Resilience, preparation and adaptable leadership are needed for sustained growth
By B Yerram Raju
Nobel Laureate Angus Deaton argued very rightly that the advocates of taxing the rich to give to the poor rarely realise that such redistribution is a pointless policy.
India, after 76 years of independence is following a pro-business agenda little realising that “competitive capitalism requires that we reverse the demonisation of the state.” He rightly threw the blame on economists for such a redistribution policy as a deliverance to the poor.
India’s decade would have commenced in 2021 itself but for the recovery effort post-pandemic overshadowing the growth impulses. Yet, in fiscal 2023-24, India rose to occupy the fifth largest economy in terms of its over $3 trillion gross domestic product.
According to the World Bank, India’s GDP is equivalent to 15% of the world GDP. India’s per capita income is $2,200 and the World Bank expects this to double by 2030.
India’s population at 142 crore is second only to China. According to UNESCO (2018), India’s literacy rate stood at 72.23% with adult literacy rate at 74.73%, youth male literacy rate hovering at 90.04% and youth female literacy rate at 82.85%. The poverty headcount rate declined from 18% in 2014 to 9% in 2019, measured at $2.15 a day per person. (World Bank).
Many Movers
A significant achievement of the nation is on the external front. India has been consistent in its global footprint. All the global institutions, right from the UN and the World Bank, G7, G20 and ASEAN looked at India during the last five years. The way we are heading to passing the baton of G20 in the next few months to another nation culminating in inclusive agenda is a tribute to the leadership in international politics.
Schemes like Swachh Bharat, digitalisation, climatology, space launchers’ fast landing on the moon, labour codes, far-reaching amendments to the archaic criminal law, the forgotten cooperatives across the country getting a fillip through a separate policy and multi-state cooperative Act, GST reaping rich dividends on the tax front, PM Gati Shakti, Production Linked Incentive Scheme, National Logistics Policy and National Education Policy have all been the movers.
India is a cheerleader in the world’s digital data. It is set to surpass one billion internet users with online spending of $400 billion by 2030. The country is digitising faster than the world’s average annual growth of 33%. The Unified Payment System, an instant real-time payment system, has crossed the shores already. According to the RBI data, the National Payments Corporation touched a milestone of 782 crore UPI transactions worth Rs 12.18 lakh crore in December 2022. “Fostering digital trust is a big boost for businesses”, says McKinsey in its 2022 year-end review.
India’s financial stability in the context of global uncertainties and supply chain disruptions won the laurels of world leaders. This is a singular tribute to the astute leadership of regulators — RBI, Sebi and Irdai. There is, of course, no room for complacency for banks, financial institutions, NBFCs and insurance companies as their sustainability and resilience depend upon governance and ethics that the RBI Governor has been harping upon.
Significant Shakers
A chill in the spine passes when we witness a more divided nation than at the time of independence — religion, caste, language, geography, ethnicity and many more. Almost 15 million youth join the jobseekers list annually adding to the nearly 8% of the population in the fold of unemployment. It is estimated that the wealthiest 5% in India own more than 60% of the country’s total wealth. Barring very few, all the legislators and parliamentarians are in the billionaires group. The bottom half of the population (50%) shares just 3% of the wealth. “On the other side, 64% of the total Rs 14.83 lakh crore in GST (March 31, 2023) came from the bottom 50% of the population, with only 3% coming from the top 10%.”
The anomaly of private consumption growing at over 9% even as manufacturing has shrunk by over 4% is a cause for worry. The 15th Finance Commission set the divisible pool of central taxes at 41%. However, in 2022-23, the States’ share in central taxes is estimated to be just 30%. Cess on taxes is overleveraged by the Centre that deprives the States of their legitimate share in the pool of tax revenues.
The world’s 17% population live in India, but it has only 4% of the world’s water resources. There is no national water policy with several States fighting for their rights over the limited water resources available.
The Supreme Court overruling the lawmakers in several cases, cooperative federalism getting the least attention, Finance Commission’s recommendations getting a squint eye, union and State governments leading the litigations in courts, etc and disappointing role of the religion in several public conflicts have been all quite a few shakers.
The year saw the overthrowing of the ruling BJP in its lone southern fort, Karnataka. There has been unrest in quite a few States. Manipur is burning. Haryana is in the grip of riots. Rajasthan is tottering. Delhi is captured by a law that gave powers to its Lt Governor to administer beyond the powers of the Assembly. With five States preparing to go to polls in a couple of months, there is more heat of politics than light of economics.
Competitive populism has started raising its ugly head with promises of loan write-offs to farmers coming back as though it is going to remedy the farm sector! The ruling front failed to deliver the promise of doubling farmers’ income as they could not comprehend that it is the States that have to ensure a smile on farmers’ faces. In a preponderantly agrarian economy like India, it may take a few more decades to separate farmers and politics.
Telangana Model
The Telangana model of agriculture involves cash in hands at the right time – sowing seasons of rabi and kharif, sale of crops again at the right time, ensuring the health of the farmer at work, giving the facility of drawing required water to the crop at least or no cost – no matter, flow or groundwater, technological applications on and off the farm within the easy reach with the right advice, investment and working capital credit, encouraging mixed farming to cross-hold risks of natural calamities (apiculture, aquaculture, crop culture, horticulture, animal husbandry, sheep rearing, floriculture moving side by side), setting up agro-industries across the State to add value close to the farm gate.
Transport, health, education and IT moving hand and glove made the State win laurels despite the denial of the Centre’s financial releases for many of the projects during the last nine years.
The McKinsey Review for 2022 drew the following lesson from the two years of Covid-19 suffering: Resilience, preparation and adaptable leadership are needed for securing a healthier global future. Assembly elections in five States this year and the General Elections in 2024 are on the watch list of the world. The economy’s future is in the clutches of politics. The nation, however, needs visionary leadership for its sustained growth.