I can hardly believe that 31 years have passed since the bugle was first sounded for a change in economic policy: the devaluation of the rupee on July 1, 1991. The opposition was so fierce that PV Narasimha Rao wanted to block the next move. Dr. Manmohan Singh pretended to “block” the Prime Minister’s wishes, RBI Deputy Governor Dr C Rangarajan was “unavailable”, and within 48 hours the bugle was blown again, announcing further devaluation! It is a two-step dance that was pre-choreographed and performed with great skill.
What has been followed can be summed up in two words: pure courage. Quickly, the government announced trade policy reforms, new industrial policies and a pathbreaking budget. The world is moving and noticing the government’s courage, transparency and speed. The elephant started his dance.
Ensure open market economy
In the 30 years since the Congress-led government began the era of liberalization, the country has benefited greatly in terms of wealth creation, new business, new entrepreneurs, a huge middle class, millions of jobs, exports and upliftment of 270 people. Millions from poverty. Yet, no doubt, a significant number live in extreme poverty. In the Global Hunger Index 2021, India ranks 101st (out of 116 countries) in hunger. There is widespread malnutrition among women and children as published by the National Family Health Survey-5. There are bad learning outcomes as published in the annual status report of education. There is widespread unemployment. Periodically, there is high inflation. Income, wealth and gender inequality are increasing. There are regional disparities. Many sections of the people are deprived of fair and equal opportunities.
We cannot deviate from the path of open, liberal and market based economy. That would be suicidal. Nevertheless, we must take stock and reset our economic policies considering global and domestic developments. This requires the courage, clarity and speed of 1991.
Global, domestic development
Consider global development. Rich countries have become richer and the gap has widened, for example, between China and India. In 2022, China’s nominal GDP will be USD 16.7 trillion and India’s will be USD 3 trillion. Digital technology will invade every aspect of human life. Data will be a new resource. Automation, robotics, machine learning and artificial intelligence will rule the world and human roles will be redefined. 5G, Internet 3.0, blockchain, metavers and the unknown will define new world space. Climate change will leave its consequences and the human race will fight against them. We will run out of fossil fuels and will be forced to increase our renewable sources of clean energy to sustain life on this planet.
Consider domestic development. The total fertility rate (TFR) has dropped to 2.0 which is below the replacement rate. The proportion of population under the age of 15 has come down from 28.6 per cent in 2015-16 to 26.5 per cent in 2019-21. This marks the beginning of the end of the demographic dividend. The average farmer produces more and yet the station of his life has not changed. He believes that farming is not effective and their children do not want to farm. Rapid urbanization is taking place and urban unemployment is rising. Digitization is expanding; So is the digital divide between the rich and the poor. Majorityism is entering the public discourse and the politics of polarization and hatred will affect the economy. Excluding 20 percent of the population from the political and economic structure of the country, no nation can be an economic power.
Exclusion is self-defeating
The suit is mandatory for a reset. The country will not accept the loss of jobs in the last few years. The basis of growth should be ‘jobs’, all other jobs will flow from creation. From the high promise of creating 20 million jobs a year to ‘selling pakoras’ as a tragic argument, the Modi government has frustrated working families who have invested everything in educating their children and are now without jobs. The Modi government may temporarily withdraw from the tempting appeal of Hindutva, but young people will soon realize that Hindutva (and a polarized and divided society) will not employ anyone, be it Hindu or Muslim. , Christian, Sikh or any other religion or atheist.
This discussion leads us, inevitably, to a changed balance of Center-State relations. Never before have these relationships been so full; Never before has the meaning of states been so fragile. States’ own resources have dwindled. There is a growing dissatisfaction with GST, thanks to the way it is being handled. Complete rupture of trust between the center and the states. There is even talk of GSTXIT, a la Brexit. The Center has taken over the legislation domain of the states and is using its executive and financial powers to force the states to submit humbly. Not only the policy of Modi government, the path he has chosen will lead to the destruction of federalism.