FE Editorial: Indias decade

Written by The Financial Express | Updated: Jan 3 2010, 02:06am hrs
Perhaps the most startling and indeed heartening conclusion of The Indian Express-Indicus study on how India will look in 2020, published in FE on Friday, was that Indias GDP can grow at an annual average rate of 9.6% in the next 10 years even if no reform were to happen. This will mean that incomes will double by 2020, and some 800 million people (170 million households) will be part of the middle class. The worrying thing, of course, is what will happen to the 500 million people who will continue to subsist below this middle class, in particular, the 250 million people who will still count as very poor even in 2020. This is where the necessity to further economic reform becomes critical. India simply cannot afford to be complacent or rest on its laurels. The study very clearly points out where the weak points are, and therefore where the next round of reform needs to be targeted. The first area of concern is education. Without any reform we will still have 200 million illiterate Indians in 2020 and only 73 million Indians will be graduates or post-graduates. That is pathetic for a country of 1.3 billion people. Outside education, the other sector of real concern is agriculture. By 2020, agriculture will only provide 10% of GDP. Yet it may continue to support half of the countrys population. Another serious problem will be the huge disparities between states. UP, in 2020, will have a standard of living the same as Pakistan had in 2005. Bihar and MP may remain similarly backward. And infrastructure, seemingly forever a problem area, will still be a bottleneck.

The UPA will be the alliance in government for the first half of the next decade. Whether reform happens depends a lot on whether some of the constituents of the UPA can shake off their apathy towards it. There are, of course, plenty of forward-looking reformist leaders in the UPA, and they need to prevail if the country is to better the business-as-usual performance. In education, there are enough indicators that the government is determined to change the way things have run until now. The Centre, however, needs a lot of support from state governments, many of which are ruled by opposition parties. Fortunately, the electorate in recent elections has conveyed in no uncertain terms its shift to a politics of aspiration away from a politics of grievance. If political parties deliver in government, they will be re-elected. Perhaps that will be an incentive for governments in the laggard states to pull up their socks in the years to come. In agriculture, there is the twin challenge of raising productivity and finding newer avenues of employment for the surplus labour. A greater focus on building rural infrastructure and relaxing labour laws may solve some of the most pressing problems of unemployment and poverty.