From A Jack To A King

 

 From  A Jack To A King

Can India become a regional or even a global super power? This question is being discussed afresh after the advent of the Modi  Government and the hope it has  rekindled.  The American intelligence community think it has the potential to do so economically, if not in other ways. Others, like noted historian Ramachandra Guha don’t think it is possible any time soon. His reasons are sociological and political in the main.

Guha cites India’s  enormous diversity, of population and customs, its stubborn and still persistent caste hierarchy, its multiple religions, etc. There are also the challenges of left wing insurrection, terrorism, inadequate education and health facilities, and a universally poor implementation record to contend with.

Some thought leaders such as Harvard educated Ram Charan nevertheless predict that India will emerge as a regional power with a footprint of influence ranging over the SAARC region and parts of West Asia. It is after all already Asia’s third biggest economy. It could arguably take up the slack from a retreating America. It could even counter- balance China if it forges alliances with several South East Asian countries. 

But the Indian reality is that we have not been much good at exploiting our own potential, let alone projecting anything other than an ephemeral soft-power in the world. And this includes our immediate neighbourhood. Our ability to emulate, let alone counter China, depends firstly on vastly improving the condition of our finances and reserves.

We have to effect great reforms and structural changes to move forward quickly and make up for lost time. The Indian legal system is perhaps illustrative of the problem. It is all laws and no justice, largely because of interminable delay.  Similarly, our infrastructure, always a work in progress, is never ahead of the demand curve, and is a serious drag on our credibility. Our bureaucracy  is renowned for its spectacular inertia. Our military is grossly under- equipped.  The economy is only just being revived, is really not very big in the super league tables, is burdened with massive fiscal deficits, and has a long road to travel.

Our greatest, apparently  temperamental  shortcoming, from the investor  confidence perspective, is an inability to remove multiple bottle-necks that constrict and contort both demand and supply engines. In addition we are very slow at execution resulting in huge cost overruns.

 Yet, leading emerging market analysts admit that the category with its relatively high growth rates compared to the developed countries, should ideally attract 50% of the world’s $ 6 trillion in investment capital annually. But there is a deep prejudice against this, and a herd mentality preference to concentrate most investment in the developed world. This is because of a faith in its institutional framework, its stability, military prowess, and the effective rule of law in the advanced nations.

In contrast, because of this confidence deficit, emerging markets including all of BRICS, receive no more than 15% of the investible capital. There is talk of the Modi Government attracting some $50 billion in FII by 2015, almost double the previous annual high of $29 billion. This, if it happens, will certainly mark a breakthrough. FDI too, already on the upswing, is slated to reach all-time highs soon. September, with its slew of high-powered  bilateral meetings scheduled, is expected to provide the eagerly anticipated large investments needed to  turbo-charge the Indian economy.

What are we doing to make ready?  First, a move to help over 300 million of our poorest.  The new ‘bank account for all’ initiative is the beginning of the end of ‘economic untouchability’.  This comes complete with a Rs.5,000/- overdraft limit, rupees one lakh worth of  accident insurance, life insurance worth Rs. 30,000/-, and  will serve as the direct conduit of other welfare measures to cut out the middle-man corruption.

Then,  a mega investment and employment opportunity in the defence production space. India has allowed domestic Industry and its foreign collaborators to develop and build 400 light helicopters indigenously.  It comes on top of another recent sanction to build cargo aircraft here as well. These  initiatives are only the outliers of India’s massive ambition to reduce its dependence on  imports as the biggest arms purchaser in the world.

Meanwhile, the strategy of taking a large number of small steps and the continuous efforts to tone up the administration have borne fruit. The RBI has just announced a 5.7% growth in GDP for the  April to June quarter, up from 4.6% in the previous one, and almost as high as the 6% figure, last seen  two and a half years ago.

Still, there is much to revamp and reform if the ‘transformation’ is to come about. Fortunately, there is a feeling in the air that if anyone can get this country moving, it is indeed Prime Minister Narendra Modi.

(797 words)

August 30^th, 2014

Gautam Mukherjee