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In the 1990s, many predicted that by 2010 India would be a superpower. Are we now or likely to be one in the foreseeable future? What is a superpower? For some centuries, Britain commanded the world. After World War II, the Soviet Union and the United States of America were competing superpowers. Russia, has many nuclear weapons but is by no means a superpower; nor is Britain. Empire strengthened the British economy; it stretched the Russian economy whose people sacrificed consumption. Neither economy could take on the burden of commanding the world. The US economy is far larger and more resilient. A superpower is “a country that has the capacity to project dominating power and influence anywhere in the world, and sometimes in more than one region of the globe at a time”. The US, in the last decade, slipped some notches. Heavily in debt to China, it now pays grudging respect. The US is declining but can still influence the world.
High gross domestic product growth for most of the last two decades gives us the conceit that India is well on its way to becoming a superpower. Since 2004, India has grown each year at 7.5 per cent, 9.5 per cent, 9.7 per cent, 8.8 per cent and 6.4 per cent. This year it might approach eight per cent and in future years nine per cent or more. This growth has consistently come principally from services (trade, hotels, transport, communications, finance, insurance, real estate, business services, community, social and personal services including government). Since 2004 to now, services growth has been 12.79, 14.15, 15.73, 17.44, and 19.13 per cent. Agriculture and industry have lagged far behind in all years.
Services dominate the American economy. The US has already reached high manufacturing and agricultural production levels. Almost all the population has high levels of consumption of products and services, unlike India. Almost 500 million Indians have no access to electricity and live on the margin of starvation. Consumption of manufactured goods and of foodgrains, sugar, pulses, edible oils, milk and so on, apart from fast-moving consumer goods and durable consumer goods, is very low in relation to population size. So is access to sanitary facilities, pucca housing, healthcare, and a good education. The real economy of goods and services consumed by the majority of the people is pitifully small.
The US, Germany and Japan dominated world trade. China has now overtaken them to become the largest exporter. Its status as a large creditor of the US has compelled toning down the aggressive rhetoric against China on its undervalued currency and poor record on human rights. India is not such a major factor in international trade, it is mostly a net importer of goods and, in most years, deficit in the balance of payments. China has attracted substantial foreign direct investment. India has had uncontrolled inflows by foreign institutions that escape the short-term capital gains tax, resulting in a volatile rupee exchange value. This brings tremendous volatility to our stock markets, making it a casino for such investors. Our foreign exchange reserves rose to over $309 billion in 2007-08 and have remained relatively static since. China has over two trillion dollars.
Infrastructure (power, roads, ports, airports) is our great weakness. It has held back industrial and agricultural growth. Restrictive labour laws have kept labour intensive product exports at a fraction of China. Procedure-ridden bureaucracy with no individual accountability has hindered substantial investments in industry and infrastructure, hampering their growth.
The other great neglect is of agriculture which has had negative investment growth by government in real terms. It remains as dependent on the monsoon as it was at Independence. Unrestricted groundwater usage, stimulated by electricity supplies below cost or even free in some states, has led to groundwater depletion, diversion to water intensive crops and growing salinity of land. There is no national programme for watershed development, checking dams, irrigation canals, and rational water pricing. Productivity for most crops is falling and effects of climate change will make matters worse.
Government deficits have been rising sharply, encouraged by subsidies on fertilizers, food, petroleum, electricity, kerosene, gas, and so on, and inefficient and wasteful expenditures. Along with encouragement to volatile overseas fund inflows, these have perpetuated the spectre of inflation and kept interest rates at high levels in relation to most other countries. This also has adversely affected industrial growth. But GDP growth will boost tax revenues and the deficits can, over a few years, be controlled.
India has advantages as well: a large and growing youthful population, which does not rebel at huge disparities in living standards, its quickness to learn, and willingness to work. The sheer size of the population enables an inadequate and variable quality educational system to produce a rising output of qualified technical and trained people in a variety of disciplines. The “software” of industry is well developed: management, advertising, market research, economic forecasting, design capability, and so on. The government in recent years has also become proactive in trying to reach the really poor with employment, education and health. The entry of the private sector into education at all levels is accelerating and should improve the skills of the population. An economy oriented towards services has perhaps made us more customer-oriented and will stimulate industry when our industrial policies are more favourable. India’s advantage is that we can leapfrog technologies, as we have done with mobile telephony, or be at the beginning of new industries, like biotechnology or stem cell research. We can learn from the experiences of others and take the latest innovations in ideas. Climate change and the thrust for renewable energy also gives us an opportunity to innovate for our own and the global good. We can hope to lead in new industries and technologies.
The top priorities for reform are the administration, agriculture, infrastructure, education, health and opportunities for the poor and marginalized. The present United Progressive Alliance government has begun thinking on all these, and except for administration, taking action (albeit hesitantly and inefficiently) on the others. We can expect results perhaps over the next 20 years, that is, around 2030. By then our population would have stabilized at around 1.4 billion and urban population might near 50 per cent.
Reform of administration includes specialization in functions, reduced numbers, and higher work expectations. Performance evaluation, rewards related to performance, individual goals and accountability for achieving them, severe penalties for corruption, will reform the management of the government’s human resources. Change in systems and procedures, with much more use of information technology and modern communications, with transparency in administration, is essential. The Right to Information Act will help. Stakeholders’ involvement requires decentralization to enable local communities to have a greater role in services delivery. To take most local decisions, urban and rural local bodies must have authority, funds, capacity and training to deal with teacher attendance, teaching quality, health-centre functioning, expenditure on facilities, distribution of cheap fertilizers, electricity, and so on.
Many good ideas go into planning and programmes. Few are implemented fully. We have to achieve inclusive growth despite threats from terrorism, hostility from Pakistan, neighbouring China that has Pakistan as a surrogate against us, climate change and its effects, the Maoist insurgency, competition for global resources and other major challenges. Far from boasting of being a superpower, India should focus on doing the necessary things to provide a good life to its people.
