Soft infrastructure, and a tablet for all, can catalyse India’s development
At Independence, India was a large, poor, illiterate, country, with disparate religions, languages, races, food, and culture, coming together against imperial domination, not much else. It was not expected to survive, much less succeed. But the 15 years after Independence created the foundations of India that stood the test of time.
A democracy based on full adult franchise was institutionalised, a Constitution agreed upon, a federal structure created, and, an independent judiciary and media were given protection.
The State addressed the lack of basic economic infrastructure by building capital industry and nationalising the key pillars of financial sector, State Bank of India, and Life Insurance Corporation. It created institutions of higher learning, controversially retained the merit-based bureaucracy, subordinated the Army to the civil State, and, despite being poor, managed to find a voice on the global stage and created the concept of non-alignment. Any fair assessment of that period will score it well.
The political economy of India subsumed everything else between 1960-1991. It was India’s moment of reckoning with “full adult franchise” in a poor democracy. Early in the period, banks were nationalised and forced to open deposit-collecting rural and semi-urban branches, deposits used to buy government securities to fund the planned expenditure. Credit was directed at identified priority sectors, and industry was allocated credit through the credit authorisation scheme.
The government’s control of the economy was stifling, more and more sectors were nationalised, and the private sector was shackled with price controls, but supported by high tariffs and entry barriers in an era aptly called the license-raj. Unsurprisingly, Indian product quality was poor, we enjoyed the glacial “Hindu rate of growth” with massive disguised unemployment, and exports were not sufficient to meet our imports, finally leading to a major balance of payments problem in 1990.
By 1991, India was on the verge of default and the then government rapidly employed policies fashioned on the International Monetary Fund (IMF)’s structural adjustment playbook, to obtain a five billion special drawing right facility.
Steps were taken to unshackle the economy. Interest rates were decontrolled, tariff rates reduced, and the exchange rate set closer to the market rate. Licensing was eased and entry barriers were reduced. The economic unshackling changed India’s economic growth trajectory, which averaged a healthy 7% for over 25 years.
Since then, successive governments of different persuasions have continued economic reforms. Even those with a welfarist orientation (which introduced or continued with Mahatma Gandhi National Rural Employment Guarantee Scheme and a range of subsidies) have prevented slippage.
In fact, in the last 30 years, governments have introduced reforms in the areas of direct taxation, telecom, labour, banking and capital markets; expanded infrastructure (roads, airports and ports); increased foreign ownership limits in controlled sectors; attempted privatisation of State-owned and conceptualised and rolled-out Aadhaar.
Currently, some noteworthy measures include the Goods and Services Tax, the Insolvency and Bankruptcy code, agricultural reforms (which, to be sure, have generated resistance but are overdue nonetheless) and sanitation and hygiene.
Yet, to me, the biggest enabling reform for the future has to be the JAM trinity — opening bank accounts for all Indian households, getting 1.2 billion Indians enrolled onto Aadhaar and getting almost all Indians a mobile phone.
To make India future-ready and to provide equal opportunity to its citizens, India must adopt technology fully in the next phase. My top five areas of reform are the following:
One, address the digital apartheid. The government must ensure a “smart device for life” to all Indians, with adequate bandwidth and data. The equivalent of a mini iPad as a passport to equal opportunity with connectivity, providing access to education, health, training, upskilling and financial inclusion. This is the first requirement for aatmanirbharta (self-reliance).
Two, ensure equal access in education. Virtual schooling in the pandemic has demonstrated the possibility for a much fairer future for our children. Using digital in education via the smart mini device should be the weapon and all public schools should be taught by the same teachers (by language), and their current teachers should become class monitors to ensure attendance and good behaviour.
Three, revolutionise health care. The same device should provide access to health centres. All health records in India need to be digitised and centrally stored. We can address privacy issues and recreate our health care delivery in India from “absent” to “personalised”.
Four, use water wisely. Managing the environment is a complex subject and India is both a victim and a perpetrator. Yet mispricing (or free) power and water has led to perversions in agriculture and lowered the water table to unforgivable levels. Exporting water-guzzling rice and sugar is like exporting food during a famine.
And finally, speed up justice. At its core, this means that our courts must work faster, and jails should house criminals and not those who are undertrials. It is unjust for 60% of the inmates of jails to be undertrials.
In the next phase of our journey, the defining focus must be soft infrastructure. We need to provide equal opportunity to citizens with basic access to nutrition, sanitation, health, and quality education. This will improve our economic productivity. In the digital era that is unfolding, without access to the benefits of technology among all citizens, our productivity will lag global benchmarks. Inequality will be socially threatening to our full adult suffrage-based democracy.
Digital access should be the weapon to rethink our future. We now have the tools and India’s poor are waiting impatiently.
Janmejaya Sinha is chairman, BCG-India
The views expressed are personal