Understanding economic issues calls fora knowledge of our economic history ,certain analytical skills and a bold articulation of certain vision!
Indian economists have all become stereotypes! Timid,withdrawing,self-effacing, till yesterday all leftists and Marxists.Today all liberals and economic reformers!
Manmohan Singh’s government,after the mid-term in office,seems to be facing many unsure goals!Indo-nuclear deal’s future seems uncertain.After Bush and Singh terms in office,what credibility the new American Act will have for Indians?Also for Americans under the Democrats,say!
Agriculture is in crisis,inflation on the rise,the Pm and his team seem to have lost their nerves!
It is now the new generation entrepreneurs,the IT,ITes,BPO entrepreneurs who have demonstrated that wealth creation is no more a magic,who give us new insights into the emerging India’s many new potential.
India with so many capable economists,managed to tolerate too much poverty, ignorance and injustice in many segments and backward regions!But with the new millionarie and billionaire entrepreneurs we can make a new India that is altogether confident and delivers high growth.During the first eight months of 2006-07,industry achieved a growth rate of 10.6 per cent,with November production touching the highest monhtly increase since the mid-196,GDP for the year will end around 9 per cent,among the highest in the world.So says no less a persont than Mr.Nandan Nilekani,CEO of Infosys.The same rate of growth,9.2 per cent is confirmed by another notable economist,T.N.Srinivasan of Yale.
Of coursAfter nearly 5 decades of slow growth and low salaries,today we see high growth and high salaries! we live in the era of internet and our daily lives are tagged on to the world technology revolution.Our life styles have changed,our work place enviornment has changed and the way,we work online,use our computer screen 24/7 to cater to customers far away in the distant US shores,the speed with which work delivered,money earned are unprecedented!The standards of living going up.This our economists couldnt predict nor understand.
Ironically,it can be stated the Indian economic boom has come about without our economists or government policy makers taking note of it! Yes,this is true and this truth needs to be understood by the wider public!Economics is not a mystery,it is not an esoteric science,it is just plain,robust common sense,if you come to think of it!
The world today is totally changed.Though USA continues to be the largest economy in the world and its dollar and domestic demand keeps the world economy moving ahead,there are certain structural changes.World economic growth is now broad-based,not just dependent upon the American consumer alone.Emerging markets,including India,Russia and Brazil now account for 70 % of world growth,they accounted 50% a decade ago.China,the number four in world ranking is growing at 10% and its growth matters much for the world.Japan ,number 2,is recovering,the world is much less dependent on the US that it used to be.
Yet there are concerns,it is part of the economy’s unpredictability and it is the job of economists to predict the future course,that gives the economist’s job certain glamour!
Wars,sudden jump in oil prices,Iran’s nuclear weapon programme and the subjects like could create slump and even deflation etc.But in a long term persppective,the world for the past 50 years or so is growing steadily,the current decade has been the best in human history,considering how the new heights to which wealth creation has reached and how it is widely distributed and diffused.So,there is much cause for optimism on the world economy front.As for India,this also seems to be the beginning of the golden era of unprecedented economic prosperity for the largest number of people.
Yet ,the basic economic concerns remain.How to speed up growth,increase productivity and generate productive employmnt etc.Likewise,the wealth creation that the new economy has enabled us to achieve also has created the social and poltiical question,the growing digital divide,the growing inequality,the persistence of poverty among the large number of people,the urban-rural divide etc.
These are all questions for the politicians,for the society at large to consider and draw up social plans to bridge the rich-poor divide and also ensure a social cohesiveness and social and religious harmony in a growing multicultural and multi-ethnic societies all over the world.India is not the only large country with so much diversity.Even smaller countries in Europe,UK,France and Germany and Austria faces this ethnic backlash,with immigrant labour now posing new challenges.
Even USA is not free of these tensions.America faces the greatesat terror threats in this century.
