These days, nothing written about about India, particularly in India, is complete without a mention of how India will beat China, sooner than later, in the race for global domination. There are some very valid underlying assumptions that lead business pundits to make these conclusions. But, several others are ignored, ones that could compound over the years and negate everything we have achieved so far.Almost everyone agrees the present trend of growth driven by capitalism started with the economic reforms in 1991. Which means, we are new to economic growth, still learning how to sustain it, and not even close to figuring out how to do it right. For now, we are trying our best to emulate the developed nations. In other words, we are playing catch up, and nothing wrong with that. So long as we realize this is lap 2 of a 50 lap race and we should try and sustain the momentum rather than go all out.But, there are so many opportunities for growth, you say? Why not whiz past the competition to the checkered flag? Well, the prosperity experienced by India is a direct and sole consequence of the IT boom. And if you ask me, the IT boom was one of the most fortunate accidents that ever happened to a nation. Think abou this: What have we done to deserve the benefits of the boom? Our English language skills, the main reason why India is such a lucrative offshore destination, are the legacy of the British, yes, the same ones who we so proudly drove out of our country. Sure, we had enterprizing young men who foresaw the opportunity and mobilized millions of middle-class English-speaking graduates from factories and warehouses into air-conditioned offices, but even after being involved in the IT revolution for a decade now, we are yet to invent a single IT product or software. The only area where our creativity has shown results is in our ingenuity to develop new ways of propagating piracy.
Let's do a reality check here. Our infrastructure: deplorable; education system: miserable; political and bureaucratic structure: rotten; social values: outdated; health care: nonexistent; law and order: unreliable. It is pretty clear the current economic growth is despite these ills, and not because of them. And that's the big difference. These factors are the cornerstones of sustainable longterm prosperity, and if you look at the ten most developed or richest countries in the world, you will see each of these factors is actively supports and sustains, barring the political system, of course, which has its own ways. The question, then, is what is India doing to change this situation? The answer is painfully obvious: nothing.
Plans to make Mumbai a Shanghai have been on paper for years now and by the time it gets approved, the plan will already be outdated. The decision to privatize Delhi and Mumbai airports was met with staunch opposition that raised an unbearable stench, but thankfully, sense prevailed. Most of India still uses the railways as the primary mode of travel, and despite the stellar financial figures, the railways is in a terrible condition. Can you imagine the ensuing outburst if the government were to privatize railways? The recent boom in the domestic airline travel might indicate prosperity, but our airports are badly equipped to handle existing flight traffic, let alone future increases. And what about our reliance on oil? Thanks to the auto boom, our consumption of oil keeps rising, but what is our contigency plan if a crisis were to erupt in the middle east? When Ahmedijinad may use the bomb is anyone's guess. Some more signs of an impending disaster:
1. Nandigram. No due diligence was done before identifying a SEZ that underlines the incompetency of our governments, and the over-reaction to the incident shows our outdated thinking.
2. Walmart. The central Government opposes Walmart's entry because the retail giant might put several middlemen and distributors out of work. Certainly, a sizeable percentage of the population, but what about the millions of consumers and farmers who will stand to gain from lowered prices and efficient supply chains? And even worse, why stop Walmart, but not Reliance which has exactly the same plans?
3. Political structure. Murli Manohar Joshi created a ruckus by reducing fees at IIMs to 20,000 and now it's Arjun Singh's turn to make some noise by announcing new quotas. These moves only manage to jeopardize the future of thousands of students, some of whom might be the next Jack Welch or Narayana Murthy.
So where are we headed? I can see these social and political ills closing in on the economic growth we are having. We already have a big divide in the economic power of urban and rural India. Without radical social and political changes, this divide will widen further, and could lead to an economic debacle like the one we witnessed in Indonesia and Argentina. Even worse, such a situation could perpetuate political chaos and unrest, and the clock on our progress will be turned back by 50 years.
Having said that, I recently read a book called Moral Consequences of Economic Growth by Benjamin Friedman, where the author promotes the view that economic prosperity will lead to social and moral progress. He backs this up with several well-researched and nicely articulated examples. Let's all pray the current economic growth will continue despite the ills, and consequently rid us of these.
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