The best of times

If Charles Dickens had been alive today and if he were to divide his time between the two cities of Delhi and Mumbai, he would have possibly changed his immortal line to: “It was not the best of times, it was the worst of times!” Many of us would agree. But should we?
This is the 64th birthday of the Republic of India, an old civilisation revitalising itself within the body of a young nation. It is also the 20th anniversary of the economic liberalisation of India, an event as epochal as when the British flag was brought down at midnight on August 15, 1947. After more than 250 years of oppression, exploitation and decay, India commands respect in the world once again. Unprecedented numbers of people are being lifted out of poverty. There is an outburst of creativity and confidence. And yet, apparently, it is the worst of times.
Who’s responsible for this dreadful mood? The international financial crisis? But we tided over an equally big crisis with flying colours in 2008. So what has changed now? Perhaps the drift in our national government led by a talented, well-meaning, yet utterly ineffective Prime Minister. When the history of India is updated a few decades from now, historians will be left befuddled as they analyse this short period. Just what in God’s name went wrong? A re-elected government, with a larger mandate, having rid itself of a few tiresome allies and blessed with an ineffective Opposition, should have been powering ahead. Yet, UPA-II will probably go down as one of the worst governments in the history of the republic, right up there with the Janata Dal tragicomedies of the mid-Nineties.
But does that deserve despondency? Do we convince ourselves that the inept UPA government has derailed the India story? In the short term, this government has hurt our land dreadfully. In the long term, however, I would suggest that India still has a glorious future. My confidence is based on one long-term mega trend and the other an unheralded yet mighty success of our liberalisation.
The beneficial mega trend is called the demographic dividend. As a society develops and becomes healthier, the death rate starts falling drastically. The birth rate tends to fall a lot slower, requiring a cultural change. Therefore, there is a phase of dramatic population boom in between. During this period, in economic terms, a country experiences what is called the demographic dividend, i.e. a very high proportion of working people between 18 and 60 years of age. These are people who work, pay taxes and save money, thus making their society richer. Over time, however, these people grow old, turning this dividend into a demographic curse as older people stop working but demand pensions and healthcare from a government whose tax revenues have reduced. This is happening in Japan and Europe. These trends play out over many decades. China, the other reviving Asian giant, has already used up much of this dividend. Its one-child policy ensured that birth rates fell drastically and its demographic dividend was intense, but short-lived. India’s ineffective government could not enforce family-planning. Thereby, we still have large dividends to realise. Of course, if we do not create enough jobs, these armies of young working-age people can cause violence and chaos. But India has rediscovered its entrepreneurial mojo post-1991. Our entrepreneurs will drive the way forward in investing the high savings of the Indians to create jobs, which leads to a virtuous cycle of even higher savings and investments.
The second factor, a signal success of our liberalisation programme, is the health of our banking system. As any economist will tell you, finance and the banking system is the life-blood of an economy. Excessive debt is a bit like high cholesterol and a banking collapse is like a heart attack. Japan has been suffering from a debt overhang for the last two decades. The Euro experiment is feeling the heat from its irresponsible debt-bingeing Mediterranean members. America has successfully converted a problem caused by rogue bankers into a crisis owned by reckless politicians. All of them are suffering. What’s the situation in India? Vastly better. The Reserve Bank of India (RBI) has consistently shown itself to be a savvy, conservative and strict regulator, earning respect from across the world. Unlike the Western central banks whose “light touch” regulation led to chaos, the RBI has kept Indian banks relatively clean and solvent. Despite pressures from some wildly irresponsible Indian politicians, the RBI has not allowed the loan programmes of Indian banks to run amuck. Not many of us remember that just a decade ago, the co-operative banks were all set to implode till the RBI took charge. The recent bout of high inflation had the RBI step in aggressively to solve a problem created primarily by the government due to lack of supply-side reforms. A healthy banking system is crucial for long-term growth. This is one thoroughly crucial reform area that we have excelled in.
So, in summary, should we be exasperated by our deeply inefficient national government? Yes. They are slowing down the rate of economic growth, which is a necessary, though admittedly not the sole, criterion to reduce poverty. But equally, this government, from all reports, is working diligently at ensuring its loss in the next general elections. So they will end up wasting two-three years of our collective lives. How long is that in the life of a nation? In the life of an ancient civilisation? Not much. Be patient. The India story is very much on. The scale of transformation we are witnessing has happened only once before in the history of humanity; with China. And it will never happen again, because no other country has the scale of India. This is a magical period, one of the best times ever to be born as an Indian. We should all consider ourselves privileged. Happy Independence Day!

Amish is the author of the bestselling novel The Immortals of Meluha. His second novel, The Secret of the Nagas, has been published recently.
www.twitter.com/amisht

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