Looking to the future : Making India an economic super-power

For a nation, like India, politically subjucated for centuries by alien conquest, and socially unsettled by invasions, the idea of becoming a super-power is no ordinary thought. Understandably, even after winning freedom, India never aspired seriously to become a super-power, politically or economically. Such an idea, if it existed, was dormant in the Indian consciousness. But it did acquire seriousness after the Pokharan blasts in May'98.But even now, the national opinion is not uniform on how to become a super-power. `Not atom bombs, only development can make India a super-power' - say some; `We need both, to make us a super-power', say others. Nevertheless, the idea that we should aim at being a super-power is no more a dormant one, even if it is not a dominant one. But, the desire has come a little late. There is background to it - the background of India's post-independence history.

The freedom movement had promised much more than mere change of rulers. But what happened was, as aptly described by English historians, a mere "transfer of power" from the aliens to the locals. Nevertheless, what did India intend to be after it became free ?

When India attained freedom, it thought of emerging as a global leader, without becoming a global power. Its claim to leadership rested on the age-old Indian, value of universal tolerance, peace and happiness. But the post-war World afflicted by cold-war had no reverence for such high values. So India was swiftly marginalised in a World which respected only power.

But, within India, the Indian leadership did the other way round - it persuaded the people not to pursue their age-old values, but, accept the Anglo-saxon ideas and institutions in the main. It folded back the philosophic lead shown by Gandhi, Aurobindo, and Tilak. Their definition of the Indian identity was substituted by the western ideas of secularism and socialism. Since then, for over four decades, the Left-Socialist parties and intellectuals mounted a vicious attack on the Indian past, and virtually delinked the Indian polity, economy, history and education from its past and turned to Anglo-saxon values.

This is precisely what the Indian freedom movement had struggled against. Because of this drift to the Indian intellectual, India's past became a burden - and ceased to be matter of pride. Also, the secular-socialist leadership systematically fragmented Indian society into majority and minority, rich and poor, forwards and backwards - and denied India of the deeper awareness of its intrinsic unity brought about by the Hindu values and civilisation. This resulted in setting one Indian against another leading to massive self-deprecation - and eroded our self-confidence as a nation. The idea of a powerful India could not be internalised in a situation where every Indian was running down every other.

The socialist regime turned two generations of potential entrepreneurs into job seekers. Permit quota and licence, not efficiency or merit, became the route to business success. The competitive strength of India was systematically weakened, and the traditional skills of the trading and business communities in India were dissipated. The devastation caused by the socialist regime in the post-independence period was more pervasive than the devastation of the Indian economy by the British rule.

The pre-British India described as caste-ridden, feudalistic and unmodern, was economically ahead of the rest of the World - including Britain and USA. The Indian economy had a share of 19% of global production in 1830, and 18% of global trade, when the share of Britain was 8% in production and 9% in trade; and that of US 2% in production and 1% in trade. India had hundreds of thousands of village schools and had a functioning literacy rate of over 30%. In contrast, when the British left, India's share of World production and trade declined to less than 1% and its literacy down to 17%. And yet, in 1947, India had had large Sterling reserves, no foreign debt; and Indians still had an effective presence in such trade centres as Singapore, Hong Kong, Penang, Rangoon and Columbo. But by the time the socialist regime came to a close. India had become politically and economically weak and disoriented, lacking in self-confidence. Its Indian influence in South Asia too had waned.

But, with the collapse of the Soviet Union, the Indian establishment swung to the other extreme - from socialism to market capitalism. It was again in tune with its lack of self-confidence - if it is not communism, it has to be capitalism. And we began to witness a massive effort to globalise - which means westernise - the Indian economy. The persons and parties who grossly maladministered the national economy suddenly turned `reformers' - and they paraded themselves as the new messiah as if someone else were responsible for the wrong doing things in the past which needed to be reformed. Thus the Congressmen - that is those who needed to be reformed - styled themselves as `the reformers'. Just as socialism was an ideology earlier, globalisation too became an ideology. Now anyone who dissents against globalisation is being labelled as backward-looking and anti-modern. Thus, just as we adopted socialism without a debate as to its viability in India and discarded it, we have adopted globalisation without any debate. With the result, we have set-out blindly to experiment on India, the experience of the West. And just as we had committed one set of mistakes before 1991, we have now begun committing another set of mistakes from 1991.

