Development needs a push

If Modi fails to deliver on these fronts before 2019, the year his term ends, all the failures would rebound on him.

As public debate shifted from development to religious and social intolerance issues over the last few months, it is imperative for Prime Minister Narendra Modi to bring back the original template of his rise to power – vikas. One sincerely hopes that Modi has drawn his lessons from the Bihar mandate, and seen how his apparently secularist, all-embracing call for development was held to ransom by disruptive forces within the ideological fold of the Sangh Parivar.

The relaxations in the FDI regime in a wide range of sectors including defence, banking, construction, broadcasting, civil aviation and manufacturing served to offset the bad press that surrounded him to some extent. But what was interesting was Modi’s tailor-made speech at the UK, with the right mix of feeling and humility, attended by a righteous noise about India’s cultural, linguistic and religious diversity, contrasted with his ominous taciturnity at home.

"There is no reason for India to remain poor”, he said expansively, “we harbour poverty for no reason”. “I wonder why we have started pampering poverty" he said, caring to add that nobody can stall the country's development, as India's demographic profile is predominantly young. Perhaps he was mindful of the fact that our young working-age population would be a burden and social nuisance without adequate employment and that with fertility rate of 2.6 per women, India is still away from the population stabilisation target of 2.1, the target was to be reached in 2010.

To the Indian diaspora, fed on Modi’s Gujarat model, the prime minister’s pious utterances must have sounded like music. We don’t want him to lose focus on development either. Development being Modi’s pet theme, he tried to use it in Bihar as well. But unfortunately for him, paired with the tried-and-tested “vikas purush” Nitish Kumar, he had little to showcase as tangible development. Modi’s predilection to be high on promises and little on delivery, high on form and little on content can be his undoing because that frustrates people no end.

The IMF has noted that inflation in India has declined, the current account deficit is in check, international reserves are sufficient and economic growth is lo-oking up with a cautionary note that further progress is required on the long-sta-nding supply bottlenecks and for ach-ieving faster and more inclusive growth.

No matter how much the economy is liberalised, deregulated and privatised, a great part of the population remains outside the national and the global markets. Poverty prevents the expansion of a large and productive middle class made up of consumers aware of their citizenship.

The much-bandied “inclusive” is the operative word here because most trans-national corporations consider that there is still enough untapped market potential in the world. They seek out narrow strata with high incomes in the underdeveloped countries. India’s liberalised economy, with a population of over one billion, offers a market of at least 200 million people with adequate purchasing power, equivalent to the entire US market, leaving the remaining 800 million Indians gazing at the shop windows.

The new trans-national aristocracy seeking to gain millions more clients can be rewarding, only it were creating abundant employment and if client countries’ exports were growing at the same pace as the trans-nationals’ sales to them. What caused our large export-import gap was that while our industrial growth remained limited to around 18 per cent, services and construction accounted for roughly 70 per cent of the increase in output over the last 20 years.

Of the BRICS conglomeration, Brazil, China and India are badly placed in the human development ranking. Great sectors of the Chinese and Indian population are living in poverty and neglect who are waiting to be transformed to a middle-class majority.

Still developing
In fact, at the beginning of the 21st century, some 156 countries are still ‘developing’ and only four have really achieved development: two city-states, Singapore and Hong Kong (China), and two small countries, South Korea and Taiwan. It is where there has been a constant increase in the average rate of per capita revenue since 1960, in addition to technological modernisation, a continuous process of income redistribution and a significant shift of population from poverty into the middle class.

Despite Modi’s call for “minimum government, maximum governance“, material prosperity and high quality of life are universal goals for democratic governments. As economic development is often conflated with the more easily measured economic growth, we must not lose sight of the distinction between the two.

Economic development falls within the larger role a government as it relates to the agglomeration of long-term investments in the generation of new ideas, knowledge transfer, and infrastructure, and it depends on functioning social and economic institutions and on the synergy between the public sector and private enterprise. It is about quality improvements, the introduction of new goods and services, risk mitigation and the dynamics of innovation and entrepreneurship. Economic growth is simply an increase in aggregate output.

Modi must now need to focus on reforms to push economic growth, without losing sight of the need to tackle poverty and inequality through social measures, because non-economic indicators such as leisure time, access to health, education, environment, freedom or social justice are not included in GDP. There are major legacy issues such as rural and urban poverty, high unemployment, corruption and lack of infrastructure (roads, electricity, irrigation, transport, communication, drinking water) and lack of rural sanitation.

If Modi fails to deliver on these fronts before 2019, the year his term ends, all the failures would redound to him. As structural transformation of the economy needs legislative changes, he must learn to strike a consensus with the Opposition and must not allow the cultural agenda of the Sangh Parivar to come to blows with his development agenda.