Back in 2000, the turn of the millennium brought a myriad of economic predictions for the coming future. The Economist said India was to be the strongest economy by 2020! It would say that India’s combination of an enormous population and great minds would take it to the top. 11 years down the road, we can ask ourselves the question: Is India close to becoming number one?
The answer is a daunting and definite NO. India’s economy has battled inflation and corruption since the beginning, the separation between the lower and upper classes has further developed, and the worst part is that none of this seems to be changing any time soon. Why is this case, you ask? Where did all the plans go wrong? Why is it that all of India’s natural economic growth factors are not taking effect?
First, there is the issue of corruption. Government officials constantly cover up they’re wrongdoings. High ranked government officials have stolen millions of dollars by getting involved with drug raids, taking money allotted for a government road or building for themselves, etc. And the few noble leaders who have the gall to make some change are struggling to be elected or selected due to lack of support by the crooked. When these few individuals do manage to be elected, they are often chased out by blackmails and death threats. The economy can only grow as much as a government allows it to grow.
Second, all the investment and capital coming into the country is going to people who already have money. India has many successful businesses: TATA, Infosys, ICICI, Reliance, and the list goes on. But most of these companies, with the exception of Infosys, are old and recognized companies, with family members passing on ownership to next generations. Capital is only being invested in those companies which have already proved themselves to be successful. Investors are not willing to take risks in middle class businessmen looking to innovate. This is why the GDP growth in India is so deceptive: a majority of it is coming form well established companies, just making the rich richer and leaving the poor where they are.
So is there hope? Of course! India has the foundation laid out for an economic boom: an unparalleled population growth rate, a ready and able job force, and an advanced technology industry. In fact, the boom could be so large it could serve as a catalyst, a sort of ‘X factor’, for the rest of the depressed world economy. To unleash this potential, a government overhaul should begin now. Manmahon Singh needs to start taking action, instead of failing to even accept there’s a problem. So far, he has simply turned a blind eye offered a stimulus package with abstract and vague details. Next, India could adopt the model that has helped worse off areas in the US. In this model private companies, not banks, would serve as a liason between capital from elsewhere in the world and (as opposed to the overwhelmingly local investments in India right now) bright minded people in India. This would spur a sort of elicitation of the inherent entrepreneurial cultural India already has. A glimpse of this can already be seen by the successful Kiva Foundation. India is ripe with ideas, and no money to feed them.
Gaurav Ahuja is a sophomore and one of the Finance Chairs of the South Asian Awareness Network.