Much has been written this past week about our achievements and failures of the last 75 years. This is a mixed picture. After being stable for about 150 years during the colonial rule, the standard of living began to rise rapidly after independence. The average Indian today is about 700% better than it was in 1950. Life expectancy also doubled to 70 years during this period and literacy increased from just 18% to 74% (see chart). However, we lag behind many neighboring Asian countries, including Bangladesh, in terms of per capita income and several social indicators. Globally, India is the second most unequal country. This week’s sad news tells us that social inequality and untouchability are still entrenched. In the end, our biggest failure is high unemployment. An authority on employment issues, Ajit Ghosh has estimated an unemployment backlog of 79 million workers, including 50 million in disguised unemployment.
The political picture is also mixed. Contrary to widely held expectations, independent India did not disintegrate because of its vast cultural, religious and linguistic diversity. Our diversity has become a cause for celebration rather than for disruption. India is also the only developing country in the world to have maintained universal adult franchise for 75 years. However, critics now describe India as a “conservative democracy”, pointing to the spread of divisive, majoritarian politics and a growing tendency towards authoritarianism.
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So our legacy of 75 years of independence is very mixed. What should be our priorities as we move towards the 100th anniversary of independence in 2047? On the political front, non-BJP parties are in power in a dozen major states. At the same time, the anti-incumbency wave is also replacing the pro-incumbency. Outgoing governments are being voted back into power. They are probably at least partially fulfilling what voters expect of them. This gives us hope that India will remain a strong democracy, albeit incomplete, with universal adult suffrage and political competition based on performance. With that admittedly optimistic political perception, let me turn to the long-term priorities on the economic front.
There is an interesting contradiction here. India is already the third largest economy in the world in terms of purchasing power parity. In nominal terms, it is the fifth largest with $3.2 trillion after the US, China, Japan, Germany and the UK. Still, it is one of the poorest 30% of the 218 countries listed by the United Nations, with a per capita income of $2,277, only one-fifth of the world average of $11,000. Understanding this paradox is the major challenge of unemployment mentioned earlier. To employ the 9 million people who join the labor force each year and absorb the unemployment backlog of 89 million by 2047, we would need to create about 12 million additional jobs each year. A very tall order when jobs are barely growing and many existing jobs may soon disappear due to technological obsolescence. That’s not all. The skill level of our workforce is extremely low, with barely 4% having any proven skills. We need a massive skilling program to radically change the skill profile of our workforce.
No one knows how this challenge will play out in the next 25 years. But overcoming the challenge will clearly require a very radical overhaul of the economy. Some ancillary factors should be noted. First, ‘services’ is our biggest sector and India is particularly a major hub for IT-enabled services. This service-based pattern of growth will get a major push from the ongoing digital revolution. Another disruptive change is the transition from a fossil-fuel based economy to an economy based on renewable energy. These changes can completely change the nature of the economy. We need to be prepared for these changes. In particular, the skill profile of the workforce will need to be completely changed. Third, strategic autonomy in foreign policy is particularly helpful in emerging geopolitical combinations. The world is wary of the rise of an assertive China, while the rise of India is seen as benign and widely welcomed. India is also seen as a potential countervailing power. The resulting gains in access to capital, technology and markets could be another major driver of change. There may be other disruptive changes that are not currently observed. So the Indian economy will change drastically by 2047, but whether all these changes will remove or increase the challenge of unemployment is an open question.
Finally, what should be the role of the state? As a developing country, the potential of our state is limited. Central and state governments should develop their capacity, focus their efforts on doing only a few essential things and do them well. These include pure public services such as security and national defence, effective delivery of justice and the rule of law, protection of the environment, creation of good infrastructure and social security, provision of qualifying services such as basic education, public health, water supply and sanitation. In addition to these essential public services, the state must also provide an appropriate regulatory framework that encourages the private sector to develop economic activities in agriculture, industry, services and trade.
This is already a tall order. Whether the state should additionally partner the private sector in the production and dissemination of scientific knowledge is another open question.
These are the personal views of the author.
Sudipto Mundle, President of the Center for Development Studies
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