TODAY Economist NK Singh on why the 21st century is also an Indian century
A youthful, productive labour force and a robust parliamentary democracy will transform the country into a leading global power
The Modi-Trump handshake at the ASEAN Summit in Manila with the caption “Two great democracies must have greatest militaries” in some way represents a transformative India. After Independence, our primary concern was food security, garnering foreign exchange to pay for inescapable imports and negotiating with donors and aid givers to be generous with us. Along with this, there was also the strategy of planned economic development. The famous words of “shipto-mouth” during the Lyndon Johnson period is now replaced by a pact between two democracies seeking strategic partnership and defence cooperation for a more peaceful world. This transition represents the tectonic changes in which we have become both strong and relevant not only to ourselves but to the rest of the world.
It is said that the 21st century is an Asian century. It can also be regarded as an Indian century. India’s strength is predicated on five factors:
First, 67 years ago, we gave ourselves a unique Constitution, not just to create a Republic but put in place basic laws and institutions. A robust parliamentary democracy with periodic election ensures accountability. The right to govern necessitates periodic renewal through free and fair elections. The checks and balances inherent in the system and the fierce independence of judiciary guarantees a governance rubric few can match. Second, India is one of the youngest nations in the world with more than 54% of the total population below 25 years of age. Analysts suggest this demographic dividend contributed to our GDP growth -- from 1-1.5% in the 1980s and 1990s to 1.5-2% from 2001 onward. Today, India is a young nation. For the next few decades, India will have a youthful and productive labour force. In fact, in the next 20 years, while the labour force in the industrialised world will decline, in India it will increase by a larger proportion.
Third, an expanding market necessitates production volumes and diversification to meet domestic and global demand. Consumer spending grew from US $549 billion to US $1.06 trillion between 2006 and 2016, putting India on the path to becoming one of the largest consumer markets by 2025. India’s consumption is expected to rise 7.3% every year over the next 20 years. This “new middle class” is significant as it will usher in fundamental changes in India and around the world.
Fourth, given our labour supply-side elasticity and comparative wage rate differential, India has the ability to become the world’s new manufacturing hub.
Fifth, the emergence of a new leadership is increasing the awareness of its obligations and accountability. Sustaining high rates of growth with high domestic savings rate, limited reliance on external capital flows coupled with macroeconomic stability invests the future with optimism.
But is our unique position or invincibility guaranteed?
We do not have the luxury to pursue policies suited for an autarkic India. The place at the high table entails costs and obligations. Increasing global interdependence also increases vulnerability. We need to improve the competitiveness of our economy. A viable export sector and sound regulatory framework is needed to cap double-digit growth rates.
Second, we need to harness trade as an engine of growth and boost its potential. Few nations have realised double-digit growth without a vibrant export sector.
Third, the potential of India, described as “Team India” by the PM, must be realised. The federal compact in which states are active participants in the development matrix is demonstrated by the agility with which the GST Council has reshaped far-reaching tax changes and balanced growth compulsions with revenue.
Fourth, many institutions need restructuring. Illustratively, the functioning of Parliament and the judiciary must be readapted to the challenges of an increasingly globalised India.
Fifth, allegations that our achievements comprise an uncertain glory due to the neglect of education, health and other human development indices must be redressed.
Finally, we must have a sagacious and decisive leadership, which recognises the need for continuing macroeconomic stability. With an enhanced consciousness of the electorate, the leadership is seeking models and patterns of growth, best suited to its local conditions for sustainable development.
The human choice we must make must be based on the strongest principles of growth and equity. Radical reforms are quintessentially disruptive. Odds may never favour the radical. But audacity and panache do. Modi knows this well.