(From the front matter of the book)
The belief that India is the fastest growing economy is widely held, and the government in recent years has made this claim repeatedly. After 2015 China slowed down, and India’s growth was in the same range as China’s. The comparison, if truly driven by a keen desire to make the economic transition, as it should be, would have to be with the East Asian Tigers and China, during their transformation phases. Korea and Taiwan grew at around 8% over more than three decades, with brief interruptions caused by global shocks (most notably the Oil shock, during the late 70s). They were able to lift themselves well above the “middle-income levels” to reach nearly advanced country status. Singapore went on to become one of the richest countries in the world on its own steam with no natural endowments. While the case of Singapore could perhaps be kept aside due to its small size and city status, the cases of Korea and Taiwan are most relevant. From 1979 till almost 2014, China has grown at rates above 9% to take the economy to within striking range of being an advanced country.
Yet, these economies hardly find mention among the policymakers and academics in India. The facts of their growth experience are readily pooh-poohed by the Indian intelligentsia, even by the few among them, who are concerned about growth and the economic transition. Others, who worry about the human agency, are predisposed to ignore growth. They create a false hiatus between growth and (human) development. The evidence is overwhelming that no country of any substantial size has made sustainable human development without economic development. Though the two are not exactly parallel, their trajectories tend to be in step. Deviations are almost entirely explainable in terms of the distribution of income, which in turn may have been caused by social and economic factors.
For many others, the economic transition does not seem to matter. It is some archaic notions of identity and culture that they seem to be concerned about. Modernization (with the inclusion that goes with it) appears alien and intrusive to them. Unfortunately, this segment of the intelligentsia has grown in recent years. Limited growth, in not being able to include all, but having benefitted the middle classes substantially, may have contributed to the rise of this segment. The political discourse today reveals that Indian society is at an inflection point where the middle classes as a whole are beginning to show their impatience with the inclusive democracy that is India, and take more than potshots at it. The failure to provide public services is at the root of this impatience, slowness of growth has limited inclusion. Elites who believe in modernization and democracy underestimate the dangers of not having high enough growth, and in leaving the problem of public services delivery unaddressed.
The so-called “middle-income” barrier has entrapped many nations, and the few instances of escape are almost exclusively the export-led (high) growth economies. Additionally, our poor land endowments per person, similar to Korea, Taiwan, and Japan, make these cases relevant. Would India be able to follow these economies? If it does not, risks to its unity would arise, belying the great political program of an inclusive society that was initiated with independence. When the cake grows slowly, the concern about where the cuts are made takes precedence over growth. The slowness of economic growth in India casts doubt on whether it is on its way to its economic transition. We know that the later a country has successfully transited, the quicker its transition has been.
Social media is rife with the country’s achievements both real and fictional. The reality that India houses some 30–40% of the world’s misery be it disease, poverty, unemployment, hurt due to pollution, child undernourishment, or illiteracy stares starkly at anyone who chooses to make even a casual glance at the reality. Countries with vastly superior endowment of natural resources—many of them African, Central Asian, and Latin American—can at least reach the middle-income level riding on the dynamism of the advanced countries and China. India has no option but to create its own high-speed engine of growth. The Philippines’ approach of depending largely on remittances is out for India. It is just too big. That approach cannot, even for the Philippines, ensure the economic transition. The thin original middle class of India that exported much of the younger generation out to escape to a better life cannot be the model for the billion that waits.
We overcame hunger through the high growth that raised the poor’s incomes, aided by the MGNREGS. But over the last 9 years or so growth had been slow. The COVID crisis has been particularly harsh on the poor and many millions have lost their jobs. Now, with almost 2 years into the crisis and recovery, the GDP has just crossed the pre-COVID level, and the effective employment is much below the pre-COVID levels. The years before the COVID were also nearly stagnant on employment. It is no longer possible to explain (away) the slowdown by pointing to the external conditions and shocks. While these are important, the small size of the economy, yet relative to the world economy means that it is action and policy within that would determine the course of the economy.