Economics is not all about statistics of growth and the balance sheet of assets and liabilities.If concentration of wealth in narrow social segment increases then it creates social tensions and even much violence and riots.If economic growth is unchecked for its excesses,as in the USA,there is pollution,environment damage.The cost of environment damage is high and even China is worried about uncontrolled economic expansion and the deterioration of the environment.
So,there are limits to economic growth.
Economic growth has to be braod based,there must be wider participation of the economic growth.This new aspect is not understood by poloicy makers even in India.
Still there is in India the old notion of an economist as one who is an expert in managing numbers.This is clearly now out of date!Also,an economist is not an expert on so many other aspects of public policy making.Today we need a multi-expert task forces,with experts in enegery,environment and agriculture,employment and the last man must be economist.Somehow this notion hasnt caught on yet in India.
In India somehow economists always enjoyed a cult status.One doesnt know how this happened.May be,Jahaharlal Nehru in his obsession with economic planning sought the help of experts and these experts,in the context of immediate dreams and hopes of Indian Independence enjoyed a disproprotationate proximity to the great leader and acquired some extra glamour.
I remmember distinctly that it was the time of unsuspect glamour fot the Soviety Russian experiment in economic planning and even I was so fascinated by the stories about the new hopes raised by Soviety Russia that I decided to travel through Soviet Russia on my way back home from England.So,I took a circutour route,I booked on the ship that plied btween London and St.Petersburg,in fact it was the same ship,I was told,travelled by Krushchev when he came to England! So,I felt adventure in my viens even in those early days when no individual tourist was allowed to enter Russia,except in groups.It is a long story how I managed and I landed in Russia one late night and stayed on board the whole of my stay in that beauriful city till the ship made a return call.
What I saw in Russia and how people lived and went about their business was all different.Everyone denied private property or ownership,even the cobblers’kiosks belong to the state etc.Though by then Stalin was dead and I saw the Lenin and Stalin mouseluem on the
side of the Kremilin wall I had my own discomfort to understand the so radical a change in economic and poltiical life.None of my Soviet acquaintances believed when I told them that in the House of Commons there was an Opposition party! They couldnt believe!
I was also still,though partially,under the spell of the porpaganda,the Fabians and the doctrinaire Socilists in England,notably the writings of Harold Laski,the Newstateman weekly were all solidy propagating lies and this I didnt know then.
Even now,I wonder how Nehru too,knowing wll the Stalin atrocities,kept quiet and what he propagated in India was ,yes,Socialism but this was outlined without the horrors of what the Soviet people underwent even then.
Indians,as I now see,are basically hero worshippers and this was what happened in India too.First,there were some scattering of the Gandhians,soon they gave way to the Nehruvites(I was one of them,I must confess) and evey year when Nehru came to Santiniketan(where I was a student) he would talk in extempore and at leangth and all the talk would be about creating a new socialist society in India.As every Indians know,the idea of an economic planning committee was first put forward by Netaji Bose but it was when Nehru became president of the Congress he constituted and it was then India’s then great statistical expert,Prasantha Chandra Mahalanobis, became a close associate of Nehru.Mahalanobis was a Santiniketan man,he was seretary to Tagore and the Mahalanonis,husband and wife,were household names for us students at Santiniketan.
I used to see Mahalanobis delivering the convocation address and Nehru sitting in rapt attention listening to the great expert who enjoyed the confidence of the Prime Minister.When the Indian Statisitcal Institutte was founded,we were all part of the great enthusiasm,I had visited the ISI more than once while at Santiniketan and we had seen so many foreign,visiting economists including the great J.B.S.Haldane,Oskar Lange and many names that might not be of interest to the common reader.
So,I studied economics in this atmosphere,Amartya Sen and his co-students,Sukhamoy Chakravarthy were making waves as young and brilliant students at Presidency college,then the premier bastion for original thinking and it had produced so many names that later went on to win international fame.
So,I chose economics and that is how I became an economist.At Oxford too the same excitement persisted.There again,the times were very conducive,Sir John Hivks(later Nobel Laureate)was our professor,Sir Roy Harrod lectured and so on.Manmohan Singh and Jagadish Bhagwati were research students at Nuffield and Amartya Sen was at Trinity in Cambridge.