The great question remains - Will what we have been doing since 1991, make India an economic super-power ? If not, by what method, will India emerge as an economic super-power? Before we comprehend what India should do to become a global power, we must understand property what is happening in the World today.

There is a gradual shift in the global view on global trade and currency regimes of today. It questions not just the global assumptions, but also the national assumptions, about the global regime. The experience of Mexico first, the EC currency crisis next, and the South Asian crisis now, tend to question the very foundation stability and viability of the present global economic regime under installation. The assumptions about what India should do is also changing fast. For instance, not even the diehard lobbyist for globalisation today talks about the full convertibility of Indian currency for which P.Chidambaram had, only a year ago, unveiled a 3-year master plan. Dr.Jagdish Bhagwati, an uncompromising advocate of currency convertibility, has now come to the view that currency convertibility should be "avoided like a plague". This single shift is enough to demonstrate how unstable are global economic prescriptions and institutions.

It is not that what happened in South Asia now was not anticipated. Akio Morita, the former Chairman of Sony Corporation, wrote a letter to the G7 leaders in the year 1992 questioning the rationale of globalisation with a currency regime operated by mindless speculation. Akio Morita said that what manufacturing, efficiency and technology achieved might be destroyed by the free-for-all money market over which no one had any control. The World was forced into the present free-for-all currency regime in 1971. It was to prevent this, and to prevent money turning as a destabiliser that the World opted for a fixed rate of exchange in 1949. The very constitution of IMF, World Bank and GATT after the II World War was to avoid a free-for-all currency regime. But it was reborn in the year 1971 after the gold-dollar convertibility was discontinued. But, with global economics coming under money spinners, the new regime has been increasingly questioned - and more so in the recent past, and more seriously now.

What is the lesson for India in the changing situation ? The WTO which is the symbol of free trade cannot function without a free currency market, but, a free currency market tends destabilise, if not, destroy, free trade. This is a catch-22 situation for which there is no answer within the global trade regime today. A mere comparison between the trade volumes in the World currency market and the volumes in the goods and services is adequate to demonstrate how paper money dominates trade. The daily global trade in currency is over $ 1.2 trillion; in contrast, the annual global trade in goods and services is $ 4.5 trillions. It means that for every dollar of actual trade, the trade and speculation in currency is 95 dollars !

If anything that will ultimately destroy the global trade regime, it will be the global currency regime. That means the present global trade regime does not have a guaranteed success, though it is not guaranteed to fail. India should not reorganise its national economy to match a global regime which has no guarantee for success. It means that India shall have to frame a national agenda.

So the road to economic success in future will be not unlimited globalisation, but, controlled, guided calibrated globalisation which is the vehicle for acquiring global economic strength. Even in the past, it has been so. Japan became an economic power by controlled globalisation - even as China is doing the same thing now. It means that India has to devise its own strategy - that is what the idea of `Swadeshi' is all about. Swadeshi means Indian agenda to which the global agenda can only be a supplement, and not the other way round. This is what China did in 1980s; it set-out on a national agenda to double its food production from 200 Million Tons to 400 million tons between 1983 and 1993. It turned to its agriculture to power its economic growth beyond 10% during the 1980s and turned to other areas to sustain the growth rate afterwards.

In contrast, the Indian agriculture virtually remained stagnant throughout the period from 1990 to 1998. This is how we mal-prioritised our economic strategy even after we set-out to desocialise our economy in 1991. What then should we do now ?

