Arun Kumar


India seems to be happy to get from the big economic powers things such as surplus capital, technology, trains, cleanliness, education and so on. This also spells its weakness 67 years after Independence. We rejoice at getting the basics from others while giving in return our best minds and yoga.


Prime Minister Narendra Modi, while campaigning in Mumbai recently, declared that India has arrived on the world stage. Election rhetoric apart, what does it imply? We have been on the world stage but are not treated as equals. So, the question is this: after Mr. Modi has become the Prime Minister, are we now being treated as equals? Mr. Modi’s visit to Japan and the United States, and the visits by the Chinese President and the Australian Prime Minister to India, would suggest that India is being wooed by the major world economic powers. The Mars Orbiter Mission signifies India’s growing space prowess, though the credit for that goes to the United Progressive Alliance.


What are we getting?


Japan has offered India $35 billion of investments in the next five years and China, $20 billion. This includes a Japanese offer of a bullet train between Ahmedabad and Mumbai and a Chinese offer of cheaper and faster trains. Australia has proposed the supply of nuclear material and investments, while the U.S. has promised investment in defense production and cooperation in defense ties and energy. There have been offers as well of teaming up with Indian cities to make them clean and hi-tech, which would help fulfill Mr. Modi’s dream of creating 100 new/smart cities. That all this is happening in the first 120 days of Mr. Modi having taken over is creditable.


The importance of the Modi visit to Japan can be gauged by the fact that the Japanese Prime Minister accompanied him during much of his program there. The Chinese President landed in Ahmedabad and went sightseeing with Mr. Modi. In the U.S., there was a grand welcome by the Indian-American community and where Mr. Modi’s speech in Madison Square Garden was a grand show. He met the CEOs of some of the biggest U.S. companies and got commitments for further investments in India. There was movement on jointly fighting terrorism in South Asia. Collaboration between some key Indian and U.S. institutions of higher learning has been proposed. The U.S. is also to help India in its fight against poverty and cleaning up its cities.


These promises need to be balanced with reality such as the Japanese refusal to relent on the nuclear issue till India signs the Nuclear Non-Proliferation Treaty (NPT). The Chinese committed much less investment than was expected given the rapidly rising trade with them, and which is skewed in their favour. It is not yet clear how the commitments to more balanced trade would work. The dampener was the confrontation between Chinese and Indian troops at Aksai Chin a few days before the arrival of the Chinese President in India and which continued much after. The Chinese also did not resolve the problems India faces in the production of oil in the South China Sea.


The biggest surprises were in the U.S. No big ticket investments were immediately announced. As the largest world economy, the U.S. could invest more in India but this trend may not reverse any time soon. It did not commit to supporting India on the food security issue in the World Trade Organization (WTO). Perhaps India’s reluctance to join the fight against IS is a major reason for why the U.S. did not commit to more.


The three “D’s” on offer


What is India offering in return for what it is getting? Mr. Modi mentioned it in the U.N. General Assembly; he referred to it again at Madison Square Garden in the form of the three “D’s” — ‘Democracy’, ‘Demographic dividend’ and ‘Demand’. Is this a big deal for any of the countries under reference?


China hardly practices democracy internally and the western alliance, headed by the U.S. has supported some of the worst regimes in the world since the Second World War. Does Mr. Modi care much about it? He ruled Gujarat with an iron hand. In recent election campaigns, the Bharatiya Janata Party (BJP) has gone about polarising voters. Ending policy paralysis should not mean that a Prime Minister has to be autocratic and marginalise his entire cabinet. There were disastrous consequences when Indira Gandhi centralised power in the Prime Minister’s Office.


A Prime Minister who is active and takes charge of situations does not necessarily lead to the building of a strong democracy. That requires the poor and the marginalised to be empowered politically, socially and economically. Yes, it is necessary to boost the investment climate in the country but it need not be anti-poor or anti-worker or anti farmer. Mr. Modi’s economic programme is largely pro-business despite the announcement of the Pradhan Mantri Jan Dhan Yojana. Thus, the democratic credentials of the new government are weak.


The idea of building 100 new cities would mean the draining of resources from the existing 8,000 towns and 6.5 lakh villages or more and which are already in poor shape. The creation of a bullet train service can only be at the expense of the existing and troubled railway network. The “Make in India” programme is targeted at big industry though there is talk of Micro, Small and Medium Enterprises (MSME). This would adversely impact employment generation by displacing the small-scale sector and that could aggravate the already acute problem of unemployment. The democratic content of these and other programmes is weak at best.


The demographic dividend can only be realised if we have highly trained and surplus manpower. Unfortunately, training in our schools/colleges is by and large poor as the Annual Status of Education Reports (ASER) testify. Up to 40 per cent of academic positions are vacant in Central universities, the Indian Institutes of Technology and medical colleges, which reflects a paucity of good teachers. Unfortunately, of the people we train, a majority of the best go abroad. Which advanced nation exports its best students?


We have a large population but does that imply a large demand which could be attractive to international capital? India’s current per capita income is $1,500 which is only 4 per cent of that in the advanced countries. Thus, the average demand generated by an individual is small. India produces only 3 per cent of world GDP, implying a small market size. Since a majority of Indians are below the $2 per capita per day line, their demand is for cheap, low-quality products which the multinational corporations of the advanced nations cannot cater to. It is only if we are able to raise our people substantially above poverty that India can begin to offer “demand” to the advanced nations.


A one-way relationship


We seem to be happy to get from the big economic powers things such as surplus capital, technology, trains, cleanliness, education and so on. This also spells our weakness 67 years after Independence. We rejoice at getting the basics from others while giving in return our best minds and yoga. Did the Japanese or the Americans or the Chinese ask how much we will invest in their countries? Are we giving them some form of technology that they do not have? We are offering them our manpower for which we have to ask the U.S. for more H1B visas and more liberal conditions for exporting our manpower.


Forty-five years ago, we introduced the Rajdhani train service but have hardly speeded up our other train services since then; in the meantime, China has introduced fast trains. Why has our Light Combat Aircraft (LCA) programme not fructified since it was conceived in the 1970s? Why have we not been able to make a nuclear submarine? Our mission to Mars is admittedly a success but it has come 50 years after the first interplanetary missions. The more than 40 missions to Mars have laid the ground for our successful mission. Remember, in the 1960s there were no microchips or the massive computing power that exists today. So, it is an achievement but we need to be circumspect about it.


Why are we so focussed on getting foreign investments when foreign direct investment (FDI) is only 2 per cent of GDP? Our internal investment is 28 per cent of GDP and that is what has dramatically come down since its peak in 2008. It needs to be revived while foreign investment can only make a marginal difference to growth. Given the sluggish growth in Japan and the U.S., they are looking for markets and that is why they are offering investment in order to increase their exports to India. Is it in our interests to offer them our markets? If we keep aggravating social divisions and diverting our energies, can we become strong? Clearly, we lack a long-term strategy.


In conclusion, it is not that India has not been on the world stage but its relationship with other major economic powers has largely been one-way given that it has had little to offer due to its internal weaknesses. These need to be addressed urgently.


(Arun Kumar is Sukhamoy Chakravarty Chair Professor, Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, Delhi.)


(The Hindu. October 10, 2014)

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