Growth in real income has not been matched by genuine advances in living standards. This must change
Will 2012 prove to be a year of renewal for India, or another annus horribilis? No country progresses unerringly, but India cannot afford another politically and economically torpid year like 2011. For India, last year is a year best forgotten.
India has been so deeply mired in political paralysis that the Nobel laureate economist Amartya Sen recently said that the country has “fallen from being the second best to the second worst” South Asian country, and that it is currently “no match for China” on social indicators. This is a damning comment on a country that held such promise just a short time ago.
In early January, the American social critic James Howard Kunstler described India as “a nation with one foot in the modern age and the other in a colorful hallucinatory dreamtime.” Kunstler’s view is harsh, but perhaps prophetic: India’s “climate-change-related problems are doing heavy damage to the food supply. Their groundwater is almost gone. The troubles of the wobbling global economy will take a lot of pep out of their burgeoning tech and manufacturing sectors.”
Reverse gear
Indeed, suddenly, India’s economy has begun spinning out of control. Last year, the country’s GDP growth slowed, manufacturing plummeted, and inflation and corruption grew uncontrollably. Elected and unelected government officials alike, including cabinet ministers, members of parliament, and civil servants, were implicated in corruption scandals. The situation triggered recollections of Prime Minister Indira Gandhi’s fraudulent call for a state of emergency in 1975, when she ruled by decree for 21 months, suspending elections and civil liberties.
The population’s outraged response to these events was visceral, and previously unknown figures such as the anti-corruption activist Anna Hazare rallied thousands of Indians in meetings across the country to protest against government corruption. As Prime Minister Manmohan Singh’s government floundered, the opposition vainly sought to gain the upper hand.
But, to ordinary Indians, this political gamesmanship appeared to be merely a farce – the blind pretending to lead the unsighted. Perhaps for the first time ever, India’s government failed to enact even a single piece of legislation, much less undertake any economic reforms, restore price stability, or address widespread civil disorder.
As the Indian business analyst Virendra Parekh has observed: “The second fastest-growing economy in the world now has the unenviable distinction of having the fastest falling financial markets in Asia.” Moreover, “the fortunes of the rupee are….tightly linked with the euro, which is in the throes of an existential crisis…” This has resulted in another, albeit unintended, consequence: “Unscrupulous politicians, bureaucrats and businessmen, who have stashed their illicit wealth abroad, are bringing some of it back,” passing off the money as export earnings. Where corruption has been absent, incompetence has replaced it.
Furthermore, weaknesses in agriculture, energy, infrastructure, and governance have all contributed to India’s current crisis. For example, approximately a quarter-million Indian farmers have allegedly committed suicide over the last 16 years, despite unprecedented economic growth.
This statistic begs the question of why India continues to import foods and oils that could be produced domestically. Solutions offered by organizations such as the US-India Business Council or USAID do not address the problem’s roots, and the crisis will most likely continue in 2012. It is imperative that India invest in its agriculture, not only for economic reasons, but also because it is central to the country’s culture.
Another concern is nuclear power. In 2008, the United States and India agreed to a civil nuclear deal that would allow India to expand its nuclear-power capability. In 2010, India’s parliament passed the Civil Liability for Nuclear Damage Bill, a precondition for activating that agreement. But, following Japan’s Fukushima nuclear disaster in March 2011, safety concerns surrounding nuclear power are large and mounting.
At the heart of India’s current malaise is a paradox: rapid growth in real income has not been matched by genuine advances in living standards. If the country’s fundamental problems are to be addressed, India needs a government with the determination and integrity to meet the complex demands of modern governance in the twenty-first century.
