Lumbering Elephant or Running Tiger -- Deepak Nayyar
Is the India growth story over? The debate rages as pundits predict India’s growth rate between 5 and 6 percent in 2012-2013. From ‘Time’ magazine to news networks across the world, India’s crimping growth in recent years has become a favourite subject of discussion and debate. Headlines scream – Does India still have a growth story to tell, Who killed the India growth story, What can be done to revive the India growth story, -- all reflecting Indian economy’s significance in the global scheme.
While opinions range from downright pessimism to rosy optimism, Deepak Nayyar attempts to weave in a balance. The former Delhi University Vice Chancellor displays a sense of history, not falling prey to the cardinal mistake of looking at past from the prism of today. And by doing so, he puts things in perspective – neither being overwhelmed by India’s impressive growth over the post-liberalisation years nor slamming the slow growth in the first decades post Independence. One could say though that the economist with socialist leanings is more kindly disposed towards what critics have dubbed as the ‘Hindu rate of growth’ of the 50s through to the 70s. And less complimentary about the big growth push ushered in by the economic reforms introduced since 1991.
Nayyar’s analyses economic growth in independent India by dividing the sixty years in two distinct phases...from 50s, when India launched its mixed economy model with 5-year plans till the end of 70s; and then 80s, when the first steps of market-driven reforms were launched, till 2004-05.
This phased analysis puts things in perspective. Post-independence, for a nation exploited and shackled by colonial rule, the thrust was on following an egalitarian path of development that was sensitive to the needs of the 400 million people who were experiencing the whiff of freedom. Nayyar rightly points out that decisions of the political leadership of the time, led by Pandit Jawaharlal Nehru, as was the trend then, were influenced by the socialist wave that was sweeping through Europe and Asia. So, India’s ‘tryst with destiny’ led it to work towards a socialistic pattern of society through economic growth with self-reliance, social justice and poverty alleviation. These objectives were to be achieved within a democratic political framework using the mechanism of a mixed economy where both public and private sectors co-exist.
This development model, though did not quite achieve its goals. Till the 90s, India’s growth rate averaged just about 4 percent per annum, shockingly even less than Sub-Saharan Africa and other least developed economies of the world. Nayyar acknowledges this failure, but perhaps his leftist leanings, make him take a more than sympathetic view. The distinguished economics professor couches his criticism by highlighting the fact that the infrastructure built during this period served as the launch pad for the high economic growth of the 90s and the first decade of the 21st century. “It was about establishing institutions, not only economic but also social and political. Goals were to create the base for development in a country that was a latecomer to industrialisation,” defends Nayyar. The JNU Professor is, however, silent on how India suffered for entrusting these goals to its public sector whose monumental inefficiency was seen as one of the key reasons to drag the country to the precipice of an economic collapse in the early 90s. Thanks to it, the premise on which post-independence development strategy was built -- generate public savings for increasing levels of investment -- failed to achieve the heights that it had targeted. The public sector instead of being a generator of savings for the community’s good became, over time, a consumer of community’s savings and gradually became a net drain on the society as a whole. The ‘trickle down’...