THE ELEPHANT CAN AND WILL DANCE
In economic analyses, 25 years is a long enough period to fit a trend.
In the summer of 1991 India flew out 67 tonnes of gold to Europe to get $600 million to tide over a dire import payments crisis. In 2011, it was ready to help Europe crawl out of a debt emergency as Greece stared at the prospect of a sovereign default. In 2016, it has become the world’s fastest-growing major economy. The symbolism is inescapable. When, exactly 25 years ago, India unshackled its economy and freed the markets, it set the country on a promising path that hasn’t disappointed. Among its emerging-market peers, India stands out. China’s growth is slowing, letting India overtake it as the fast-growing country, tracking a 7.6% growth rate. Brazil is slipping further into recession. Energy-driven Russia’s economy looks rundown. Far from falling off the BRIC constellation, it’s India that’s sticking up.
The country’s economic transformation, however, is vivid in people’s lives and experiences, not in these macroeconomic comparisons, but in their ability to earn and spend, enabling upward mobility for millions of Indians.
Bollywood is an unlikely dipstick for Indian society. Its protagonists until not long ago portrayed an “India that doesn’t exist”, to borrow the legendary Satyajit Ray’s words. Yet, it’s a good place to gauge how money moves, people spend or lifestyles have changed.
In 1991, the best-selling film made ₹7 crore. Today, most successful films rake in ₹300 crore. The successful movies of any era are mostly the ones that people can relate to instantly, not necessarily because of state-of-the-art production technology or hype created by modern marketing razzmatazz, but almost always because the stories have a current bearing.
The government’s policy moves cause mood shifts and social change, accentuating prosperity or poverty, provoking love, happiness and anger that show up on the screens.
When the economic reforms were launched in 1991 in a foreign exchange-scarce economy, the hero changed. In Hum Hain Rahi Pyar Ke (1993), Aamir Khan plays a garment exporter.
The Sanjay Dutt-Govinda starrer romantic comedy Haseena Maan Jayegi (1999) came shortly after the new telecom policy of 1999. It set the stage for plunging tariffs and more widespread use of cell phones epitomised in the mov- ie’s hit song “What is your mobile number?”
Farhan Akhtar’s Dil Chahta Hai (2001) depicted the ambitions of contemporary urban youth, willing to take the road less travelled both in professional and personal spheres. Likewise, for cricket. Cricket icon Sachin Tendulkar made his debut in 1989, two years before the reforms programme began. By the time he retired in 2013, he became a brand in part due to the 170 million TV households, which provide a concentration of eyeballs advertisers can’t ignore. Especially, when a big chunk of these families are glued to cricket, in whichever form.
The average match fee for an international cricketer was ₹7,000 in 1991. Today, it’s ₹700,000 a match. Whatever else, these jumps, among other things, reveal people’s ability to splurge money on what economists call discretionary spending, or expenditure on recreational activities.
It is not just about rising disposable incomes. A more open economy has made life more convenient.
Time was when having an ATM/debit card was a kind of status symbol. Withdrawing money from a bank was an hour-long affair. Not any longer. ATMs — or automated teller machines — also effectively serve as 24X7 kiosks that dispense cash and offer sundry banking facilities. ATMs are at the core of India’s efforts to spread the banking net far and wide. As on March 31, 2016, there were about 212,061 ATMs in India. This roughly translates into about 18 ATMs for every 100,000 people.
Much of this would not have been possible if India did not open up the banking sector to private players in the mid-1990s. That forced staid state-owned banks to become more nimble. In many ways this also illustrates Joseph Schumpeter’s process of “creative destruction”, where relentless improvements and competition result in new products and technologies rapidly replacing outdated ones. Schumpeter considered such “destructive” obsolescence an “essential fact about capitalism”.
There cannot be a better illustration of this phenomenon than India’s telecommunications sector. Two decades ago, when the first services launched, a mobile phone was a luxury. Today your milkman or the kabadiwala (the guy who carries junk from your home with a benign smile every day) or the even the guy who helps you commute in crowed city streets by pulling a cycle rickshaw carries one.
All has not been that rosy, though. Don’t let the image of razzle-dazzle mislead you.
Nearly one in every four adults did not have a bank account until the launch of the current government’s signature initiative to eradicate “financial untouchability” — the Jan Dhan Yojana — in 2014. In two years, 200 million new accounts have been added with an accumulated deposit base of about ₹40,000 crore.
Poverty, institutional finance and lack of jobs have a symbiotic relationship. There can be no argument over the fact that a productive job is the best form of inclusion. Handouts have a static characteristic and, therefore, cannot match the pace of people’s rapidly expanding aspirations.
The census data on India’s youth unemployment only confirm what some experts have been cautioning about. Nearly one in every four, or 24%, of those in the age group 20-24 are looking for jobs. Given the size of India’s population, this translates into millions of youth who join the army of job hopefuls every year.
This raises some serious questions. How many workers will industry and services have to absorb in the next decade? How many will they absorb if they continue creating jobs as they have in the past? How many of the job seekers actually have the required skills or “employability”? These are concerns that India cannot afford to gloss over any longer.
In many ways, India presents a policymaker’s paradox. At $2 trillion, India is among the world’s top 10 economies in terms of size of GDP. Yet, by most estimates, India is home to the largest number of extremely poor and impoverished people in world.
In the next quarter century we should be able to conquer this very substantially, if not in full measure. The elephant can still win the race.