The most important positives for India are our great demographic advantage and the collective weight of our decade and a half old economic reform programme.
To talk about the first one, a recent report by Standard & Poor’s, the global rating agency, forecast that France, the US, Germany and the UK, each of which now has their highest rating, triple-A, would lose even their investment grade ratings between 2020 and 2035. This will be largely the result of demographics coupled with budgetary laxness—ageing populations, combined with a lack of discipline in budgeting.
IWhether S&P will be accurate is beside the point. The important take-away is that these countries, which for so long have enjoyed hegemony over political and economic world developments, which stride over global institutions like the World Bank and the UN, are beginning to face structural pulls and pressures which they will find hard to address. The report further states that these countries will be compelled to cut pension benefits and medicare for what will be an increasing proportion of retirees and older people. Around the same time, China will taper off in terms of its workforce expansion. The only sizeable country still growing in terms of its working age population will be India.
This demographic reality is what will power India’s growth in the next several decades.
European countries are alre-ady beginning to face difficult times, as their manufacturing bases start moving offshore. Soon, the same will happen to a number of services. The US, with its more flexible economy, culture of entrepreneurialism and relatively higher openness to immigration, will head-off such a situation for a while, but the demographic bullet is travelling fast. In addition, the US is adopting policies that appear to be shortsighted, in terms of higher budgetary deficits and clamping on immigration.
To my mind, therefore, there is an inexorable momentum shift taking place in the globe that will become more apparent by the next decade. As a country, there is clearly a great opportunity to capitalise on these remarkable developments and reposition India, if not as an increasingly important global power, at the very least as a regional economic powerhouse. When coupled with our slow but forward moving and broad-based reform process— over a long period, even slow reforms can add up to a lot—it appears we are directionally okay.
That is the optimistic view and very much a macro story. On the other hand is the grim reality that our infrastructure is woeful, corruption is endemic, bureaucrats generally inefficient and lethargic and politicians usually inept. And that is putting it mildly.
• India has an opportunity to reposition itself as a regional economic power
• But for now, the reality is an inefficient bureaucracy and inept politicians
Our political process is too ponderous. While in the econo-mic ministries such as finance, commerce, etc., most politicians and bureaucrats know what needs to be done, they are severely hampered by the political environment. In addition, it is at some of the tertiary ministries, such as fertiliser, steel, mines, textiles, railways, surface transportation, etc., and at the state level where the rubber meets the road, that we see the biggest deficiencies in the quality of governance. Unfortunately, it is precisely in these offices where the hard task of reform needs to be carried forward.
How do we get them to see beyond personal gain and function in the best interests of the country? I can appreciate honest ideological differences, but not doing what is right for society and country, either for personal gain or complete ineptitude, cannot be condoned. The quality of governance is going to be the single most important driver of forward growth. While there is an increasing effort to improve governance, I fear the rot is deep. Solutions, therefore, will have to necessarily be radical, and I doubt we are doing enough. Having said that, the structural elements are coming together nicely for what could easily be India’s millennium.
Source: The Financial Express