If the industrial revolution, and everything that followed in its wake, relegated India from being the foremost player on the world economic stage to the fringes – from a 25 percent share of world industrial production in 1750 to 2 percent in 1900 – there is every reason to believe that India’s youthful demography and the strength of its institutions will prevail in the 21st century and bring it back to centrestage.
Post-Independence India’s economic history can be broadly divided into two eras – from Independence to 1991 and from 1991 to the present time. The pre-1991 era was afflicted by a series of wrong policy choices and missteps, and for nearly forty-five years the nation tottered from one crisis to another. The economy was fragile and vulnerable to even the slightest external shocks and weather conditions. Extreme poverty and suffering were widespread.
Steadying Our Ship
Imminent bankruptcy forced us to act in 1991, and the actions we took during this crisis helped us weather three global shocks – the Asian currency crisis of 1997, the dotcom meltdown, and the credit crisis of 2008 – better than most other nations. Extreme poverty too has been coming down every year, excepting perhaps during the two COVID years.
At a macro level, the moderate approach to policy making, a healthy balance between industrial growth and welfare orientation, sustained strength of important institutions like RBI, SEBI among others, along with a youthful demographic profile has put India in a sweet spot in terms of creating conditions conducive for a long period of sustained growth.
Key economic indicators that determine the underlying health of any economy, like fiscal deficit, debt to GDP ratio, and inflation, have been religiously tracked by successive governments, and institutional checks and balances have ensured that these indicators were generally within a healthy band.
Capital markets have worked efficiently and reasonably free of interference and hindrance. Liberalisation was done thoughtfully and pragmatically. While we rolled out current account convertibility, we stopped short of capital account convertibility despite strong recommendations from global financial institutions. This has played a not so insignificant role in mitigating the adverse impact of global crises in the last twenty-five years.
A more recent example of India taking the middle ground on liberalisation is the decision of the government, correct in my opinion, to impose a steep tax on the gaming industry despite determined lobbying by the industry with logically inconsistent and false arguments. On the other hand, blind belief in the goodness of free markets and capitalism has forced the best of countries to take decisions that created wild swings from high growth on the one hand to extremely painful corrections on the other.
India’s Time Has Come
Most of the developed world is getting old and China got old before it got rich. It is evident that many of the countries that were prominent players on the world stage are looking weary and walking away into the sunset. Many of these nations do not even have the basic workforce to provide the comforts that its ageing population was used to in its youth. Therefore, at one level unless we do something horribly wrong, India’s rise is inevitable.
Every nation goes through its own hype cycles and reality checks. India too went through some of this from time to time but today we are poised for an extended period of sustainable growth. And the reason I say this is because the number of Indians who are now taking up entrepreneurship for the right reasons is on the rise every day. While some noisy and unscrupulous individuals have been lionised as role models, there has also been space for sane voices from the entrepreneurial ecosystem who have been repeatedly emphasising that there is no easy way to build businesses.
Economic activity is akin to traffic on a busy highway. From time to time, bottlenecks tend to develop and choke traffic. These choke points need to be unlocked with the right interventions. In the last two decades India seems to have developed an uncanny capability of quickly identifying these choke points and debottlenecking them on a timely basis.
In the earlier decades we were paralysed by these bottlenecks with no clue on how to go about addressing these. Aadhaar and UPI were some planned and thoughtful interventions conceived by some of India’s brightest minds and executed with the full backing of the governments of the day.
On top of these public goods, profit seeking entrepreneurs began systematically attacking problems one after the other. Collaboration between builders of public goods, governments, non-profits, and commercial enterprises is probably at its best, and this is unleashing unprecedented energy, and creating hope and optimism not seen before.
It is therefore not an exaggeration to say that a new world order is taking shape and India’s time has come. Once again.
TN Hari is Co-founder, Artha School of Entrepreneurship. Twitter: @TNHari. Views are personal, and do not represent the stand of this publication.
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