They say, ‘Life begins at 60!’ Today, as India celebrates its 60th birthday, the world’s largest democracy with over a billion population opens a new era of progress heading to become a world economic superpower.
In recent years India has certainly been making rapid economic progress. Its economy is now the 10th biggest in the world and a new middle class of over 300 million has been created. The economy is currently growing at about nine percent a year and the country’s life expectancy, adult literacy and GDP are all going up.
India’s economic transformation dates to a series of reforms that were introduced in 1991 when the government removed many restrictions and opened up the country to foreign capital. Tariffs were reduced and financial markets were opened. One of the architects of the reforms was the current Prime Minister Manmohan Singh.
The runaway success of India’s outsourcing industry has brought big gains to a tiny slice of it people and put the nation on the map of the world’s multinationals. After many decades of economic isolation and stagnation, India now has momentum in the global economy, and the chance to finally move a majority of its people out of poverty in the coming decades.
By 2030, India is expected to became the most populous nation on earth, overtaking China around the point when both reach 1.45 billion. Also in 2030, economists predict, India will surpass Japan to become the world’s third largest economy after the United States and China. In that year, India will have by far the largest workforce in the world, because a disproportionate 68 percent of its population will be of working age. Therein lies the challenge.
Nobel laureate Amartya Sen says India must use resources generated by its fast economic growth to remedy its continuing deficiencies in basic health care, in school education and in rapidly expanding physical infrastructure.
“Money will continue to come very rapidly into the government’s hands if the fast economic growth continues,” he says in a commentary on “India At 60” published on Monday by Forbes.com, the website of leading American business magazine.
“What is critically important is to use these generated resources to remedy India’s continuing deficiencies, in particular in basic health care, in school education and in rapidly expanding its physical infrastructure.”
“In some of these, the private sector can help,” said Sen, the Lamont University professor and a professor of economics and philosophy at Harvard University who was the first Asian to be awarded the Nobel Prize in Economics in 1998 “for his contributions to welfare economics”.
“But a lot more has to be spent on public services themselves, in addition to improving the system of delivery of these services, with more attention paid to incentives and disciplines, and better cooperation with the unions, consumer groups and other involved parties,” he said himself posing the question, “Where will the money come from?”
Sen’s answer: “If the total revenue, from taxes and other channels, of the central and state governments keeps pace with the rapid growth of the economy, when the economy is growing at eight percent a year, that would be a big rate of increase of available funds for public services. “As we look back over the last 60 years, some things have happened well enough, and some, where the gaps were large, have started to catch up.
However, there are other areas in which there are still huge shortfalls,” Sen said. “These gaps would need to be urgently remedied. We know what to do, and there are resources to do it.
Noting “democracy has indeed flourished nicely in India,” the Nobel laureate said, “What we need now is some determined action to do what we can do and must do.”
For India, however, the demographic dividend could prove a grave threat. Today, 31 percent of its 1.1 billion people are under age 16. When the demographic bubble begins to reach working age, India will need far more jobs than it now has to keep living standards from declining. Creating these jobs for India’s poor is yet another challenge. India is thus at a critical juncture.
A unique constellation of factors now objectively indicate that India is on the threshold of a golden age of growth,” says former Finance Secretary Vijay Kelkar. “If we seize this moment, India can transit out of poverty, and coming generations can enjoy an era of unprecedented prosperity and a decisive voice in shaping the global economic order and world politics. So it is necessary that we choose wisely.”
However, the recent Indian floods have spotlighted a myriad of challenges and posed another reminder of its struggle to build and maintain reliable infrastructure.
In India, the floods have struck a nerve in part because they have underscored the continued vulnerability of the rural poor. An estimated 38 million people have been affected — either driven from their homes or had family members killed — and more than 1,750 people have been killed, according to government-disaster-management officials.
For all the recent strides in technology and services, India’s farm sector continues to dominate the national economy: About one-fifth of the country’s economic output comes from agriculture and about two-thirds of India’s population still live in villages.
In a 2006 report, the World Bank said that while it was upbeat about India’s economy, it was concerned “that the basic institutions” in India’s government were failing — “especially for those at the bottom.”
Thus, India stands at another historic threshold of independence. But this time, the freedom at stake is economic, not political.
