India at 72: Waiting for Godot
The Road Travelled: Imagine taking responsibility for the governance of a country in 1947 when 83 per cent were illiterate, life expectancy at birth was 32 years, per capita income at current prices was Rs 247, and per capita consumption of electricity was 16.3 kWh per year. Lesser mortals would have concluded that India was ungovernable. Jawaharlal Nehru and the Congress took up the challenge with courage.
India has come a long way since August 15, 1947. India's economy too has come a long way. In 1950-51, India's GDP was Rs 2,93,937 crore. It has since grown many times over to Rs 14,077,586 crore in 2018-19.
While speaking on the Budget 2019-20 in the Rajya Sabha, I said, "If the nominal growth rate of GDP is 12 per cent, the size of the GDP will double every six years. If the nominal growth rate is 11 per cent, it will double every seven years." Between 1991 and 2017, the GDP indeed doubled three times. Hence, I urged the Union Finance Minister to not stop with the goal of a $5 trillion economy in 2024-25 but also point out that the size of economy will become $10 trillion six or seven years thereafter and it will become $20 trillion six or seven years thereafter.
The Budget Unravels: Budget 2019-20 has unraveled sooner than normal for Central government budgets. There is no 'conversation' among the people about this or that proposal. The super-rich (6,467) are bitter but silenced by fear. (Even the tragic death of a home-grown entrepreneur moved only a few individuals to speak truth to power.) The rich are relieved that they have been spared. The middle class is disillusioned because only new burdens have been put on them. The poor are resigned to their fate. The mid-size corporates (4,000) are counting the crumbs thrown at them.
Any government's policy will be to promote savings and investment; to build, equip and staff health facilities and hospitals and schools and colleges; to build roads, enforce traffic rules and ensure safety; to build quality infrastructure and beautify cities and towns; and so on.
The Legislature or the Executive (i.e. the ministers) makes the policy and, naturally, wants the policy implemented well. But there is a huge gap between intention and implementation. Why? We are hesitant to say it, but it must be said: within the Government (with a capital G) there is another government (with a small g). It is the small-g government that has failed the big-G government as well as the people, at least as far as India is concerned.
The BJP government failed to grasp this fundamental truth about government. Consequently, even good policies have utterly failed in their implementation. The best example is the GST. The BJP government's ministers failed to keep in their hands control and supervision of the roll out of the new tax system. The result is numerous glitches, frequent amendments, mounting litigation, poor collection of revenues, harassment of the taxpayers and all-round disappointment.
Growth Stumbles: The government promised to deliver 7 or 8 per cent growth of GDP in the year 2019-20. It is not just a difference of 1 per cent. It is the difference between continued moderate growth and potentially accelerated growth. Most observers have noted that there was no indication in the Budget speech whether the government is content with moderate growth (7 per cent or less) or is aiming at high and accelerated growth (8+ per cent). I suspect it is the former.
High and accelerated growth requires all four engines of growth to be fired up and running at full throttle. Exports (merchandise) crossed the mark of $315 billion - set in 2013-14 - only in 2018-19 and, even then, the growth rate was a modest 9 per cent over the previous year.
Investments are low and there is evidence that many investors have pulled out of India in recent weeks. Government expenditure on the revenue account (net of interest payment and grants) was only 7.18 per cent of GDP in 2018-19. Private consumption depends on a number of imponderables including expectations about inflation, employment, economic disruption, security, etc.
The perennial dilemma before a householder is 'shall I save or shall I spend'? All indications are that consumers have decided to postpone their purchases. If no engine is firing, how can there be growth, much less accelerated growth?
Structural Reforms Absent: The Budget speech used the phrase 'structural reforms' in two places but there was no reference to any measure that could be regarded as structural reform. It confirms my view that Mr Narendra Modi is not a bold reformer in the mould of a Dr Manmohan Singh. He is conservative, protectionist, not a believer in free trade, and a votary of the tax-and-spend policy. His positions are remarkably similar to those of President Donald Trump, except on taxation.
The government seems satisfied with moderate growth of about 7 per cent or less. Seven per cent growth will be totally insufficient to create wealth or enhance welfare. Seven per cent growth will not generate the millions of jobs that are required. Seven per cent growth will not raise the per capita income of the lowest deciles (the bottom 20 per cent) of the population.
Seven per cent growth may win India the certificate of being among the fastest growing large economies of the world but that will mean little or nothing to the very poor, the unemployed and the neglected, vulnerable and exploited sections of the people.
Freedom in Peril: We will celebrate this month the 72nd anniversary of our Independence Day. Ask the very poor, the unemployed and the exploited. Ask them if they have any cause to celebrate.
Unless there is economic freedom, there can be no real freedom. Unless there is real freedom, there can be no way forward to end poverty or unemployment or exploitation. And as long these scourges are present in the country, freedom will be in peril.