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India the Superpower? Think again

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hariharan1972

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India should put aside pride about its growing economy and concentrate on improving the lives of average citizens, argues Fortune's Cait Murphy

Plug in the words "India" and "superpower" into an Internet search engine and it's happy to oblige - with 1.3 million hits. I confess that I did not check each one, but I suspect that almost all of these entries date from the last couple of years.

This is understandable. For the first time ever, India has posted four straight years of 8 percent growth; since it cracked open its economy in 1991, it has averaged growth of 6 percent a year - not in the same league as China, but twice the derisory "Hindu rate of growth" that had marked the first 45 years of independence.
India has gone nuclear, and even gotten the United States to accept that status. Its movies are crossing over to become international hits. The recent $11.3 billion takeover of Corus by Mumbai-based Tata Steel was the biggest acquisition ever by an Indian firm.

No wonder the idea of India as the next superpower is fast becoming conventional wisdom. "Our Time is Now," asserts The Times of India. And in an October survey by the Chicago Council on World Affairs, Indians said they saw their country as the second most influential in the world.

Sorry: India is not a superpower, and in fact, that is probably the wrong ambition for it, anyway. Why? Let me answer in the form of some statistics.
  • 47 percent of Indian children under the age of five are either malnourished or stunted.
  • The adult literacy rate is 61 percent (behind Rwanda and barely ahead of Sudan). Even this is probably overstated, as people are deemed literate who can do little more than sign their name.
  • Only 10 percent of the entire Indian labor force works in the formal economy; of these fewer than half are in the private sector.
  • The enrollment of six-to-15-year-olds in school has actually declined in the last year. About 40 million children who are supposed to be in school are not.
  • About a fifth of the population is chronically hungry; about half of the world's hungry live in India.
  • More than a quarter of the India population lives on less than a dollar a day.
  • India has more people with HIV than any other country.
(Sources: UNDP, Unicef, World Food Program; Edward Luce)
You get the idea.
The 2006 UN Human Development Report, which ranks countries according to a variety of measures of human health and welfare, placed India 126th out of 177 countries. India was only a few places ahead of rival Pakistan (134th) and hapless Cambodia (129) and behind such not-about-to-be-superpowers as Equatorial Guinea (120), and Tajikistan (122).

As these and other numbers suggest, Indian triumphalism (a notable 126,000 hits on Google) is not only premature, it is misguided. Yes, growth has been brisk, and of course growth is necessary to make a dent in poverty. But as Edward Luce, author of the excellent, "In Spite of the Gods: The Strange Rise of Modern India," noted in a recent talk, poverty in India is not falling nearly as fast as its brisk rate of growth might anticipate.

The reason for this is that Indian growth has been capital-intensive, driven by the growth in high-value services such as IT. This is a good thing, but what it does not do is create stable and reasonably paid employment for not particularly skilled people - and this matters a lot, considering eight to 10 million Indians enter the labor force every year. Luce estimates that there are 7 million Indians working in the formal manufacturing sector in India - and 100 million in China.

To look at it another way, the 1 million Indians working in IT account for less than one-half of one percent of the entire working population. This helps build reserves (and national confidence, and tax revenues) but is not the poverty buster that labor-intensive development is. As Prime Minister Singh told Luce, "Our biggest single problem is the lack of jobs for ordinary people."

The problem with India's self-proclaimed (and wildly premature) declaration of superpower status is that it reflects a complacency about both its present - which for many people is dire - and its future. Eight percent growth for four years is wonderful, but as the saying goes, past performance is no guarantee of future results. And India is not doing what it needs to in order to sustain this momentum.

Consider the postwar history of East and Southeast Asia. The comparison is appropriate because India started at about the same point, and has watched just about every country in the region get ahead of it on the economic curve. All these places developed by being relatively open to trade; by investing in primary and secondary education; and by building pretty decent infrastructure (not only roads and ports, but health clinics and water supplies). India has begun to embrace one leg of this triangle - freer trade.

Even here, though, many of the worst features of the swadeshi ("self-reliance") era remain intact, including an unreformed state banking sector; labor regulations that actively discourage hiring; abstruse land laws (and consequent lack of land titles); misshapen subsidies that hurt the poor; and corruption that is broad, deep and ubiquitous. Nothing useful is being done about any of this.

As for the other two legs of this development triangle - education and infrastructure - these are still badly broken. About a third of teachers fail to show up on any given day (and, of course, are unsackable); the supply of both water and power is expensive and unreliable.
These facts of life too often go unremarked in the current euphoria about the state of the nation. "We no longer discuss the future of India," Commerce Minister Kamal Nath told the Financial Times in a typical comment. "The future is India."

