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Seeing ourselves as other see us

Seeing ourselves as other see us

Author: M. V. Kamath
Publication: Organiser
Date: June 24, 2001
 
There is nothing more educative than seeing ourselves as others see us. Finance Minister Yashwant Sinha may think India, all told, is doing well, but most concerned experts are likely to take his assurances with a pinch of salt. But when an important journal like the London based The Economist (June 2) assesses. India's economic situation one has to sit up and take notice of it.

It may be remembered that both India and China started their independent careers about the same time: India in 1947 and China in 1949. Actually India had a head start considering that it had political stability whereas China had yet to recover from a terrible civil war. But what are conditions today in both these countries? The economic indicators for 1999 show that foreign direction investment in China was $38.8 billion whereas for India it was $2.2 billion. China's share of world trade was 3.3 per cent while India's share was 0.7 per cent. Population living in China on less than one US dollar a day was 18.5 per cent while in India it was 44.2 per cent. Male illiteracy in China was 9 per cent and in India 32 per cent. And life expectancy in China was 70 years whereas in India it was 63 years. Ten years ago, because of a grave balance of payments crisis, India had to jettison four decades of economic isolation and planning and free the country's entrepreneurs. Soon after, says The Economist, "growth picked up, inflation fell and India began to recapture some of the ground it had lost in world markets". Actually the growth rate is around six per cent, not high, but not bad either.

As The Economist says, "it is good enough to make India one of the world's fastest-growing big economies" but it also adds in the same breath that India "could and should be doing better still". As it puts it, "Every fraction of a percentage point of extra growth means faster improvements in welfare for the country with the world's largest concentration of poverty... it also means more international clout for India's Government".

But what are the shortcomings? Firstly, says the journal, "the combined financial deficits of the Central and State Governments are near where they were before the 1991 crisis. Government spends lots of money on subsidies, salaries and interest, little of which helps the poor, and too little on what ought to be their priorities such as health, education and infrastructure that the private sector cannot pay for".

Though the Government has given up the "license raj" which told enterprises what to invest in and how much, the "inspector rat" is still very much alive and continues to hold the economy back. Importantly, according to The Economist, what is still holding back India's economy is red tape, little accountability on the part of bureaucrats and politicians and lack of judicial resources to dispense justice quickly. These are real handicaps. The journal has praise for the leaders of India's ruling coalition who have been sounding increasingly eager to privatise during their last three years in office but it adds that "unfortunately, scandals have weakened their moral authority to do so".

The journal believes that "the state needs credibility even more to withdraw protection from the economically privileged". And who are those "economically privileged"? They are organised labour, whose members, once employed, face little risk of being dismissed, big industry which wants protection from foreign competition until the Government makes it easier to sack workers and enacts other reforms and small-scale enterprises which enjoy an array of sops, including protection from competition by big firms in some 800 industries. The result is that labour seldom puts in a full days' work, quality of manufactured products is poor and Indian goods cannot compete in the world market. Organised labour recently showed total irresponsibility when it went on a one-day strike that paralysed Mumbai and was responsible for the loss to the country of several crores of rupees.

Yet, according to the journal, the economic reforms ushered in have launched India in the direction most Indians want to see it go: towards more widely shared prosperity and a position of influence in the world. But, while the momentum "is not irreversible" it has created its own problems, environmental, cultural and social. What are the benefits? These are seen as:

* Having faced the prospect of default on its external debt in 1991 (gold reserves had literally to be pawned!) India has now accumulated $40 billion of foreign exchange reserves.

* Consumer-price inflation has fallen from 14 per cent in 1991 to four per cent last year.

* Software sales have risen from almost nothing in 1991 to an estimated 58.3 billion in 2000.

* Since 1991, the number of serious car makers has jumped from three, making 190,000 old-fashioned vehicles to ten, making 500,000 some of which would sell anywhere in the world.

* The number of daily flights from Delhi to has gone up from three, on one "slovenly state owned airlines" to 22 on three competing airlines.

* Liberalisation has made manufactured goods cheaper relative to farm products.

Other factors have been noticed. Thus, the percentage of poor from 1993 to 1999 has fallen in Punjab from 12 to 6, in Haryana from 25 to 9, in Kerala from 25 to 13, is Gujarat from 24 to 14, in Rajasthan from 27 to 15, in Andhra Pradesh from 22 to 16, in Karnataka from 33 to 20, in Tamil Nadu from 35 to 21, in Maharashtra from 37 to 25, in West Bengal from 36 to 27, in Uttar Pradesh from 41 to 31, in Madhya Pradesh from 43 to 37, in Bihar from 55 to 43 and only in Orissa from 49 to 47. The only trouble apparently is that the rich are getting richer, but then, it is made clear, in smaller ways the poor are also getting richer.

As The Economist put it: "A recent study of two villages in central Bihar, Bokhila and Kaithi, suggests that even there, the lot of the poor has increased." But "colossal waste" has been noticed in many spheres. The Planning Commission has been reported as noting about one rural development programme of "leakages, misappropriation of funds, violation of programme guidelines, selection of the non-poor as a target group, absence of proper maintenance of accounts and poor quality of assets". For all that, The Economist's survey of India's economy is hopeful. Not all reforms, it says, may help the poor. "But a reformed state can soften the blow". India's big business, according to the journal "have been slow starters and slow learners". But credit is given to India's Information Technology sector and a growing service-sector. All in all this is an excellent survey that should be brought to the attention of our policy-makers. It is so educative.
 


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