The Indian Economy Blog

August 15, 2007

Happy 60th Birthday, India!

Filed under: Business — Atanu Dey @ 8:27 am

My analysis is one of hope, potential and possibilities. Although political freedom was achieved 60 years ago, economic freedom is still a distant dream for the majority of the population. It is understandable why political freedom is easier to achieve relative to economic freedom. The entire population of the nation has an interest in political freedom — with very rare exceptions. But there are factions within the country that oppose economic freedom because they have a vested interest in the perpetuation of a command and control economy. Yet without economic freedom, the nation is unlikely to achieve its potential.

John Kenneth Galbraith in an interview to Outlook in 2001 said, “that the progress of India did not depend on the government, as important as that might be, but was enormously dependent on the initiative, individual and group – of the Indian people. I feel the same way now (as I did some forty years ago) but I would even emphasise it more. We’ve seen many years of Indian progress, and that is attributable to the energy and genius of the Indian people and the Indian culture.”

A limited degree of liberalization in the early ’90s (thanks to the then prime minister PV Narasimha Rao) led to enormous and widely celebrated achievements by the people of India. If a little bit of economic freedom could achieve so much, with greater liberalization one can expect the eradication of persistent and chronic poverty.

I think that the three most broadly defined critical sectors where liberalization is a must are infrastructure, energy and education. Currently they are the brakes and they have the potential to be the engines of growth.

Energy independence is possible. India has to think beyond fossil fuel because that is a limited horizon fuel, mostly imported, and the competition for the limited resources will intensify with the growth of global demand. Fortunately, India is very large and is in the semi-arid tropics and therefore blessed with sunshine. Solar power research and development is costly but the paybacks are enormous because once developed the technology has immense returns on investment. India can be a solar power superpower.

Infrastructure can gain from privatization. Roads, ports, airports, and railroads. I think the emphasis has to be on a modern efficient fast rail transportation system. First, trains run on electricity. That means that the system is independent of the source of energy — you can generate electricity from wind, solar, coals, gas, oil, or whatever. The same cannot be said of air transportation. Cars can run on electricity but cars need roads and roads are not the most efficient compared to rail.

Finally education. The world of the past was essentially static compared to today’s world. Innovations and advancements are happening at rates that are accelerating. Current rate of technological and scientific growth means that every year more progress is made than was made in a couple of decades in the last century. A centrally controlled education system could have served a limited purpose in a static world but in a dynamic world it is impossible for the old education system (developed 300 years ago by the Prussian government) to meet the current challenges, to say nothing of the totally unknown world just a few decades hence.

For all those things to happen, the necessary condition is the restructuring of the political institutions. That, however, is close to impossible.

4 Comments »

  1. Atanu, while I agree with everything you say, it’s odd quoting Galbraith. He is a big believer in commanding heights and was an special adviser to Nehru in economic matters (although he gave more than economic advise) when Nehru was pulling the nation into solid socialist column and laying the foundation of commanding heights in early 50s. But it’s nice to know he believes in Indian people and their genius.

    Comment by Chandra — August 15, 2007 @ 12:49 pm

  2. I very much agree with Atanu on many of his points. Economics freedom is the need for the hour… and infrastructure and education are both among the most critical issues and bottlenecks in India’s journey to success and happiness!

    We teachers at Mumbai are doing our bit to contribute towards the dream of achieving economic freedom for India through our initiative “ARTH-MANTHAN – THE ECONOMICS FESTIVAL”!

    A festival based only on economics… well that was unheard of in Mumbai campuses about seven years ago. Unlike many other college festivals that offer a little bit of everything, we decided to focus solely on enhancing students’ interest and enthusiasm towards economics by bringing the subject to life! That’s how Arth-Manthan was born!

    The festival was started in 2001 to celebrate 10 years of liberalisation. Through the festival the college campaigned for further opening up of the economy with a firm belief that it would lead to India finally reaching its tryst with destiny!

    Over the years, Arth-Manthan has received wide coverage in the media and has inspired many other colleges to introduce similar festivals. The festival has in fact become a forum for industry-academia interaction. Arth-Manthan has become the largest festival of its kind in India and has even attracted the attention of international educationalists!

