Harish Damodaran

The new 3D reality

HARISH DAMODARAN | Updated on March 09, 2018

Their expectations are far higher than that of their mothers and fathers.

New India can be well understood through the lens of three ‘Ds’: Development, Democracy and Demography.

What happens when an underdeveloped country with a young population and a vibrant democracy to boot grows at unprecedented rates for a sustained period of time? And what happens when that growth engine suddenly stalls?

These are questions few economists, political scientists or sociologists have posed, but they capture the story of New India, which can well be understood when viewed through the lens of three ‘Ds’: Development, Democracy and Demography.

During 2003-04 to 2010-11, the Indian economy grew by an average of 8.5 per cent a year. That, by itself, isn’t extraordinary, for many countries have recorded such high growth rates over extended periods. But the difference is that most of them did so either under formal single-party rule (China, Taiwan), de facto single-party regimes (Japan, Singapore, Mexico) or outright military dictatorships (South Korea).

India is an exceptional case, where Development (8 per cent-plus growth for nearly a decade) and Democracy (every adult citizen, be it Dalit, Muslim or upper-caste Hindu, having the right to vote) have both gone together.

The current century, if anything, has seen the forces of competitive electoral politics and free media (especially 24-hour television) gain strength, both at the national and regional levels. Voter turnouts, too, have been on the rise, despite all the organised efforts at belittling the country’s politicians and its electoral system.

That brings us to the third D: Demography. The average (median) age of India’s population in 2010 was 25.5 years, as against 37.1 for the US, 42.3 for Western Europe, 44.9 for Japan or 34.6 for even China.

Further, 42 per cent of Indians were aged between 15 to 40 years — those whom we can call the young and aspirational population. This crowd cannot be compared with the youth of the previous generations, having far higher expectations in employment and consumption standards, and not as tolerant to harsh working conditions. The additional ‘aspirational’ element has to do with the spread of education, increased access to information from multiple media sources (television, newspapers and internet), and greater exposure to the culture of towns and cities.

When they converge

The three ‘Ds’ are mutually reinforcing.

When people see Development and the incomes of others rising, it unleashes similar desires to raise their own living standards. The transmission of these expectations takes place faster in a Demographic structure with a significant young and aspirational component. The expression of aspirations and the pressures on governments to respond to them are, moreover, higher in a Democracy where parties have to face voters at least once in five years.

Since the early 2000s, India has been witness to a convergence of the three ‘Ds’.

One of its effects has been on labour costs. Farm wages in India rose annually by 17.5 per cent over the last plan period from 2007-08 to 2011-12. Even after adjusting for inflation, the increase was 6.8 per cent in real terms, which clearly had to do with accelerated growth in the wider economy and urbanisation, creating new employment opportunities outside of agriculture.

But rural wages wouldn’t possibly have risen that much had India not been a democracy, with no restrictions on labour mobility ( a la China’s Hukou registration system) and politicians even obliged to seek the votes of agricultural workers. The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was, after all, only a response to such pressures.

It is fair to say that the wage increases in recent years have been a product of both high growth and MGNREGA — apart from the presence of a young rural labour force more willing to exercise migration options and not as keen to work on the farms as its predecessor generations.

The land question

The impact of the convergence of the three ‘Ds’ has been felt not just in the labour market.

In a brilliant recent work, The Price of Land: Acquisition, Conflict, Consequence (Oxford University Press), Sanjoy Chakravorty has shown how the Government in the 1950s could acquire some 130,000 acres of land for the Hirakud Dam project in Orissa by paying Rs 50-200 an acre — a paltry Rs 1,500-6,000 at current prices. Even till the early 2000s, one could buy a few thousand acres of land in many parts of India for Rs 50,000 per acre or less.

But today, forget 100,000 acres, even 10,000 acres is beyond anyone’s capacity — including the State with all its eminent domain powers — just as no land is available for less than Rs 4-5 lakh an acre.

The above transformation is again a result of growth (generating new demand for a resource whose supply is inherently limited), greater awareness among farmers (especially the younger generation) of the ‘real’ value that their lands can command, and ‘unfair acquisition’ becoming part of mainstream political discourse (Singur, Nandigram, POSCO, Yamuna Expressway).

When things slow

Since 2011-12, GDP growth has dipped sharply to 5-6 per cent.

Yet, the aspirations fuelled by the extended economic boom of the last decade haven’t faded away. Having seen, if not experienced, a rise in living standards during this period, there is an overwhelming sentiment of disappointment and frustration amongst the youth today. Ironically, it is directed at the Congress, under whose reign the India Growth Story happened.

The man hoping to tap into this discontent, while hard-selling his own so-called Gujarat development model, is Narendra Modi. Whether or not he succeeds, the decade of the three ‘Ds’ has left behind some enduring legacies.

One of it is certainly the fact that the Indian polity is more democratic now than before.

Governments no longer can take lands with impunity and pay whatever compensation they deem to be fair. In 2005, Bhupinder Singh Hooda’s administration in Haryana could get away with the most violent police crackdown on striking workers at Honda Motorcycle & Scooter. But such strong-arm methods were simply ruled out when it came to dealing with the labour unrest at Maruti only six years later in the same Gurgaon-Manesar belt.

Much of what India Inc terms as ‘policy paralysis’ stems precisely from the State’s increasing inability to ‘manage’ things for it — whether in acquiring large swathes of land, imposing projects on unwilling locals or showing labour its place.

While it is possible that many corporates expect Modi to restore order, what they perhaps don’t realise is the new 3D reality of India. The interaction between Development, Democracy and Demography will mean India’s growth story is going to be different.

We only saw a glimpse of that in the last decade.

Published on June 20, 2013

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