After returning to India I had many opportunities to interact with economists of great repute.I admired their sure-fire confidence and optimism,in the Delhi School of Economics and the Institute of Economic Growth where I had friends I saw them engaged in teaching and research and advising the poltiicians and the government in so many ways.
In Mumbai,I met so many of my friends in journalism and one of my frequent haunts in Mumbai those days was the office of the Economic and Poltiical Weekly, then edicted by my friend Krishna Raj amd assisted by my other Oxford friend,Rajanai Pandit(Desai).I remember Krishna Raj speaking with such reverence of his regular contributors,Dr.Ashok Mitra and Mohit Sen.These are the two extremists who gave Indian Communism the Stalinist hard look image!
Anyway,my mind was set in poltiics and that is how I missed(or gained?)in my later life,though my interest in economic issues continues.
After having turned to entrepreneurship,that too in the Bangalore Silicon Valley,in IT and internet-based media activities,I have come to view the current Indian economic issues in a new light.
What the economic managers in Delhi do is of course very important but it seems to me they talk a language that is still outside the new economy perspectives.Economic growth,inflation,budget deficit,trade deficit are all the mantras our policy makers vouch by.They are the very touchtone of economic management.
But has the Indian people been given a broad vision,a new perspective about the prospects of India emerging as a domiant power in the outsourcing industry segment,perhaps the fastest growing industry segment in India and also the fastest employment generating sector with so much impact on a wider segment of society and economy.
There is still a lot of poltiical resistence among the alliance partners,both the Leftists and the regional chauvinist poltiicians,to economic reforms.Why?
There is no cohesive economic articulation on the part of our so-called professional economic experts and amateur experts about what are the priorities of economic reforms?Why we need them,like disinvetment,land for industries ,opening up for more FDI etc.Or,what a delay on economic reforms might cost to the common man,for creating high paying jobs etc.Or,about the shape of agricultural reforms that would be needed in the new economy.Or the WTO negotiations and more trade,more exports etc.Our exports are expected to reach 125 billion dollars.
At least Pandit Nehru had the vision.He was the greatest teacher after Gandhi.Likewise,we dont have any teachers.Our economists,the more older they get have become more confused,they know they have changed their earlier doctrinaire stands,first they took a pro-Left,almost Marxist style stands.Now,they would be exposed if they try to rework their pet theories.So,they almost let amatuers like the Fiannce Minister and others to do the talking.This is almost a wish list from the World Forum,we Indians are slavishly following.No bold initiatives are forthcoming from the PM and his team,all the same old,tired retired bureaucrats,though their professional CV would place them as economists.The Planning Commission is the worst hit,all packed with retired persons seeking cushy jobs.
It is this atmopshere that replels me.I like to see some bold talk, at least.Some unorthodox articulations even welcome than the present status quo type approach.At least the entrepreneurs who have demonstrated the alternative paths to take the country and the economy to international level attention are better placed to do some good.
Anyway,how is Indian economy is getting integrated with the world economy?That is the most important question now.Certainly,India is doing well by all standards in economic sphere.Globalisation has helped.The new technological revolutions,IT,ITes,BPO,have all helped.Thanks to globalisation we see the world exports grwon,since 1974 doubled,by 24%,world income has doubled since 1980,almost half a billion people have come out of poverty ,the number of those living in poverty,on one dollar a day,from today’s one billion to half the figure by 2030.These are all positive developments and India in particular has emerged as the most sought of destination for outsourcing and this has made India a super start,if not a software superpower!
So,the world has turned to India to take note of these developments,the Indian human resources are sought after in foreign companies,the Indians are now making it to CEO level jobs in some of the high visible sectors.
America sees India in a different light.India is a reliable ally,says the top ranking American intelligence chief,”India’s growing confidence on the world stage will make it a more effective partner”with USA,says he.
