Putting wind under the sails of the economy

Unfinished business. The foundation of India’s social and demographic pyramid is economically weak. At the time of independence, India’s policymakers took Nehru’s high road to build the economy’s lofty heights. They created the foundation for a modern industrial economy: large factories for basic inputs for manufacturing and agriculture, such as steel and fertilizers, as well as scientific institutions. World-class institutes for technical education (IITs), and basic research (Nuclear Energy Establishment, Tata Institute of Basic Research and Foundations for Space Research) were established. These industries and institutions were built by the public sector because they required large capital investments and generated little or no profit. The Gandhian path – building rural economies and local bodies – was given lip service. For all practical purposes, it was consigned to the dustbin of history as an old man’s romantic ideas.

A large economy without a strong base of producers and consumers in villages and small towns cannot be economically or politically sustainable. Investors in capital-intensive industries need customers to buy their products. Investors can be induced by incentives and subsidies and ease of doing business. However, if consumption does not increase, investments will decrease. Economic growth will run out of fuel until the easy earning and living standards of the masses increase.

Globalization will be marred by years of international conflict. The potential of India’s 1.4 billion citizens, with the largest working-age population, is one of the world’s most underutilized human resources. It will be a significant source of energy for India’s economic growth. Policymakers should focus on creating employment for the masses working on farms and small enterprises, not creating more wealth for the working classes in financial ventures and high-tech industries.

Interrupted business. India’s capital goods, electrical equipment and auto sectors were as advanced as China’s in 1990, perhaps even more so. By 2010, China’s capital goods sector was 50 times that of India’s, and China is the world’s largest supplier of electronic equipment. In 1991, a new wind propelled India’s economy, but it diverted the economy. „Make in India” has historically been limited to „protectionism” and „industrial policy” being banned. Imports became easier, which was a boon for Indian consumers who could buy international goods from China, Korea and other countries. Employment and Income The income of workers there increased.

Indians can do more for themselves. The country’s leaders should develop the strength of domestic industries. Foreign manufacturers are welcome to participate in the country’s development by investing and manufacturing in India, provided they are willing to help their Indian partners and domestic suppliers learn new technologies. Many foreign companies did this before 1991 in commercial vehicles, auto parts, electrical equipment and other capital goods. The government should more actively promote high employment industries producing consumer goods such as textiles, clothing, processed foods, electronics, etc. and persuade them to provide better jobs. And the government should expand the social safety net.

The ideology of business. India’s GDP is rising in international rankings. However, the country continues to rank very low on the HDI (Human Development Indicators). The purpose of economic development is to improve the lives of citizens; And human development is essential for sustainable economic growth.

In the 1990s a new economy shook the world. According to it, governments are not the solution, but the problem; And public is bad, private is good. India’s education and health sectors have been privatized. The government must roll back excessive privatization of the country’s public services and strengthen its own capacity to deliver. It will build the foundation of the economy more sustainably than digitalized transfers of welfare schemes and benefits (which will help win elections).

Arun Myra is the former Chairman of BCG India and Member of the Planning Commission