Hubris, of course, is the stuff of politics everywhere. But the future will not belong to India unless it takes action to embrace it, and that means more than high-profile vanity projects like putting a man on the moon or building the world¹s tallest tower. It means showing that the world's largest democracy can deliver real progress to the hundreds of millions who have never used the phone, much less the Internet. And in important ways, that just isn't happening.

India has many reasons to be proud, but considering it remains a world leader in hunger, stunting and HIV, its waxing self-satisfaction seems sadly beside the point.

 
Oh my dear friend!

What a long essay !!

You have triggered my defence mechanism and I fell compelled to analyse things from my point of view. Hope you will find my response palatable.

The section below from your post is a typical White man's disdain. There is no harm in taking pride in one's achievments and get further inspired to do more and better. Inequalities have existed even in the great Roman civilization and exists even in the land of golden dreams the USA. So, let not despair by some statistics which make us uncomfortable or may be guilty in the mind. We can do better. We will do better.

India should put aside pride about its growing economy and concentrate on improving the lives of average citizens, argues Fortune's Cait Murphy

some time back, I read an article somewhere. It talked of two Indias: one as India which is confident, resurgent, educated, literate, cultured with a million dreams and the ability and desire to realize them. Another India, also known as Bharat, is in hopeless dispair, in darkness, unequal, illiterate, malnourished, run by gangster politicians and corrupt bureaucracy and where diseases , poverty and hunger are widespread. Probably, this India also has the problems of social inequity, where dalits are murdered by high caste people, merit is allowed to decay and people ready to sell their soul for a penny.

Both Indias coexist - in every town, village and city. The statistics quoted below are for the second India. However, the first India has to pull out the second Bharat the way a locomotive pulls the bogies.


Sorry: India is not a superpower, and in fact, that is probably the wrong ambition for it, anyway. Why? Let me answer in the form of some statistics.
  • 47 percent of Indian children under the age of five are either malnourished or stunted.
  • The adult literacy rate is 61 percent (behind Rwanda and barely ahead of Sudan). Even this is probably overstated, as people are deemed literate who can do little more than sign their name.
  • Only 10 percent of the entire Indian labor force works in the formal economy; of these fewer than half are in the private sector.
  • The enrollment of six-to-15-year-olds in school has actually declined in the last year. About 40 million children who are supposed to be in school are not.
  • About a fifth of the population is chronically hungry; about half of the world's hungry live in India.
  • More than a quarter of the India population lives on less than a dollar a day.
  • India has more people with HIV than any other country.
 
SIR- I think the biggest problem is population explosion! the population, unfortunately more so of illiterates has been increasing by leaps and bounds due to failure to enforce birth control measures strictly! about growth rate, i think the chidambaram style of economics is dangerous for a rural country like india. achieving a higher growth of rate based on foreign investments is not laudable at all. BJP tried to aim for higher growth rate by encouraging local industry. that is why during BJP rule, growth rate was relatively lower, because they did not stand with a begging bowl before foreigners for foreign investments, as chidambaram is now doing!! the credit for exploding nuclear device should also go to BJP and not to the present dispensation. if this govt. continues for long, i think the country is doomed! whatever we have achieved is t because of labors of BJP from 1998 to 2004 and not because of manamohan or palniappan chidambaram!!!
 
Lotus-Quartz,

Firstly let me state that the post is a "sutta pazham"..i don't know whether you saw it but the article is from Fortune.

Yes i agree that the article takes a pretty dim view about India and perhaps doesn't realise the fact that the economy is always performing a tight-rope walk among the plethora of issues which are plaguing India today.

The article however points out certain key weaknesses in my view :

a) There is a bit of myth surrounding India's literacy rate - 60% or thereabouts is on paper but the key point is "employability" of these "literate" masses.

b) "Quality of education" is a serious issue. No industry can provide greater testimony to this fact than the BPO industry - the percentage forced attrition in "Pre Process training" is a healthy double digit number. Mind you, it is NOT only due to the candidates inability to pick up the foreign accent but mostly it is because that his communication skills are near hopeless.

c) Distribution system - India's perennial problem..It is said that 'rats each more grains than BPL families' in India. It is shame that surplus quantities rot in the Central Warehousing Corporations & millions starve

d) Lack of Quality Education at “Affordable cost” – 2 of my friends admitted their little daughters in Pre KG at Bengaluru. Cost – Rs. 43000 per child/annum. I am not sure whether I would have spent that kind of money for my entire educational career… Not sure where we are headed to !!!

e) 60% of employable Indians are engaged in Agriculture which is showing a negative growth – Result : Per Capita income of Agricultural laborers dwindling by the day.

One section of India as you say is “Shining” but as long as the benefit of the growth doesn’t touch the rural masses & we have “Farmer Suicides”, I am afraid, we cannot really stick up our neck in ‘complete’ pride.

