What Independent India must do at 75: Focus of economic policy must be towards quality education, skills & agri reforms

August 16, 2021 5:00 AM

We need to implement the agri-reforms that are pending; the success of its agri-reforms helped China make non-agri reforms palatable to its citizens

Remember, China’s reforms started with agriculture, and India, till date, has been avoiding reforming its agriculture.Remember, China’s reforms started with agriculture, and India, till date, has been avoiding reforming its agriculture.

By Ashok Gulati & Ritika Juneja

As Indians, we feel proud of our Independence on every day of the year. After centuries of subjugation, when India finally breathed freedom on August 15, 1947, our leaders pledged to make our own destiny. We have achieved several milestones, from reducing poverty to improving literacy to life expectancy and modernising the economy with technologies ranging from space to digital. One of the most important, perhaps, was the technology that enabled India to feed its population during mid-1960s, namely the ‘miracle seeds’ that unleashed the Green Revolution. Though these seeds of change came from outside, they were adapted well to the local climatic conditions by Indian scientists, and by now, India has emerged as the world’s largest rice exporter and also the government kitty of grains is overflowing, exceeding 100 million tonnes.

Looking back on our own journey, we feel proud of our achievements, but wisdom lies in also looking at how other nations have performed, those who started with a similar base or even worse conditions. And, if some have done better than us, we should not hesitate to learn from them.

Let us begin with our neighbours, who were very much a part of India in pre-Independence era, Pakistan and Bangladesh. It is gratifying to see that independent India has certainly done better than Pakistan, if measured in per capita income at least. As per the IMF, India’s per capita income was $1,960 (and $6,460 in current PPP terms) in 2020, while Pakistan’s per capita income was just $1,260 ($5,150 in PPP). But Bangladesh, whose independent journey started in 1971, had per capita income of $2,000, which was marginally higher than even India, and certainly much higher than Pakistan in 2020.

However, the comparison of India, should actually be with China, given their population size and that both countries started their journey in late 1940s and adopted socialist/communist strategies to give their masses food, good health, education, and prosperity. It is ironic to note that China, during the peak of its communist era (The Great Leap Forward, 1958-61) lost 30 million lives to starvation. India, on the other hand, managed to escape such horror with support from the US through PL 480.

However, China, after the lacklustre economic performance during 1949-1977, switched gears towards market-oriented policies, starting with agriculture. From Household Responsibility System to liberating agri-markets, economic reforms in China gave agri-GDP growth of 7.1% during 1978-1984, and farmer’s real incomes increased by almost 14% per annum during the same period. This gave political legitimacy to carry out reforms in the non-agricultural sector and also created demand for manufactured products, triggering manufacturing revolution in China’s Town and Village Enterprises. The rest is history.

By 2020, China’s overall GDP was $14.7 trillion ($24.1 trillion in PPP), competing with the US at $20.9 trillion. India, however, lags way behind with overall GDP at $2.7 trillion ($8.9 trillion in PPP). The quality of life, however, depends on per capita income in PPP terms, with the US at $63,420, China at $17,190 and India at $6,460. No wonder, it is even reflected in China’s rise as a sporting nation in the recently-concluded Tokyo Olympics. China has won the second-highest number of medals—88 (38 Gold) after the US’s 113 medals (39 Gold). And, India lags at the 48th position with a total of 7 medals (1 Gold).

India’s relatively sluggish performance raise doubts about its flawed democratic structure that makes economic reforms and policy implementation more challenging, unlike China.

The first lesson to learn for India@75: It will take decades to catch up to the US standards, but if we target Chinese standards over the next decade or two, perhaps India can do better. Remember, China’s reforms started with agriculture, and India, till date, has been avoiding reforming its agriculture. For manufacturing sector to grow sustainably, we have to increase the purchasing power of rural people, which has to be done by raising their productivity and not by distributing freebies. It requires investments in education, skills, health and physical infrastructure, besides R&D in agriculture, both by the government and the private sector. Liberating agri-markets is a part of this reform package that China followed.

The second is a bit controversial: China adopted the one-child norm from 1979-2015. As a result, their per capita income grew much faster. India’s attempts to control its population succeeded only partially and very slowly. Poor education, especially of the girl child, is still at the core of this failure. Enforcement of measures like sterilisation (vasectomy), as tried by Sanjay Gandhi earlier, may boomerang politically. In that context, UP’s bill on population control (2021) has attracted much controversy. But, given that UP’s average family size is six —the largest in the country (2011 census), compared to just three in China, poses a large challenge to increase their incomes. We feel the focus of economic policy has to be towards quality education, skills, and agricultural reforms. Can India do it? Only time will tell.

Gulati is Infosys Chair professor, and Juneja is consultant, ICRIER

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