Global terrorism is now threatening everybody,the USA in particualr and America seeks reliable partners.America is the most powerful economy in the world and also American military and economic strength sets the agenda for many of the other developed countries in Eurpe and Asia.UK wont go against the American wishes and interests.In Asia itself,there are superficial talks about forming some Asian union,in economic,trade andmilitary and energy co-operation etc.Asean and East Asia are often mentioned.But Indians have to remember that of the three dominant countries,China is more closely aligned in trade and startegic matters than with any other country.There is a trust deficit with China as far as India is concerned.Japan-India co-operation is okey but Japan is a satellite of the USA,so too South Korea.Though Japan and Korea have made investments in auto and consumer electronics in India,they are more closely tied to the USA.As for India’s traditional friends,even Russia is drifting after Putin,the country itself is unsure of its future,its energy exports to the West sThough there are many worthy initiatives,Sarc initiatives to Asean ones,in technology co-operation,ISRO put Indonesia’s satellite,partnerships in IT and also seeking security in the wake of militancy spreading in the Asean region.
Russia cant be taken as our traditional ally,as it was the cas ebefore. Today’s Russia has priorities that might not coincide with India’s.
India’s traditional ties with the Arab world have weakened.
So,Manmohan Singh’s otherwise hype-ridden Indo-US nuclear deal,though welcome,is not wholly a Congress invention,as claimed.It started with the BJP’s thaw witht he USA after the nulcear explosion and it is an open question how India would really evolve vis-a-vis USA in the more sensitive areas of co-operation in war and peace initiatives.
Indian economy is doing well.Mr.Ahluwalia asserts that by the next two decades,India must be reporting the world’s third gross GDP! Fine,indeed.But then economic growth is not solely a national pursuit.It is also closely tied with politics and other strategic factors.
India has had a long tradition of an independent foreign policy,non-alignment neednt be revived in the old form but it has to be a basic vision to stand by smaller nations in Asia and Africa and also work with European nations in evolving a'”no war,only peace” international order and an international policy.UN reforms has to be on the agenda as well as seeing India’s role as a bastion of democratic values,poltiical moral values,safegurading the Gandhian legacy and so on.
The world bank has been producing so many useful reports,in economic growth,governance to many other areas of global concern.Latest one is about the”second wave of globalisation”.How to sustain and use the globalisation process for the benefit of large number of nations.The visiting Nobel economist Joseh Stiglitz warned about what globalisation can do and dont.We have to have a regulation mechanism to take on the many issues of globalisation,from funds flow to capital convertibilioty etc.
Likewise,there is one more latest report from the World Forum,”Global Risks 2007″.There are as many as 23 risks.Five major “economic risks”are:oil price shock,a plunge in the US dollar,a hard landing in China,budget crises caused by ageing populations,and a crash in asset prices.These are some of the more acute than at this time last year.t
There are also the environmental risks:climate change,loss of fresh water supplies,tropical storms,and inland flooding.They have worsened,says the report.
It also says the world is at increased jeopardy from six geo-political risks:international terrorism,WMD,war,failed states,instability in the Middle East and retrenchment from globalisation.
“Should any of the main geopolitical risks outlined here worsen considerably,the environment for business and society could be changed beyond recognition”.
Governments should consider appointing risk officers who would manage threats across government departments,recommmends the report.
The report also calls for an urgent need to beging on a successor to the 1997 Kyoto treaty on climate change.”Climate change is seen as one of the defining challenges of the 21st century and a global risk with impacts far beyond the environment”
Indian economic development,further,calls for new perspectives.We have to integrate more with the global processes.WTO talk must succeed,somehow so that our trade and exprots expand.Our technological prowess must be further strengthened.
As we see there is still many hurdles to start businesses.We have to provide governance in a trasnparent manner.Corruption in bureaucracy and government,politics must be tackled head on.
Our education must be focused on quality.Our tech talent ,engineering skills,must be further expanded.
Already the IT industry reports high growth rates.This has to be further ensured.