Suresh sir,

As much as you despise Congress, we have to ‘grudgingly’ concede the fact that it was that ‘90s team of PVN – Dr Singh which started the wave of economic reforms on which India has been riding till now. The efforts of Dr Singh in ushering in the reform movement, dismantling the ‘license / quota raj’, lowering of duties, removing of trade barriers, removing the veil of protectionism for the domestic industry etc.. are significant milestones in the path of our economic revival. All successive governments have brought in their own variations of the reforms but the essence remains the same as that of PVN & Dr Singh.
 
Lotus-Quartz,

Firstly let me state that the post is a "sutta pazham"..i don't know whether you saw it but the article is from Fortune.

Yes i agree that the article takes a pretty dim view about India and perhaps doesn't realise the fact that the economy is always performing a tight-rope walk among the plethora of issues which are plaguing India today.

The article however points out certain key weaknesses in my view :

a) There is a bit of myth surrounding India's literacy rate - 60% or thereabouts is on paper but the key point is "employability" of these "literate" masses.

b) "Quality of education" is a serious issue. No industry can provide greater testimony to this fact than the BPO industry - the percentage forced attrition in "Pre Process training" is a healthy double digit number. Mind you, it is NOT only due to the candidates inability to pick up the foreign accent but mostly it is because that his communication skills are near hopeless.

c) Distribution system - India's perennial problem..It is said that 'rats each more grains than BPL families' in India. It is shame that surplus quantities rot in the Central Warehousing Corporations & millions starve

d) Lack of Quality Education at “Affordable cost” – 2 of my friends admitted their little daughters in Pre KG at Bengaluru. Cost – Rs. 43000 per child/annum. I am not sure whether I would have spent that kind of money for my entire educational career… Not sure where we are headed to !!!

e) 60% of employable Indians are engaged in Agriculture which is showing a negative growth – Result : Per Capita income of Agricultural laborers dwindling by the day.

One section of India as you say is “Shining” but as long as the benefit of the growth doesn’t touch the rural masses & we have “Farmer Suicides”, I am afraid, we cannot really stick up our neck in ‘complete’ pride.

Suresh sir,

As much as you despise Congress, we have to ‘grudgingly’ concede the fact that it was that ‘90s team of PVN – Dr Singh which started the wave of economic reforms on which India has been riding till now. The efforts of Dr Singh in ushering in the reform movement, dismantling the ‘license / quota raj’, lowering of duties, removing of trade barriers, removing the veil of protectionism for the domestic industry etc.. are significant milestones in the path of our economic revival. All successive governments have brought in their own variations of the reforms but the essence remains the same as that of PVN & Dr Singh.

sir - if you read the economic 'policies' of congressmen particularly fellows like the manamohan singh, you will notice that what they are saying now is diatemetrically opposite to what they were saying till 1991! these were the same fellows who were paying second fiddle to 'socialism'! after 'socialism' & 'communism' collapsed all over the world, they have dropped 'socialism' like a hot potato! if 'socialism' or 'communism' come back to some extent again at international level, these same congressmen will again pen hosannas to 'socialism' . manamohan & congressman never have any original ideas in any matter at all! they are blind followers of foreign ideas! in contrast, economic policy of BJP - both before & after 1991 has not changed very much!!!
 
Even world bank has grudgingly accepted that India has world's most exhaustive PDS - Public Distribution System. It started in 50's and 60's when our own foodgrain production was at pathetically low levels and the country was unable to feed itself. Huge quantities of wheat were doled out by US under Public Law-480. Over the ensuing decades, indigenous production of foodgrain rose exponentially from perennial deficit to foodgrain surplus and the PDS has continued. Cases of foodgrain rotting in godowns is nothing but sheer incompetence of the system which fails to nurture and benefit from its built structure and strength.


c) Distribution system - India's perennial problem..It is said that 'rats each more grains than BPL families' in India. It is shame that surplus quantities rot in the Central Warehousing Corporations & millions starve


In developed economies, agriculture supports only around 10 % of the workforce and has yield among the highest in the world. We are nowhere near that. During past 4 decades, we have seen the % of people dependent on agriculture going down from 80 % to 60 % and yield increasing by significant figures. This is a welcome development. Agriculture is not supposed to be dumping yard for unemployed hands. It should support only 10-15 % of working population. Rest should be absorbed by industries and services.

We too can achieve such figures by proper land reforms, modern agriculture implements, extensive use of pesticides, fertilizers, dissemination of modern knowlwdge to the farmers, multi cropping, irrigation systems etc. What is needed is more visionaries like Verghese Kurien, M.S.Swaminathan etc.

Schemes like crop insurance, cattle insurance, minimum support prices etc. are steps in the right direction. Soft loans to poor farmers should be strengthened. However, Government should compensate commercial banks whenever loan default takes place so that commercial banks do not become sick.

