The path ahead

One can see that in terms of rate of growth, we have done better in the latter half of the 20th century than during the first half, and far better in the final two decades. Over the period, fluctuations in growth of output have been reduced. The resilience to withstand shocks has progressively increased. External sector has become comfortable in the sense that there is no foreign currency constraint on growth now. Yet, we have pervading poverty, high illiteracy and poor condition of health and sanitation.

There are islands of excellence like information technology experts amidst a sea of deprivation and misery. Clearly, economic policy, especially of the 1990s has removed several constraints on economic growth, which is in itself an achievement and a necessary condition for the rest of the goals of a civil society. But, there are lurking doubts on whether we are systematically building a system that would ensure continued high level of growth and, achievement of minimum social objectives associated with such growth.

Economic indicators show that we are one of the fastest growing economies now, with high savings and investment ratios coupled with a respectable level of productivity as evidenced by capital output ratios. External sector is comfortable, though with relatively low level of capital inflows, a reflection as much of lack of interest of overseas investors as of ambivalent attitude domestically. Our position in Current Competitiveness Index shows confidence in our growth performance in the short run. However, our position in Growth Competitiveness Index indicates a less optimistic picture in the future growth of per capita income. The position in regard to other related indicators also gives rise to a feeling that factors contributing to current growth are relatively stronger than those contributing to future growth, unless strong policy actions are initiated soon. At the same time, there is impressive confidence that our economy will not go into a slump - ours is a very stable economy.

Institutional indicators may provide some answer to this difference in perception between immediate and medium term to long-term prospects. The evidence is subjective and hence not very reliable, but the high rank in corruption is of concern. More disturbing is the perception that effectiveness of government is low. As regards the role of law and business environment, the picture is satisfactory but does not, as per current indications, appear to assure an environment for a high growth path. The government, law, and business environment are only means to an end, the end being socio-economic well-being of the people. The critical part is in the outcomes as reflected in socio-economic indicators where India appears to be lagging.

Yet another significant set of indicators relevant for medium term prospects relate to infrastructure. India seems to score rather poorly in regard to energy, say in terms of power- consumption or wastage of power. In spite of recent improvements, India is lagging in telecommunications, and is virtually the last in penetration of personal computers. Here is an example of islands of excellence in information technology, but the domestic penetration of information technology is very low. While assessing the future, we should note that, though we have a large pool of scientific personnel and engineers, in terms of their deployment in research and development, we are almost at the bottom.

Finally, the end product of all economic policy is social well being, and admittedly the long term prospects for economic growth also depend crucially on the social well being. The social indicators in regard to our country do not give us too much of comfort.

Overall, we rank rather low in human development and high in human deprivation. In spite of this, one notices relatively low levels of public expenditures in health, and in primary education though mere expenditures may not reflect actual delivery of services. The policymakers and more importantly opinion makers including academics perhaps need to consider issue of the mending of mindset in favour of the poor.

(Concluded)

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