While I have outlined my view point in the original post, I exchanged posts with my friend Dr.Ananth Nageswaran and reproduce the points here:
Dr. Ananth in his inimitable way asks some very deep and insightful questions. I quote :
I mean that the current spell of high growth, rising consumption, asset prices and confidence could be a confluence of the pay-off from the incremental reforms of the past, low interest rates, high global growth and some serendipitious stuff whereby past mistakes turned into virtues
Example of the last: Bangalore Public sector investment, emphasis on higher education, crippling government grip on industrial actvity and affirmative action, etc., contributing to the emergence and spectacular growth in a sector (IT) which the government had no clue about. Notice how it was all about IT software and not hardware.
Of course, the stroke of luck was that it neatly coincided with the advent of Internet and the technology boom in the United States.
The question is what are we doing in the present to build on them? Yes, things happen in dribs and drabs. perhaps, the flow dropping to a trickle under this government. (But then, forward thinking under the NDA government was not in evidence until 2002; the government appeared to be drifting until then)
But, are they happening in the right areas? What are our answers to access to primary education, teacher compensation, motivation, public hygiene and health (AIDS and mosquitoes are, in the same breath two socialist scourges of the population) issues?
Why, even better traffic management (big monetary fines even if they are gobbled up by the traffic constables would be fine) and a small improvement in road discipline in India’s big cities would unleash considerable productivity and save fuel!!
Also, do we have a clear strategy on dealing with external threats? – China, Pakistan, naxalites, maoists, ULFA, Bangladesh and the United States (in that order or in reverse?)
After all, they seem to believe that we are and would be a formidable force and hence needs to be checkmated now. We roll our eyes.
In a nutshell, post-independence, modern India could safely be said to have been at the cross-roads every year. Without making explicit and grand choices, we seem to have glided our way to where we are today: at the take-off point on the runway when all the engines are revved up.
This analogy is actually implicitly a positive one. This means that there is no looking or turning back, usually. Other planes are in line to take off. You won’t get another chance for a very long time.
The other implication is that not that the plane would not fly. Mostly, it would. The question is for how long, how high and how smooth would the take-off be. The answer depends on the skill, competence of the pilots, the state of the aircraft and the amount of fuel left.
On all of these, there are reasons to be both hopeful and fearful. The exciting and exhilarating country that India is, it is a punter’s nightmare.
It is perhaps the only country that could simultaneously prove detractors and supporters wrong.
A set of curious questions: if governments in India get their act together, arrest the chaos and drift in policy-making, raise competence within the government, would India’s private sector come to grief? where would water, mosquito repellant companies be? where would auditors, lawyers, consultants find jobs? would Indians become complacent and less creative when chaos turns to order? would the service sector then have to and would give way to the manufacturing sector as the engine of growth? the latter thrives under less chaos and more predictability than the former? ”
And here’s my response:
I am of the opinion that a set of factors — starting from our reputation to deal with the Y2K bug, the growth of the Internet, (hence the call centre/BPO industry) with the inability of the government to regulate them and the growth of the telecom industry, the shift in outlook from the manufacturing industry to look at exports and adopt a more aggressive marketing approach, the success stories of the Ambanis, Mittals and the like have made this an eclectic mix that’s just getting heady.
Contrast this with some grim realities: India’s economic success lies with the service economy and still over 70% of the population depend on agriculture for their living where we havent seen any improvements in productivity or incomes. The rate of increasing disparity between the haves and the have-nots, is hard to miss in tech centers like Bangalore, Chennai and Delhi. Even a tier 2 city like Nagpur has its own set of glittering malls, pubs and clubs. But just 100 km away, farmers are becoming poorer by the day and committing suicide (vidarbha region). Can a socio-economic structure as lopsided as this sustainable or is it bound to collapse sooner or later? Will the Indian government’s apathy towards the rural poor bring India’s party to an abrupt end?
The other issue that is deeply perplexing to me, is whether the rural or even the urban poor would barter their spades for knives, in a desperate attempt to liberate themselves from the throes of poverty. Is a flash point lurking in the corner somewhere? (Just as I write this post, saw the news item where separatists in Assam kill 30 people in North East India)
I do not think that musquito repellent manufacturers or lawyers and accountants for that matter would come to grief if the government starts becoming proactive. If history is anything to go by, when the MRTP, FERA, licensing got abolished or when taxation got simplified the rent seekers in these domains didnt protest. They simply found other avenues. And as for musquito repellent manufacturers would simply unleash their entreprenurship skills elsewhere.
And whenever the government fails in its roles, the private sector moves in to fill the void; only that it becomes far more expensive for the citizens. As Government failed to provide clean drinking water, buying bottled water even in homes, offices and hotels has become a common practice. So, that way, the government has indeed become “pro business”.
On the positive side, the success has generated a strong pan-Indian mentality and mindset and people are less divisive about being a Punjabi or a Malayali at least in urban areas.