The answer is obvious. If we have to break into a high trajectory growth rate on a sustained basis, just as China did, we have to start with agriculture. Higher agricultural growth leads to rural prosperity which, in turn, leads to more buying power, and that triggers high industrial growth. The Indian agriculture has greater advantages than the Chinese agriculture had. We have 1 1/2 times as much plain land as China has and a whole year's sunshine. Agriculture involves the greatest number in our country and unless a nation activates a majority of its people it cannot grow. Thus agriculture is our biggest asset. We should have invested more and more capital in our agriculture. But, in contrast, the capital formation in Indian agriculture is declining from year to year - down from 17% in 1980 to 9% now. So agriculture in India that has been increasingly neglected. So agriculture is our mal-starting point for India to emerge as an economic super-power.

The second trigger for high growth is the energy sector. It is linked to transport. We did not plan for multimodel transport nor did we integrate energy and transport in planning. We have allowed the cheaper Railways decline in favour costly of road transport. The Railway share in freight traffic has come down from 88% in 1950 to 37% now; in passenger traffic from 68% to 13%. The reduction in railways share has meant a corresponding rise in the share of energy - intensive road transport. Coal accounts for 45% of the Indian Railway's freight. It completely clogs the Railway system and prevents its modernisation. Why did the railway decline. It is because we have saddled our railway which is 1 1/2 times that in length as US Railways and twice as that of China - with coal transport - coal accounts for 45% of Railway freight today. We have not yet tapped the vast potential of coastal transport and inland water transport which can considerably ease the pressure on the energy-intensive road transport and the clogged railways.

Water transport involves less than 1/3 of the energy as land transport. We have not also tapped atomic energy, the biggest source of energy. The expert view is that by using fast-breeder reactors with international safety standards, India can produce 300000 MW of atomic power with indigeneous resources. Our current power generation by all sources is about 89000 MWs. Atomic energy has higher initial investment, but, no running cost. But, in thermal power, running cost is as high as 50% of the production cost. In other countries, atomic energy constitutes a high percentage of total energy - it is 76% in France, 40% in Sweden, 29% in Japan and 23% in USA, but less than 2% in India. Also we can turn alchohol into diesel like Brazil does, in large quantities. An integrated energy-cum-transport planning can trigger a high growth.

The third area for large scale activation of India is the non-corporate sector which accounts for 40% of our GDP, over 30% of exports and more than 75% of employment outside agriculture. This sector consists of the traditional craftsmen and artisans in the main. During 1997, this sector had contributed over $12 billion by way of remittance from abroad by the skilled workers of India employed abroad. From 1980, the total remittance by this sector has exceeded $75 billions. This is largely self-employed - and labour intensive. This has withstood the socialist assault and later the free market globalisation so far. Yet this sector has had no assistance from the system by way of organised finance or employment or social insurance scheme. This has enormous potentiality for high growth .

As an adjunct to this is the services sector - both modern and traditional services. This is an area of high growth potentiality for India because of the advantage of familiarity with English language, particularly in the modern services sector like legal, accounting, consultancy, and advertising professions. And yet we are mindlessly allowing the MNCs to enter this area where we have our dominance.

Yet another area in which India is expected to become a major player is textiles, particularly, after the quantitative restrictions are removed by the West from 2005. Textiles accounts for 30% of India's exports and the largest industrial employment. And yet this crucial area is underdeveloped in terms of technology and processing. Powerlooms which account for 73% of the textile produced in India are unfunded by organised financing. Organised finance, technical upgradation and freedom from tax inspectors will transform the textile sector into a high growth area.

Computer software and IT Technology are an important area. The Indians in Silicon Valley in USA have proved our proficiency in IT products. The global players are sourcing India in a big way in IT tech area because of the highly skilled manpower available in India. Some of the best minds in India are taking to this area of expertise. Since information is key to the World ahead, the Indian mastery over this area is likely to make India a dominant IT power in the next decade. There are estimates that by 2002, India will export software products worth $ 10 billions.

