Independent India’s 75-year journey has been grinding, glorious, exasperating, but never one that has belied hope. A running theme of this period has been the quest for change. There is a restless dynamism in India today, two-thirds of whose population lies in the 15-64 age bracket. Its energy is in particular, a product of three decades of liberalisation — a period when controls on production and exports were lifted, and shackles on entrepreneurs broken, to turn India into a market-driven economy. When the British left India, we were seen as a hopelessly impoverished nation of 347 million ‘snake charmers, magicians and mendicants’,which would struggle to govern its people or run an economy credibly enough to feed its people or provide them with the essentials of life. Today, India commands recognition for being the world’s fifth or sixth largest economy (in nominal GDP terms), with a skilled workforce that is in demand the world over, be it in the fields of medicine, economics, finance or the fast-growing digital sector. It is a responsible nuclear power, and a democracy that may not be perfect but one that has withstood the test of time.
Today’s India is less shackled by self-doubt; it has managed global upheavals reasonably well to be the fastest growing economy. Indeed, India has displayed governance skills comparable to the best in the world in managing shocks such as the 1997 East Asian crisis and the Great Financial Crisis that broke out a decade later. If India is no Sri Lanka or Pakistan today, it is also because these capabilities have been institutionalised, notably in its central bank and other regulators whose crisis-management skills have won global recognition. Governments have come and gone, but discipline with respect to overseas borrowings has always been maintained, as a result of which the percentage of external debt to GDP has remained stable at 20 per cent or less. The transformation of a country from a food importer (producing 50 million tonnes of foodgrain for a population of 347 million) in the 1950s to a net food exporter (producing 300 million tonnes of foodgrain for a population of 1.3 billion) lies at the root of India’s confidence. The per capita net availability of foodgrains has increased from 334 grams/day in 1951 to over 500 g/day today. The Malthusian trap that stared at us at a time when we battled wildly fluctuating food output is now a fading memory, as are images of the ‘ship-to-mouth’ existence that stayed with us (imports from the US under the PL-480 law) for two decades after Independence — till the Green Revolution dramatically raised output. This is no mean feat, given India’s rapidly rising population in the intervening years. It is a happy irony that the US is now chiding India for curtailing its wheat exports in the wake of the Ukraine crisis.
India has managed to reduce poverty through higher trend growth rates after the onset of reforms. In the years prior to that, the rates of growth were too low for effective redistribution to take place. To be sure, the planning process did play a positive role in developing capacities in strategic areas, but its limitations as a growth driver became evident by the 1970s. Controls over production by private sector had been pushed too far, and for too long. A socialistic model of development, with the public sector occupying the ‘commanding heights’ had led to a distribution of poverty, as it were, rather than incomes. The public sector failed to generate savings to drive investments and growth as envisaged; by 1990, public sector borrowings touched 9 per cent of GDP. India was stuck in a trend rate of growth of about 3.5 per cent between 1950 and 1980s. The reforms ramped up the average annual growth rate to 5.9 per cent in the 1990-2000 decade and sharply to 7.6 per cent in 2000-2010. It is lower at about 6 per cent for the decade ended 2020. Poverty levels have dipped from 45 per cent in 1947 to 21-26 per cent now, while ways of measuring it have kept changing.
But the high growth years have also been ones of rising income inequality. According to the World Inequality Report 2022, the ratio between the incomes of the top 10 per cent and the bottom 50 per cent India is 22. If in the pre-reform years there was no growth of incomes to redistribute, now it is evident that the fruits of growth are being distributed very unevenly. There is no clarity on how a workforce of over 400 million, which is rising at about five million every year, can be gainfully employed. India’s biggest failing in 75 years is its inability to universalise health and education. Unchecked privatisation of these sectors has inhibited access to quality services, eroding equality of opportunity. India should have prioritised social spending over planned industrialisation early on, as the ‘East Asian Tigers’ did before their economies took off. It is high time that budgetary priorities are reset.
Indian democracy is faced today with the liabilities that come with rule by a dominant party without a credible Opposition, as during the 1970s. As it happened then, there is a risk of the erosion of institutions now. It is truly unfortunate that the government is not subjected to adequate scrutiny in Parliament. Our lawmakers must take their job seriously as gatekeepers of democracy. India may have come a long way, but there isn’t much to take for granted.