The border line between state support and encouragement and political ly motivated raj of freebies like free electricity is very thin but is very important to understand the difference and to stay on the right side of the border to make these schemes successful.



e) 60% of employable Indians are engaged in Agriculture which is showing a negative growth – Result : Per Capita income of Agricultural laborers dwindling by the day.
 
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PSP or ASP?

India has a long way to go before it becomes an actual super power. There has only been one real super power for the last fifty or so years and that has been the US. The former Soviet Union was not a real Super Power but was rather a Percieved Super Power. At some point the false front colapsed by the weight of economic reality.

So the question is this. Does India just want to be a Percieved Super Power or does it actually want to be an Actual Super Power? PSP is much easier than ASP.
 
Jsp ?

India has a long way to go before it becomes an actual super power. There has only been one real super power for the last fifty or so years and that has been the US. The former Soviet Union was not a real Super Power but was rather a Percieved Super Power. At some point the false front colapsed by the weight of economic reality.

So the question is this. Does India just want to be a Percieved Super Power or does it actually want to be an Actual Super Power? PSP is much easier than ASP.

Valid point !!!

If India really wants to be a ASP it should DEMONSTRATE that it can tackle terrorism with a firm hand, provide a secure living environment to citizens, not discriminate people by caste, GUARD MERIT & PROVIDE AMPLE SCOPE FOR GROWTH & DEAL WITH THE PROBLEM OF POVERTY.

Being PSP is what India has been trying to do, unmindful of the voice of it's citizens.

Even if it is accepted into the fold of SPs by virtue of being perceived to be a PSP, without addressing the above issues & more, to the hapless citizens it will always be a JSP - Joker Super Power.
 
U S P !!!

Valid point !!!

If India really wants to be a ASP it should DEMONSTRATE that it can tackle terrorism with a firm hand, provide a secure living environment to citizens, not discriminate people by caste, GUARD MERIT & PROVIDE AMPLE SCOPE FOR GROWTH & DEAL WITH THE PROBLEM OF POVERTY.

Being PSP is what India has been trying to do, unmindful of the voice of it's citizens.

Even if it is accepted into the fold of SPs by virtue of being perceived to be a PSP, without addressing the above issues & more, to the hapless citizens it will always be a JSP - Joker Super Power.

SIR - as long as persons like sonia and manamohan are in power, we can neither become ASP, PSP NOR JSP. we can only hope to become USP - useless super power!!!!
 
Oil price of $80/barrel can erase fiscal deficit !!!!!

Well Macro economic purists excuse, but a totally diametrical view about oil prices. Weak hearted Leftists, avoid this !!!!!

OIL THAT MATTERS/ BS ANALYSIS

Siddharth Zarabi / New Delhi February 20, 2007




The country's fiscal deficit, as a percentage of GDP, would be wiped out if the crude oil price, as measured with the Indian basket, touch $80 per barrel.

In contrast, if the crude oil prices were to average $55 per barrel, revenue buoyancy would get evened out.

This paradox is of particular relevance to the Indian situation, where government imposes heavy taxes on consumption of some petroleum products, while subsidising others.

Falling crude oil prices lead to lower excise collections, lower royalty, lesser collections from the cess on domestic production, lower dividends and taxes from state-owned oil companies.

The average price of the Indian basket of crude oil for the fiscal year beginning April 1, 2006 — up till February 16, 2007 — stood at $62.8 per barrel.

The basket price touched the highest level of $75.20 per barrel on August 8, 2006, subsequently dipping to $49.85 per barrel on January 17 this year. The average price in the month of January was $52.53 per barrel and $55.5 till February 16 this year.

In effect, the recent trend has been towards lower crude oil prices, a situation which is expected to continue till the next fiscal, provided there are no external supply shocks triggered by supply side disruptions.

The Indian crude oil basket is based on the total industry processing of sweet and sour crude oil and represents free on-board prices of average Oman/Dubai crude oil for sour and Brent for sweet grade in the ratio of 59.8:40.2.

The average Indian basket price of crude oil for 2005-06 was around $55 per barrel. At this price, the contribution of the petroleum sector to the central exchequer was nearly Rs 87, 647 crore (as per 2005-06 figures).

As per some research estimates, if the price were to increase to $80 per barrel, assuming everything else remains constant, the contribution to the central exchequer would increase to over Rs 1,30, 412 crore.

This would mean the fiscal deficit would be lower by Rs 42,765 crore. If the price were to fall to $22 (it was $26.65 in 2002-03 and $27.97 in 2003-04), the contribution to the central exchequer would fall to around Rs 34,000 crore.

The fiscal deficit would have been higher by Rs 53,623 crore, had the price been $22 per barrel in 2005-06.

 
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