This takes us to the role of foreign Direct investments in India emerging as a global power. By its very nature, FDI has a marginal, but, crucial role to play. But it must be made to flow into areas where the local capital is shy or incapable of funding a global size venture, particularly for global use. It can usefully supplement our large national savings which, in dollar terms, amounts to over 90 billions. Instead of going for FDI in areas which hurts the local economy and employment, the government may allow 100% FDI in, say, four large international airports or two large seaports. Such facilities require income to be generated from abroad for their very survival. Indian capital cannot build them and the ordinary Indian need not pay for them. Such airports alone can fetch an FDI of 20-30 billion dollars in the next 5 years. The thrust of the FDI regime must be to channel FDI where local capital is inadequate and where from the FDI cannot leave India at will.

Indians must realise, as have done the West and the Japanese, that global business is war - not just commerce. Wars have always followed commerce and commerce has followed war. Therefore trade like war, is a game of deception; and free trade is a strategy, not an ideology. That is why nations build up non-tariff barriers. South Korea used to tax raid the buyers of foreign cars. Phillipines mandates that cars may be produced by foreign companies, but, distribution can only be by a local company.

France has instituted professional appraisal of imported electronic goods so as to clear only a fraction of the imports. Thus, every nation digs trenches to fight the advances of global trade to the prejudice of national interests. But in India,just as socialism did, free trade has emerged as an ideology. Indians must learn to look upon trade as war and free trade as a strategy and develop native non-tariff formulations.

Again what India and Indians critically need is a measure of national pride and self-confidence. Without both, no nation can prosper. It is unfortunate that the English-educated Indians have repeatedly failed to generate personal or national self-confidence. Instead, they began to deprecate everything Indian. In the process, they deprecated each other resulting in allround self-deprecation. This trend has to be reversed. If we deprecate ourselves as we have been habituated to, no one is going to respect India. The atomic test by India triggered our national pride in a big way, but we threw cold water on it. We have to build - and not waste - such achievements - whether it is the Param Super Computer, or PSLV launch, the Tata Car or Kamini nuclear reactor working on thorium. A rapid build up of national pride and self-confidence will yield a quantum jump in economic advancement. Trade is a matter of psychology. When Japan followed Chinese lead in Technology, it prided itself as combining the `Japanese spirit' and `Chinese Technology'; when it was forced to accept the Western technology, it coined a new motto, `Japanese spirit' with `Western Technology'. Thus a measure of nationalism has to be built up to create a psychology of national pride. This is needed for economic advancement - and those who delink national pride from economic growth will have to be educated on what the World history teaches every nation.

But the Indian parliamentary democracy which is a carbon copy of the Western system, does not allow the emergence of national consensus in politics; eventhough the Indian society functions on consensus, the Indian polity does not. For transforming India into a global power expeditiously India has to review its polity and bring it in tune with its traditional principle of Panchayat or the idea of consensus to which the Indian society is accustomed.

There is no need for a trade off between democracy and development, as Lee Kwan Yew, the former President of Singapore, proposed. Probably, Presidential form of government will ensure the support that national economics needs from national politics. Yes, India has all the potentialities - and also the compulsion - to become a global economic power in the 21st century, and early enough in the coming millenium.

All that India expects of its leadership is that it should ensure that there are no round pegs in square holes. The leadership must inspire the nation to think and function as a nation. The essential quality of a leader is that he does not care how long will he be power, but how decisively he rules. This is what a Lalbahadur Sastry did. He ruled for just 18 months and asked the people to starve on mondays - a trans-religious auspicious day. He is remembered for both. India is expecting such a trait in its leadership to lay its claims to becoming an economic super-power. Will the present leadership which claims to be different from the previous ones, rise up and respond to the Will of the nation to become a global economic power.