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India’s Turn

Eliana Cardoso's picture

An Ideal Husband, the play by Oscar Wilde, tells a story of unrealistic expectations. Lady Chiltern, a woman of strict principles, idolizes her husband, a rising star in politics. Their life is filled with nectar and ambrosia, until the appearance of Mrs. Cheveley. She comes with a letter – one that proves Sir Robert Chiltern’s fortunes were made on the back of privileged information during the construction of the Suez Canal. In exchange for this letter, she seeks support for the construction of a new canal in Argentina.

Having previously denounced the Argentine project as a fraud, Sir Robert is faced with a dilemma. Should he alter his stance or allow the contents of the letter to come to light? Either course will result in the demolition of his spotless character and bring an end to his marriage. Although he loathes disabusing his wife of her unrealistic expectations, he realizes no amount of money can buy back his past.

Lord Goring, a friend of Sir Robert, confronts Mrs. Cheveley (Image from Complete Writings of Oscar Wilde [Vol I]: The Duchess of Padua - The Ideal Husband, The Nottingham Society - Wikimedia Commons).

The same principle holds for governments. Every administration is hostage to the actions undertaken by previous ones. India’s development is littered with shortcomings dictated by the choice of mistaken policies in the past.

But, in contrast to Sir Robert who cannot buy back his earlier errors, the Indian government can reform and create a new world. If India persists in its commitment to reform, the country could become the most successful developing country in the world in the next 20 years.

Since 1990, the growth performances of China and India have been approximately triple and double the world average respectively.  What are the reasons behind such extraordinary achievement? Both countries enjoy high rates of investment. Both changed their policy environment in the last few decades and opened up to international trade despite the choice of different strategies. China has become a global exporter of electronic goods and a partner in the international segmentation of production processes in manufacturing. India has become a global center for information and communication technology services.

The next decades are pregnant with challenges. But as opposed to China which runs a society of 1.3 billion people with a system of authoritarian planned capitalism, India’s 1.1 billion people enjoy the flexibility of a democratic regime.

Soon India will also enjoy the advantage of a demographic dividend (in part responsible for the two countries high growth rates). Remember that a demographic dividend is related to high output per capita in countries where the majority of the population is of working age and the increase in the share in total population of working age people can create a virtuous cycle of economic growth.

The UN Population Division projects the share in total population of working population (15-64 years) to reach its peak in China in 2010, and in India in 2040. China has already consumed almost all its demographic dividend. Its labor demand is increasing more rapidly than the workforce (in part because the increase in the working age population is slowing down as a result of the strict implementation of the one-child policy since the early 1980s). The tightening supply of migrant workers in the coastal areas has contributed to real wage increases in excess of GDP growth since 1998 and before too long, mass exports of cheap goods will move to more competitive areas of the globe.

India must be prepared to grab this opportunity as its demography soon will begin to move in its favor. Children dependency ratio will fall in the next decade and the increase in the working age population will contribute to higher savings. Higher savings could be channeled to productive investment through a dynamic financial sector. For this to happen, the quality of institutions must continue to improve. With the right policies in place and with infrastructure investment, India can create job opportunities for the growing numbers of people of working age and secure high growth from the demographic dividend.

When do you think India will replace China as the most dynamic economy on the globe? Or do you think I am talking about unrealistic expectations?

Comments

Submitted by SAT GOEL on
I generally agree with the views of the author. However, two things need to be attended to in India. There should increased spending on education and health and improved delivery in these two sectors. Another is the issue of corruption in the public sector. It is generally believed that a lot of spending by the government goes in the pockets of powerful people and to the targetted people. Corruption is a very big factor in the development process in India. It is mentioned that that US$ 1.4 trillion is stashed abroad by the powerful people. Should this not be brought back home and used for the nation building? I think it is time that there is some control on increasing population in India. But this subject is not even discussed on religious grounds and vote bank politics. India has potential to be ahead of China but our leaders are only interested in remaining in power than doing any thing for the future of the country. The day it changes, India will go several miles ahead. India, being a democracy, has many advantages but its leaders will have to develop a national view instead of thinking how to grab power.

Submitted by Amit on
India has great potential. Government need to do reforms and make easier for company to invest. BY 2030 India will be ahead of China and leading economy in world. India has a great pool of resource a great bench which help India to move forward.

