Sanjaya Baru: Getting Back to 'Business' Should be Priority
The head of the new government cannot take his eyes off the goal of reviving India's growth story
India’s new government must take its cue from the summer of 1991. That was the last time this country was desperately seeking a turnaround strategy.
Consider the facts. The governments that came to power in 1996, 1998-99, 2004 and 2009 did so against the background of a vastly improved economic situation compared to the one their predecessor inherited.
Even though the world economy was in crisis mode in 2009, the second Manmohan Singh government (UPA-2) took charge patting itself on the back for India’s relatively robust response to the trans-Atlantic financial crisis and the global economy slowdown.
In 2014 things are different. India’s new prime minister faces a challenge that no one since the late PV Narasimha Rao has faced: The challenge of restoring India’s credibility as a growing economy, defined by credible and predictable macro-economic governance that is hospitable to business.
Outgoing finance minister Palaniappan Chidambaram has tried hard to restore that credibility, but the jury is out. Indian business has been on an ‘investment strike’ for over three years now.
Till Indian investors invest in India, the world will not invest in her.
Till 2010 India had a credible long-term story to tell and sell. The sub-continent’s growth rate had been close to zero percent per annum between 1900 and 1950, then went up to an average annual rate of growth of 3.5 percent between 1950 and 1980, to 5.5 percent between 1980 and 2000 and to around 7.5 percent in 2000-2010. An accelerating trend that imparted confidence to investors at home and abroad.
India’s initial ability to absorb the shocks transmitted by the trans-Atlantic financial crisis further boosted investor confidence in the government’s economic management.
Then came the downturn. The political and policy elements that defined that downturn, and the Congress party and its alliance partners’ inability to understand the significance of these factors, have been the focus of the election campaign this summer.
In response to this background the prime ministerial candidate of the Bharatiya Janata Party, Narendra Modi, has consistently focussed his attention on ‘development’, fully aware of the challenge of reviving the Indian growth story.
Whoever becomes the head of the new government this May cannot afford to take his eye off this goal.
As India’s election cycle comes to a close, the news that has grabbed column space across the front page of most newspapers around the world (but went largely unreported on navel-gazing prime time national news in elections-focussed India) was China’s emergence as the world’s largest economy, in purchasing power parity (PPP) terms, overtaking the United States.
According to the World Bank, and based on the data collected by the International Comparison of Prices (ICP) Project, China’s gross domestic product measured in PPP dollars will surpass that of the United States by the end of 2014. The US has been the world’s largest economy since the second half of the 19th century. By the middle of the 21st century, China could well overtake the United States not just in PPP terms but also in US dollar terms.
China’s re-emergence as the world’s largest economy two hundred years after its decline, along with that of India, is the most important geo-political challenge and opportunity facing India. However, India’s response to this external challenge will have to be defined and acted upon almost entirely at home.
That is, India has to recover its growth momentum and sustain it over the next two decades to be able to catch up with China.
It is not easy, but it can be done.
The way we have defined and drawn up our five-year plans must change.
India needs a 10-year plan to emerge as the world’s second largest economy by 2020. India’s external relations, with big powers, with major economies and her Asian neighbours, from the Mediterranean to its West to the Pacific Ocean in the East, must be defined by this goal.
The new government in New Delhi must define its entire agenda in terms of the Indian people’s desire to demonstrate to the world that this other ancient civilisation, this other great Asian nation, can also recover its lost place in the world, and that too within the framework of a plural democracy.
Investing in education, in public health, in infrastructure, in manufacturing, creating jobs for a skilled workforce and talented professionals, India has to regain its momentum, its resolve, its sense of purpose, putting behind the drift of the past four years and regaining the confidence of the investing and saving classes.
New Delhi’s new government must define its policy agenda solely in these terms, without allowing itself to be distracted by short-term, chauvinistic and divisive domestic agendas.
A new sense of national purpose can be constructed around the idea of India emerging as the world’s second biggest economy by 2020 and the world’s biggest economy by 2047, in the 100th year of India’s independence, overtaking China.
The national rural employment guarantee (NREGA) programme can be converted into a development-oriented scheme rather than a welfare programme by using it to build rural infrastructure.
The National Service Scheme (NSS) and the National Cadet Corps (NCC) can be integrated to create a National Youth Corps in which every student and young person must enrol for a period of one year, either at the end of class 12 or at the age of 17, so that they can get involved in nation building activity relevant to a given cohort—uneducated youth can be drafted into one set of activities, while educated ones could be assigned a different set of activities.
Indian youth need a national sense of purpose. Making India the world’s Number One Nation by 2047 can be one such energising and mobilising project. India has to get back to business and hard work.
India has to recover its growth momentum and sustain it over two decades to catch up with China. It is not easy, but it can be done
(This story appears in the 30 May, 2014 issue of Forbes India. To visit our Archives, click here.)
