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India Lacked Policy Focus For Growth With Equity, Grass Root Development

By Nantoo Banerjee


Some may disagree but India has failed to cash in on its spirited struggle for freedom from over-a-100-year-old British Raj to convert the country into an abode of peace and prosperity for its citizens in the last 75 years. Official claims apart, India continues to be a poor country with almost 280 million people or 20 percent of its population living in poverty. The country’s demographic failure far overtakes its economic success in select areas.


The total population of India was only about 340 million at the time of its independence. In March 2022, the population figure reached 1,417 million. Next year, it is expected to surpass China’s. The massive population growth negated almost all its accomplishments. Every year, more mouths are needed to be fed and more hands are required to be provided with jobs. On a per capita basis, every achievement looked small and inadequate. The country’s two biggest accomplishments over the last seven decades have been its commitment to democracy despite many frictions and its self-sufficiency in food grains production.


Actually, achieving “self-sufficiency” in food grains has been India’s biggest achievement. From receiving international food aid in the 1950s and 1960s, India has become a net exporter of grains. The country’s total food production stood at only 54.92 million tonnes in 1950. As per the government’s press information bureau (PIB), the total food grains production in the country was estimated to reach a record level of 314.52 million tonnes, last year. “The production during 2021-22 is higher by 23.80 million tonnes than the previous five years’ (2016-17 to 2020-21) average production of food grains. Record production was estimated of rice, maize, pulses, oilseeds, gram, rapeseed and mustard and sugarcane,” PIB stated. This is certainly a major achievement.


In most of the other areas, the country’s achievements in the global context is either neutral or even negative though India did reasonably well in pushing up electricity generation and distribution, urbanisation, housing and rural development. According to the union power ministry, only 3,061villages had access to electricity in 1950. In 2018, the government announced that all of the country’s villages – 5,97,464 in total – had been electrified. However, given the criteria to declare a village electrified – 10 percent of households in a village having access to electricity, there are millions who still live without electricity. Low voltage and frequent tripping pose a big headache to rural householders. Until the country’s independence, negative economic growth was more frequent than after 1947. Growth was negative in 27 of 50 years leading to 1947, compared to 11 in the subsequent half century.


Since India and modern China were liberated around the same time, the comparison of the two country’s economic progress is natural. India is the second most populated country after China with a sixth of the world’s population. The UN has projected China’s population in 2022 at 1,426 million, showing a zero percent increase from the 2021 level, whereas India’s population would grow by 0.68 percent this year over the 2021 figure. The population growth, rising unemployment, increasing imports and trade deficits, slow growth of manufacturing, domestic inflation, high rates of indirect taxation and Indian Rupee’s dwindling exchange rate value are among the most challenging areas of the country’s development. On the contrary, China, the world’s largest exporter and energy guzzler, has managed such challenges well to emerge as the world’s second largest economy in US$ terms and the second largest military force, as well.


In 1949, China with a much higher population (541.7 million) than India’s (340 million) produced less steel and coal than this country. Today, China is the world’s largest producer of steel (1,337 million tonnes) and coal (4.07 billion tonnes). Last year, India produced only 120 million tonnes of steel and 778.19 million tonnes of coal. The comparison should provide a reasonably good picture of India’s extremely slow industrial progress and economic development. Both countries had long been neck and neck in GDP per capita terms. As per both the ‘nominal’ and ‘purchasing power parity (PPP)’ methods, India was richer than China till the end of 1980s. In 2019, China was almost 4.61 times richer than India in nominal method and 2.30 times richer under PPP terms. Per capita rank of China and India was 72th and 145th, respectively, under the nominal method. Since 2020 was the Pandemic year, the figures of 2019 would be more normal and acceptable.


Nominal GDP per capita in India is expected to reach $1,850 in 2022 as against China’s $9,020, according to Trading Economics global macro models and analysts expectations. Quizzically, the number of rich Indians migrating abroad is going up almost every year while Indians working outside combine as the single biggest source of the country’s net annual foreign exchange income. In 2021, India was the top recipient of foreign remittances at US$89 billion. India has been the largest recipient of remittances since 2008.


It is important to note that in 1947, a US$ was equal to only Rs.3.30. Till 1980, one US$ was equal to Rs.7.86. In August 2021, US$1 was equal to Rs.74. Earlier this month, INR’s exchange value fell to Rs.80 for one US$. India’s economy went through a very tough time in the early 1990s. Interest payment accounted for almost 40 percent of the national government’s revenue. Fiscal deficit was 7.8 percent of GDP. And India was on the verge of being declared an international market defaulter. The crisis led to an IMF-World Bank prescribed economic reform and official devaluation of the Indian currency. Since the middle of last year, INR got hammered by the systematic withdrawal of foreign portfolio investors from the market, rising oil prices and inflation. Factors such as these with several others may cause further depreciation of INR in the future. Clearly, the government has failed to manage the economy well, especially since the 1980s.


Despite its rising foreign trade, India ranks lowly in the 16th position in terms of merchant fleet size with only 456 vessels plying on overseas routes out of its 1,463-ship merchant fleet combining a gross tonnage of around 13 million GRT. India is the world’s eighth largest importer, importing merchandise worth nearly $480 billion. Imports are made largely on a f.o.b. (free on board) basis, making the country lose heavily on insurance and freight charges. Compare this with China’s merchant fleet size and strength. In 2019, China became the world’s second largest ship-owning nation, controlling a fleet of more than 5,600 vessels, totalling a capacity of 270 million dwt. There are several examples of how the government and India’s business community neglected the key areas of the economy over the years despite their huge growth potentials.


Honestly, there is little to cheer about ‘Amrut Mahotsav,’ a nationwide initiative by the government to commemorate India’s 75th year of independence. Instead of boasting about India’s position as the world’s sixth largest economy — now ready to topple the fifth largest United Kingdom this year — the world’s most populous country must try to do some soul searching to find out where it had gone wrong to meet the expectation of its people and try to rectify them fast. That will be the best way to celebrate ‘Amrut Mahotsav’. There’s still a long way to go for India. (IPA Service)



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