Thursday, May 29, 2014

India 2014: Assessing India's Opportunity

Hope has made a comeback in India. The grand yet sombre swearing in of the new Prime Minister yesterday made an impression; at least one Western commentator, John Eliot, wondered whether Mr Modi will become a transformational leader like Nehru (see here). The assemblage of South Asian leaders, specially invited for the occasion, also ignited hope of peace, stability and freedom of movement in South Asia, which will, in turn, make India's prosperity stronger and sustainable. Besides, the spectacle itself, that a new Prime Minister from outside the ruling elite is being sworn in, is a sign of how strongly embedded democracy has become in India (though as I argued elsewhere, it should never be taken for granted).

The hope for India's prospects rests primarily upon the electoral fact that first time in thirty years, India has a majority government. The successive coalition governments, held at ransom by India's regional parties, struggled to move forward and respond to a rapidly changing world. Mr Modi will be able to govern without such constraints. If he respects his mandate and focuses his energies on economic development - as he said he would - this is indeed India's best chance to 'unleash' its economy (as The Economist sees it).

One important factor that works in favour of the new government is that India's demographic window of opportunity, when most of its population will be between 15 and 65 years of age, is just opening. US National Intelligence Committee gives India the next 35 years to capitalise on this (2015 - 2050). This is a moment in history like no other, an unique opportunity to achieve leapfrog development, and may even catch up with developed world on some parameters. (For more discussion, see here)

Indeed, demography is not destiny, but just the raw material national destinies are built with. To make good of this demographic opportunity, one would need deep 'reforms'. Mr Modi has shown intent and decisiveness to facilitate labour market reforms, a sticky issue in India, and a cure-all as seen by the neo-liberal types. But taking advantage of the Demographic Window of Opportunity will take more than just the labour market reform.

For a start, this will need a deep education 'revolution' at all levels, a renewed commitment to environment (particularly, Water) and regional peace. This will also need unlocking the new sources of economic growth and prosperity, most of which may lie hidden in the politically and economically neglected 'resource economies' of India's Eastern and North Eastern states. It would also require India to achieve a technology catch-up in all aspects of life, and yet ensure employment or productive engagement for the 10 million young people who will join its workforce every year. And, all along, India has to modernise its agriculture to spread its Green Revolution across the country.

There are mixed signals that Mr Modi has understood this opportunity. The opening gambit of regional peace is promising, as is his message that he wants to take everyone along. North-East has been talked about, and there is a special ministerial role allocated to it. The Water Resources Minister has a special portfolio for the Ganges, a river that is Northern (and Eastern) India's lifeline.

However, educational reform and development is yet to feature prominently anywhere in the plan, and complete silence about the subject and relatively lightweight Ministerial appointment for Education (Ministry of Human Resource Development, as it is called in India) do not bode very well. There is also a disquieting resurgence of a social agenda, including early talk of constitutional changes such as repeal of the special status of the state of Jammu and Kashmir and introduction of an uniform civil code, both long-standing issues of the current ruling party, which can have an incendiary effect on the communal make-up on India, and potentially destablise the whole region. Mr Modi's record on environment in his home state of Gujrat isn't good: He preferred tycoon-driven growth over environmental preservation.

In summary, this is indeed India's moment, but this is about more than efficient governance. This is also a moment when imagination is needed. Having a business friendly government can take a country forward only to a point; the key issues of education, environment and stability need to be addressed and attended to if India is to be able to deliver on its promise. The glorious prospect of demographic window of opportunity has a stark downside: It can go wrong quickly if it is not attended to with intent and imagination.

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