Yes. And among reforms, two come to mind as priorities: fiscal consolidation and making it easier for the private sector to invest in infrastructure.

Submitted by Prajwol on
Thanks for a very insightful article Dr. Cardoso. I loved the comparison with the Oscar Wilde play :) It's frustrating to see, not only India, but other governments too, in South Asia, live inside a bubble. As soon as someone get's to the government, there is a definite disconnect with the ground reality and hence the bubble effect. The low expectation of people from their government does not help either. My philosophy of a government is similar to that of contractor that we hire to fix our roof, if we don't like their service, just fire them and hire a new one. But in reality the process is never this efficient. After all politics is all about perceptions :( I see the potential of India overtaking China in couple of decades, primarily based on the diversity of the population, and the diversity in their manufacturing/production of goods and services. You have raised a very interesting point about capitalism Vs “authoritarian planned capitalism”. I sense similar comparison being raised in United States too, as people are getting frustrated with the sluggish and partisan Congress to get anything significant done. BUT, it takes only couple of crooks at the top in an authoritarian planned capitalism to screw the country, while it takes lot more in a functioning democracy :)

Thank you for your comments. Yes, indeed, democracy gives as rotation of power. And this is immensely positive.

Submitted by rajeev jha on
Dear Eliana, I agree with your comment but with some reservation. Comparioson of development is also related with comaparing two diffrent system who works in entirely diffrent paradigm. India is a mixed economy with robust capitalist system working since last few decades. In china economic reform was started after the decline of Mao.it was almost political within an ambit of open door policy of china. In India reason to initiate the reform was more of economical less political. To take the development into th botom of society and become a developed country , india needs to deliver in the front of education, health, and massive investment in infrastructure projects. At the same time use of soft power( Japan has does this) to the outer world would also help in change of image. I feel ini india the seriousness about achiving the goal of development is required, which is missing at large barring few exceptions.

You are right, but comparisons are usually unavoidable and many times illuminating. The momentum for reform in India seems strong.

Submitted by RickW on
To All, Does anyone think the caste system may have negative impact to India's growth? There are certainly some very good points raised here.

Yes, there are many people who think so. Bad for growth because because it is bad for the creation of more productive jobs. It is well known that in many South Asian countries, there is no single homogeneous market for labor. Important dimensions of segmentation include spatial, gender, and social (by caste, religion, and ethnicity). There are systematic differences in employment patterns and productivity across these groupings.

Submitted by Rakesh C on
Interesting article. Here's a few thoughts: 1. Demographic dividend - While it's true that India has an advantage here, it will depend on the convergence of the education system and the employment opportunities in the public and private sector. As you rightly mentioned, the workforce must be equipped and prepared to meet the requirements of a growing economy. 2. Disparities within the country - A comparison with China can easily dilute the disparity between various states in India. While it's important to look at the progress made by the neighbouring country, efforts should be made to remove disparities within the country. 3. In response to your question: When do you think India will replace China as the most dynamic economy on the globe? It is important for us to learn lessons from the success stories of other countries. But, I don't think we should worry too much about replacing China. I think it's better to focus on setting benchmarks for ourselves based on where we are today and where WE want to be over the next decade than worry about replacing China as the most dynamic economy. Competition, as a result of comparison, does not attract success. But, again that's just my opinion.

Submitted by T N U Nair on
I fully agree with Eliana. India is really young and the Gen Next is exhibiting more values and ethics than those from 1950s to 1980s. Indian judiciary is more active in social justice system and act fast on issues of immediateh social relevance. Indian media is one of the best in the world and investigative journalism is at its best currently. Many bureaucrats and politicians are being exposed through sting operations. Corrution cannot be totally eradicated from any part of the world. Only system reforms can mitigate corruption. Look at the demand for smaller states in India. The necessary evil of corruption is being democratised through smaller administration outlets so that service delivery every where becomes efficient. India in this way can march ahead of China.

