Why is India poor…. continued

If you have not read the first part of this post , you can read it here . It is a brief about some of the factors which contributed to the growth and decline of India between 14th century till India’s independence.Though the invasions of foreign rulers and the colonial rule drained the wealth in India, we cannot ignore the fact that after independence, the path taken by India has not been successful in eliminating poverty and has failed in creating a good standard of living for majority of the people.

For half a century before independence, the Indian economy was stagnant. Between 1900 and 1950, economic growth averaged o.8 percent a year. After India’s independence, Prime Minister Jawaharlal Nehru and his group of ministers created a socialist state by nationalising major industries in all the sectors with a firm grip on the private sector. The Fabian socialist policies followed by the government created an inefficient public sector, over-regulated private sector and an environment that discouraged foreign investment, thereby losing out on foreign technology and competition. This along with the mis-governance and corruption led to the failure of the socialist system.

During 1980’s, the government started the process of gradual liberalisation of trade, investment, and financial markets. Licensing requirements, import restriction were eased. According to the IMF publication, the external debt India had, started increasing from around 12% of GDP in 1980 to about 30% of GDP in 1991. The increase in the oil imports and oil prices, combined with the political uncertainty and reduction in the economic growth of the world, particularly US led to the currency crisis. The foreign exchange reserves were the lowest and India had to devalue the Rupee.

Fortunately, all these events pushed the Indian government to initiate sweeping reforms which opened up the Indian economy and allowed its integration with the world economy. This is the reason for the 8+% growth of the recent years. The chief architect of those reforms was the finance minister, Manmohan Singh, who is now the Prime minister.

China has been successful in growing at high rates because the central leadership has ensured economic growth as the topmost priority and has instilled “business above all” attitude in the bureaucracy. By marketing itself as a top manufacturing destination with the necessary infrastructure and minimal red tape, China has been successful in attracting huge inflow of foreign capital leading to high economic growth. Part of the success can be attributed to the single party leadership and its control over the entire country. Also, the reforms which led to the growth of the manufacturing sector was started in 1978 compared to 1991 in India.

However, we have to accept the fact that running the largest democracy in the world which is home to more than a billion people with a multitude of religions, cultures, languages and their inherent problems is not an easy task. It is like managing more than 20 countries with different cultures within a single country. For instance, the former Indian President was a Muslim, current Prime minister a Sikh, head of ruling party a Christian , opposition leader a Hindu and it is quite rare to find such a diverse group of people to co-exist and run the country in a democratic manner. Also feeding a billion people in itself is a gargantuan task. Added to that are poverty, illiteracy, unemployment, religious conflicts, unsafe borders, instability in neighbouring countries, boundary disputes, cross-border terrorism, internal state disputes, poor infrastructure and a coalition government at the centre with parties having differing ideologies. This can explain how chaotic the ground situation can be. And even amidst this, the government is trying to reach a growth rate close to 9%, which is a commendable task. If the reforms are pushed ahead along with investment in infrastructure, improved productivity / efficiency and an inclusive growth, we can be successful in ensuring that our future generations can live in a developed India.

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I would like to state that, I am not a historian . All the above listed info are my thoughts, of the info I was able to get on the respective topics. Pls feel free to add in or correct me in your comments.