I had no hope from the earlier two United Progressive Alliance (UPA) governments (2004–14), in which Prime Minister Dr Manmohan Singh, though an accomplished economist, remained a marginal figure of no consequence in his own government, and accidentally a prime minister. His government saw some of the most senior ministers committing gigantic corruption, and coming to the adverse notice of the law and undergoing prosecution in courts.
As a prime minister, Narendra Modi is the exact opposite of his predecessor, Dr Singh. He is not a person of letters, and one who has an unstudied familiarity with microeconomics but not macroeconomics and its intricacies of inter-sectoral economic dynamics. But he has immense appeal with the masses and hard-working middle classes, and thus the mandate to carry out major reforms. He is honest in money matters. Moreover, he has come up from his humble beginnings the hard way, by pulling himself up by the boot straps and thus, by example, has won over the toiling masses of India—to win election after election from 2002 onwards, first at the state level as the chief minister and now twice as the prime minister. But this same lack of academic background has made him dependent on his friends and chosen rootless ministers, who never tell him the bitter truth about the economy or explain the macroeconomics or that he needs to figure the way out of a crisis.
Hence, we have witnessed the folly of demonetization and the inanity of the Goods and Services Tax (GST), both of which have accelerated the tailspin of the economy. But as the prime minister, he is a domineering figure who brooks no political competition. His reliance on unelectable political advisors and colleagues for clues on the complex subject of the economy, which they know little about, or even lettered but timid economists appointed by him to posts of huge perks, results in them telling the prime minister only what he wants to hear. This is a frightening potpourri for the nation.
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The good news is that the current developing crisis does not necessarily mean an imminent collapse of the economy. That is India’s historic innate resilience. To solve the current problems, the first step is to recognize the urgency that a crisis is imminent or already in existence. I have suggested a new menu of measures to stem the tailspin and turn it around to a fast-growing economy. The Bharatiya Janata Party (BJP) government also needs to give an alternative ideological thrust to economic policy rather than trying to improve on the failed efforts in the past and to seek marginal changes. Now is the time for a structural overhaul to purge the remnants of the command economy, and usher in an incentive-driven, innovation-structured and market-determined competitive economy.
The people of this young republic, but an ancient civilization, which is known the world over, are demanding modern transformation and rapid growth within the framework of our ancient values and heritage. Thus, today’s India is an ancient nation in search of a renaissance.
In the Preamble of the Constitution, our nation is defined as ‘India that is Bharat’. The term ‘Indian’, that is ‘Bharatiya’, signifies a citizen of the Republic of India. India is a new republic but not a new nation. Its people are modern, but they do not reject the nation’s time-tested traditions and the cultural heritage of its age-old past. Now, in 2019, as a renewed republic entering the eighth decade of Independence, India stands at the cusp of a major transformation caused by unprecedented economic development through out-of-the-box thinking, using everything from primitive tools to electronic software, and from entrepreneurship to hard work and self-confidence. This has given a significant and substantial boost to the quality of life for its more than 1.25 billion citizens.
There is now, since Independence, a realistic hope for India to regain its ancient glory, to become the most advanced nation. Its GDP has risen to more than $2 trillion and, in current prices, it is now already the third-largest nation in terms of real GDP (in Purchasing Power Parity [PPP] prices). This rapid growth has created an emerging middle class with rising aspirations and the ability to discover, invent and adapt modern scientific innovations for natural development. In 2019, India leads the world in the supply pool of youth, i.e., percentage of the young in the age group of 15 to 35 years (about 65 per cent), and this lead is expected to last for another forty years. This young generation, with growing access to quality education, Internet use and mobile connectivity, is not only empowered to demand positive change but is the most fertile milieu for promoting knowledge, innovation and research, which will ensure accentuated, sustainable economic growth in GDP at 10 per cent per year. It is this prime workforce that also encourages saving for the future, thus providing the corpus for pension-funding for the retired and the old. We should, therefore, not squander this ‘natural vital resource’, termed Demographic Dividend, which will shrink as development proceeds and as quality of life further improves in the future.
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India is thus at the inflexion point or cusp in the curve of transformational growth to global power status. India has now regained its position as the fastest-growing large economy in the world, but a 7 per cent GDP growth rate is not good enough any more. Economic growth must accelerate over the next two decades to meet the rising aspirations of our young consumer population. India thus needs to achieve and sustain a GDP growth rate of over 10 per cent per year for the next two decades (2020–40).
This sustained GDP growth will be accompanied by an increase in per capita income growth from $1,500 to over $7,000 per year at 2019 prices, and thus make the third angle of the global triangle of India, China and the US. For this, India must adopt a three-pronged strategy that can create capabilities for growth and new solutions, which will, in turn, build shared prosperity for its 1.25 billion citizens. Firstly, development must become a mass movement, in which every Indian recognizes and experiences tangible benefits accruing immediately, even as long-gestation reforms continue to be implemented.
Secondly, our development strategy must help achieve broad-based economic growth to ensure development across all regions and states, and across all sectors, ranging from education, agriculture and healthcare to manufacturing, urbanization and retail/trade. This needs the fostering of new innovations and the upskilling of labour, modernization of agriculture, water resource management, finding new fuel sources (such as thorium), and strong research and development (R&D), and physical infrastructure. These path-breaking innovations have to be backed by robust financial architecture and human resource development.
Finally, our growth strategy must minimize the gap between public- and private-sector performance. This calls for efficient, transparent and accountable state governance, which will require developing rational risk-taking and merit-rewarding governance. This will ensure that India not only achieves its ambitious goals for 2040, of overtaking China, but also challenges the pre-eminence of the US, to go on to become scientifically one of the two largest economies in the world by 2050. Thus, as we would then celebrate the centenary of our republic established in 1950, such a national development effort will enable us to challenge the hegemony of the US, in innovation-driven growth and global order.
