aspirations.

Growth: The pick-up in GDP growth over FY18-30 (to 8.1 per cent p.a.) is likely to be driven by three sets of factors: (1) The continued creation of physical, financial and virtual networks, which in turn are likely to drive productivity growth; (2) The continued focus of subsequent governments on a black money crackdown is likely to formalise the economy; and (3) Liberalisation continuing to be a policy theme, thereby resulting in the continued opening up of the broader economy.

Earnings: Our forecast of 12 per cent nominal GDP growth implies 9 per cent Sensex earnings growth over FY18-30 (estimated), as a maturing economy shifts cost of capital lower in the next two decades. (Note: FY95-2018 Sensex returns have been 11 per cent per annum).

Saurabh Mukherjea is CEO of Ambit Capital Pvt Ltd, a merchant banking, stock broking, portfolio managing and research analysis firm. This analysis was originally circulated as a note on the economy by Ambit.

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2 Comments Share Your Views


  1. Interesting view point, which makes me optimistic regarding India’s development. The economy seems to be much more resilient then any effort of an individual.

  2. If you mean that three “strong” PMs SUPPRESSED growth, the premise is valid.

    However, weak PMs (Desai, Charan Singh, VP Singh and Chandra Shekhar) have generally been disastrous.

    Only other data you have to support your claim is the fact of some growth under MMS — but it would have been nil had not a strong PM, PV Narasimha Rao, thought-up and implemented right policies!


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