He is an optimist and believes that within a generation from now, by 2039, India will become an affluent society. ?Between 2035 and 2040 a lot of dramatic changes will happen in the Indian society and economy. The onus will lie on the Indian leadership on how it can steer India to affluence and avoid the middle-income trap.? After being at the helm of policy making, with a 25-year stint at the World Bank, Harinder S Kohli, Advisor to the World Economic Forum (Davos) and also Chief Executive Officer of the Centennial Group, tells Sarika Malhotra how India?s long-term future can be secure . Excerpts:
Between the ?middle-income trap? and ?affluent society?, what seems more realistic for India?
It is going to be somewhere in-between. There are very few countries that have avoided the middle-income trap. The new generation is much more innovative, ambitious and gung-ho than the previous one, the private sector is much more dynamic and our demographics and middle class are all in our favour. So, the fundamentals are strong to avoid the middle-income trap, but the public sector is acting like a brake. The government can actually add a supercharger to this growth engine. If India does what needs to be done, then the chances of getting trapped in the middle-income trap is hard, and, therefore, India could be an affluent society in a generation. It is imperative to provide a vision and inspiration to test the resolve of Indian leadership in both the public and private sectors. Our report will make a little bit of contribution in conveying that the aim is within reach. And we will rather have it achieved around 2039 than 2050. We will like to put the Indian leaders? feet on fire. If they keep India on a high growth path for a full generation (which is not easy at all), then India would be an affluent society. But if India gets stuck in the middle-income trap, it is possible that the per capita income will only be one-fifth of this projection.
You have cited how Chinese and Indians are convinced about their prosperity increasing in the 21st century and how in India?s case it may well happen despite the state. Given that the state has been a catalyst, how do you see it happening?
With the kind of civil society, democracy and press we have, there will be continuous noises urging the government to do better. We will have society questioning why everything has to be decided in Delhi? The mantra is to decentralise. The closer you go to the people who vote, the better. If you give autonomy to cities, villages, councils, people will pay more taxes for better services. Whether Delhi likes it or not, it will have to decentralise. It is inevitable.
You have pointed out how inclusive growth has become a leitmotif of policy discourse in past years. Do you see it moving beyond policy debates, in the real world?
Inclusive growth is one of the fundamental inter-generational issues. However, the flip side is that some businessmen are capturing the state. Crony capitalism is neither in the interest of the business community nor the people. There are millions of business people, but only 20-odd billionaires. That visible power and ability to influence the government?s decision has to be curbed. We have to understand that capture of state is a hidden time bomb. Competition, reform, accountability and transparency need urgent attention. Inclusive growth is not just about helping the poor, but is also about what is happening to the rich and where and how the government decisions are made.
What are the unique, real and perceived, internal constraints that India has to address in order to be an affluent society?
When we talk about decentralisation, even senior officials say it can?t be done without a constitutional amendment. But the amendments are already in place. Similarly, there is a perceived feeling that the civil services can’t be changed. But a strong chief minister would assert and transfer an IAS officer if he doesn?t perform. A real constraint is the way in which we do things ?there are laws pending in the Parliament, files with bureaucracy that take years to be passed. We need to usher in discipline and have result orientation in our approach. Inclusive growth, competitive economy and a global citizenship have to be balanced on a continuous basis. But governance remains the biggest issue.
By 2039, how do you place China vis-?-vis India?
Accountability and execution is the single-most important difference with China. Policies in India are better than China, but where the Chinese do better is in execution. However, China has to go through one more political transition, which may be painful. Indian demographics will give her an edge. China has an ageing population and will begin to get short on labour, coupled with no thriving private sector and lack of English language skills. India?s growth rate will cross over China in the next 10-15 years. The two societies will be similar in per capita income by 2035, and between 2039 and 2050, India?s economy will become larger than China.
But India has two big dangers to tackle. First, the internal security situation is worsening, which is linked to inclusive growth. The second problem is India?s neighbourhood. In a scenario in which India continues to grow the way it is and our neighbourhood grows the way it is, the difference in per capita income of an Indian in 2039 and a Nepali, Bangladeshi or a Pakistani will be stark and the problem of illegal migrants will grow. If India will not accommodate the refugees, it will lead to jealousies and terrorism will flourish. You cannot be affluent in a poor neighbourhood. India needs to do what China is doing?export prosperity to the neighbours. Instead of undercutting them, stabilise them.