Why India should not chase old shibboleths like swadeshi and socialism

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Published: June 22, 2020 5:00 AM

This time, without chasing old shibboleths such as swadeshi and socialism, India must focus relentlessly on economic growth in an open economy environment

Its economy has been a huge growth machine since 1980.Its economy has been a huge growth machine since 1980.

India has not faced such severe multiple crises since the mid-1960s. In those poorer but more sanguine days, the five years 1962-67 were labelled the problem of ‘the Three Twos’, in a pastiche of Maoist style. There had been two famine years 1965/66 and 1966/67 as well as seeing the death of two prime ministers, Nehru and Shastri, and the two wars—China 1962 and Pakistan 1965.

But, India never lost heart. Only 20 years of Independence had obviously not been enough to tackle problems, but the mood was optimistic whatever the data.

But, the data hid a drastic failure of Independent India’s leadership to deal with any of its basic problems. Agriculture had been neglected, which explained why there were famines. The Green Revolution, which was implemented and succeeded, was forecast to fail, and the Left predicted the green will turn into red. The change from Nehru to Shastri promised a fundamental recasting of economic policy. Shastri was the first to question whether these Five-Year Plans were benefiting the aam aadmi. He would have swung rightwards economically, and US -wards in foreign policy. But, he died and the dynasty resumed its disastrous economic policy.

What Shastri was hailed for was the 1965 victory over Pakistan. Similarly, what Indira Gandhi is lauded for is the 1971 victory over Pakistan, and the 1974 nuclear test. The growth rate was abysmal, inflation was rampant, but we had defeated Pakistan and got the bomb. Defeating Pakistan made India forget the humiliation with China, or even that China may come back better prepared.

Fast forward to today’s crises. The economy had been tanking even before Covid, in terms of the growth rate of GDP, the lockdown in the credit market, rising unemployment (though obscured by data). Add to that the pandemic. No country has got it right. Each country has had its own failure. India felt it had succeeded in keeping the deaths low. Now we know better. India still has a low per capita death rate, but it has grown seven-fold in the last six weeks. The economy has also suffered like everywhere else and had a huge fall. The weaknesses left uncorrected over 70 years in terms of surplus labour in the informal sector have been exposed. The big stimulus, as usual for middle-classes, has not yet worked miracles.

Now, there is a war with China. Nothing galvanises the country like war. Before the election last year, it was Pulwama and Balakot . We had beaten Pakistan again. But, this is very different. Indian defence thinking has been Pakistan-focused. That is one enemy we can beat. With China, we have known, but never admitted, that the odds are the other way around. China’s corona failure is irrelevant to its military power. Its economy has been a huge growth machine since 1980. India and China had the same per capita income in 1975. Now, there is no comparison. While India has grown since then, China has grown much faster. Just look at the per capita incomes.

India had a shock in 1962, but escaped without damage because the Chinese withdrew unilaterally. But, China never lost sight of its goal of recovering the Tibetan territory. It has been training mountain troops and investing in light tanks suitable for mountain warfare for decades. Hopefully, Galwan will not develop into a full-scale war, but we never know. Globally, China has opened up hostility on three fronts simultaneously—Hong Kong, Taiwan and the Indio-China border. This is not accidental, nor is it a sign that China is diverting attention from its own Covid problems.

Since the early days of Covid, people have been arguing how we must make radical changes to our lives, our environments, our priorities in the post-Covid world. With an extra dimension to the crisis, India has to seriously rethink its future. The skirmish at the border has brought back the boastfulness and complacency reminiscent of the months before December 1962, which then ended in bitter disappointment. Yes, our jawans were brave and patriotic, but the weapons they had in 1962 were like matchsticks. We cannot repeat that.

This time, without chasing old shibboleths such as swadeshi and socialism, focus relentlessly on economic growth in an open economy environment. Make friends around the world by trading rather than boycotting their goods. Equip India with the best weaponry from whichever country makes them. Get sustained economic growth. Reform the obsolete laws, and the bureaucracy inherited from the British (as the British have reformed theirs). Clean up the credit markets by shortening the judicial process to settle debts. Utilise the surplus labour, which is wasting away.
Get India ready to face China better.

The author is Prominent economist & Labour peer
Views are personal

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