Submitted by Arvind Mathur on
I share Eliana's optimism about India.Living in the dynamic suburb of Gurgaon, it is clear that India is developing with incredible momentum. There is an air of apparent permanent optimism prevalent in the country.Private companies should be encouraged to list on the stock exchanges which will bring more transparency.NGOs and independent anti-corruption watchdogs should be financed and supported to act as a check on government and private sector actions and inactions.The press is open and courageous and is playing a very positive role in highlighting problems and solutions in all spheres of life. Corruption will become less of a constraint and definitely decline in India as these steps take hold .The Manmohan Singh government should dramatically liberalize domestic pensions so that domestic currency funds can finance much needed infrastructure and over-reliance on overseas capital can be curtailed.Standards of safety of infrastructure should be raised substantially and its quality independently monitored.India should be prepared to pay more for its infrastructure if it means one less citizen dies on our roads every day.If an Indian has travelled and worked in China, she will realize how much is common between Indian and Chinese cultures and the two peoples and any competition must be regarded as friendly and healthy for both nations and the world.

This is the way ahead. Time to grab opportunities and move on with much needed reforms, fiscal consolidation and investment in infrastructure!

Submitted by Adarsh Rao on
The United Nations Development Programme(UNDP) International Policy Center for Inclusive Growth (IPC-IG) will be hosting an Academic Forum on the 12th and 13th of April 2010 in correlation to the India-Brazil-South Africa (IBSA) summit to be held in Brasilia, Brazil on the 15th of April 2010. The theme will be social development strategies for inclusive growth. We invite you to share your thoughts on the 'Ideas for Development blog' http://www.ideas4development.org/ Topics at the Academic Forum include role of cash transfers, role of employment programs/policies, health innovation, intellectual property rights and access to essential drugs. An Academic Forum Hot site will also be launched shortly. We will keep you posted on that. Looking forward to your inputs and participation. Thanks, Adarsh.

Submitted by C. Mohan on
Readers of this blog might be interested in the following talk which I was asked to give by the Univ of California at Santa Cruz faculty as part of their Mapping the Future of India lecture series. Talk Title: "Can India be an Innovation Superpower" Talk Announcement: http://bit.ly/9lGNBd Slides: http://bit.ly/dxuurP Recording: to come If you have any comments, please feel free to let me know via preferably a post on my FB page (http://bit.ly/a0lRgi) or by sending me an email. Feel free to forward the above URLs to others. Thanks! Dr. C. Mohan, http://bit.ly/6kVNwW

Submitted by Kennedy Samuel on
Agree with Eliana Cardoso per her recommendation to making available the right education to children & generate a skilled work-force with the ability to command a respectable salary, on Indian soil. Having said this, India would need to forsee & invest in creating the infrastructure to accommodate the 'educated' & skilled workforce. For instance, 2-3 decades post India's independence, large number of IIT graduates could not be accommodated (salary & opportunity) within the Indian public or private sector. Coming back to the education part, I strongly, believe in education being affordable & education being work / profession oriented. India made the best of it's first chance, when the world, recognized India as a land of Milk & Honey. India had the best of professionals & experts processing the best of fabrics, silk, agricultural & dairy products, advanced food preparation & preservation related, the best education system (universities where world scholars visited) & amazing techniques & skills to measure distances within the Universe among other. Yes, it was only few betrayers, who let India fall, then & even now.

Submitted by Siddhartha on
Most of the communities in the entire Indian sub-continent(such as Bengali) succumbed in ‘Culture of Poverty'(Oscar Lewis), irrespective of class or economic strata, lives in pavement or apartment. Nobody is genuinely regret ed or ashamed of the deep-rooted corruption, decaying general quality of life, worst Politico-administrative system, weak mother language, continuous consumption of common social space (mental as well as physical, both). We are becoming fathers & mothers only by self-procreation, mindlessly & blindfold(supported by some lame excuses). Simply depriving their(the children) fundamental rights of a decent, caring society, fearless & dignified living. Do not ever look for any other positive alternative behaviour(values) to perform human way of parenthood, i.e. deliberately co-parenting children those are born out of ignorance, extreme poverty. It seems that all of us are being driven only by the very animal instinct. If the Bengali people ever be able to bring that genuine freedom (from vicious cycle of ‘poverty’) in their own life/attitude, involve themselves in ‘Production of (social) Space’ (Henri Lefebvre), initiate a movement by heart, an intense attachment with the society at large is very much required - one different pathway has to create, decent & rich Politics will definitely come up. – Siddhartha Bandyopadhyay, 16/4, Girish Banerjee Lane, Howrah-711101.

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