    Arth–Manthan 2007 will be held on 30th & 31st August. Through this year’s theme ‘Lage Raho INDIA’, they plan to celebrate India’s arrival in the global arena and call upon the youth to encash the unprecedented opportunities before us!

    EVENTS @ ARTH-MANTHAN 2007

    Choc-a-bloc with innovative and exciting competitions Arth-Manthan offers students, a unique opportunity to experience and interact with the entire spectrum of economics at one go!

    CHAK DE INDIA! – THE MAHA DEBATE. The theme for round one is ‘Politics – Young India is crying out for change!’ Ten best speakers – fiery, passionate and sincere – will qualify for the Maha-Debate on 31st August.

    At GLOBAL LEADERS MEET participating teams will play the role of economic advisers of the various world countries allotted to them in advance. An important agenda at this year’s meet is ‘Working towards global peace and economic co-operation’.

    PEN’EM DOWN – The Essay Competition and WAR OF WORDS – Elocution Competition
    Students can voice their thoughts on issues ranging from India’s relations with neighbouring countries to economic policies, sustainability of economic growth in the country, reverse brain drain and much more!

    TOONY LUNES Cartoon Competition where students can express their concerns over Mumbai’s crumbling infrastructure and the apathy of the authorities through creative and humourous cartoons.

    The theme for DRAW’ EM UP the Poster Competition is ‘INDIA @ 2020 – Fulfilling our dreams’

    There is CLASSIC COLLECTION – the Book Exhibition, the Business Plan Competition, AD-MASTERS “Daag acche hai…” the advertising event, and for those interesting in Quizzing there’s QUIZ WIZ …!

    BUDDING ECONOMIST: Students can make presentations on various issues like Indian companies on an acquisition spree, India as a centre for Healthcare tourism, Creating world-class airlines, Modern retailing: A solution to the Indian farmer’s woes?

    CUT OUT DA NOOSE!: Students have to submit recent paper cuttings from newspapers depicting the theme of “Growth of Modern Retail in India”.

    ECONOMICS … It’s Rockin’…!!! Prepare your own economics song on economists like Adam Smith or Marshall or on economic terms like Demand and Supply, diminishing marginal utility etc. and Arth-Manthan will offer you the mike to sing out loud!

    YEH HAI ZINDAGI – Wah Bhai Wah! (Economics Skit Competition)
    Students can prepare a skit on one various topics like ‘Fighting corruption in India’, to Life @ call-centre, Globalisation or the Mobile Revolution – How it has changed the life of an Indian…

    Eminent personalities who spoke on various current economic issues during Arth-Manthan include G.N. Bajpai, Ex-Chairman SEBI, Dr. Narendra Jadhav, Principal Advisor to R.B.I., Shri M. N. Chaini, President (Corporate Affairs) Reliance Industries Ltd., Dr. Ajit Ranade, Chief Economist Birla Group, Shri Diwakar Gupta, Chief Gen. Manager, SBI and many more economists.

    For further details you can contact: Prof. G.S. Panikar M: 9324818296 or Email: arthmanthan@gmail.com Website: http://www.arth-manthan.com

    Comment by Prof. G. S. Panikar — August 15, 2007 @ 3:19 pm

  3. A strong argument has to be made for following two widespread common belives in India elite:

    1. …that the progress of India did not depend on the government…

    2. …Infrastructure can gain from privatization. Roads, ports, airports, and railroads…

    An adjustment has to be made for such believes. Infrastructures, as US and China have demonstrated, must be led and built by the central government (if not 100%, but most), including planning, funding, construction, and maintainance.

    Above two widespread common belives in India elite might be the two most important reasons that India does not do well on infrastructures.

    Comment by thecupgr — August 21, 2007 @ 12:32 am

  4. Agree to all points except perhaps the last one. I’m not entirely sure that reforming political institutions is a **necessary** condition, though it certainly would be helpful. :-)

    Comment by Nandan Desai — September 7, 2007 @ 12:29 am

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