Historically speaking, the twenty first century is important to India in more than one way. Beginning from the eighteenth century, for around two hundred years of the second millennium, the country was under the domination of the British. Indians could not do much on their own under the oppressive alien forces. India was suppressed cruelly and her citizens had to face untold miseries. The native systems that had made India a unique nation since the ancient days, with contributions of the highest order in almost all the fields of human activity, had to suffer and die. The country was compelled to do away with and forget the knowledge and expertise gained through experience over many centuries.
In fact, the Indian economy had to face difficulties from the invading forces for many centuries even earlier. Beginning from the end of the first millennium, the second millennium saw a continuous stream of outsiders pillaging the country and interfering with the native practices that made the country prosperous and peaceful at the same time. Hoards of wealth were swindled out. Different parts of the country were ransacked and many regions came under the domination of outsider- rulers, inflicting serious pain on the native population.
Indians withstood all the onslaughts with courage and rebuilt the systems to the maximum extent possible, though scars remained all over their bodies. As a result, as the OECD economist Maddison has shown, India was the largest contributor to the global economy even in 1700 with 24. 4 per cent share. It is relevant to know that India’s contribution to the global economy was an astonishing 32.9 per cent during the beginning of the first millennium. The share of India stood at 28.9 per cent a thousand years later, maintaining her position as the most powerful economy in the world throughout the period, followed by China. But things began to change drastically during the British domination, initially through the East India Company and later under the British sovereign rule.
The native systems that had sustained the economy continuously for hundreds of years were systematically destroyed by the colonialists. Hence at the time of Independence, India was reduced to a poor and underdeveloped country. 45 per cent of the population was living below the poverty line around that period. The industrial and business sectors were very weak. India’s share of trade was very low. The agricultural sector was over populated. Literacy rate was around 17 per cent. This situation led to loss of respect for the country at the international level.
With Independence, the country got the opportunity to frame her own economic policies based on the priorities and preferences of her people. It was necessary to formulate an independent policy framework as India had prospered as the most successful economy possessing superior systems of functioning for most of the time in the history. After the country fell into the hands of the alien elements, she could not continue her style of functioning making use of her time-tested native systems, as the motives of the rulers were different. Hence Independence presented the country with a historic opportunity to set things right, rectifying the mistakes of the alien classes that ruled us during the previous centuries, and move forward with a clear vision. But unfortunately the ruling sections did not have a proper understanding of the history of this ancient nation, and so looked outside for ideas to frame policies for deciding the course of action to be followed. Ultimately they chose the socialistic model, conceived in the west less than two hundred years back as a reaction to the circumstances then prevailing there, based on their limited experience and turbulent history.
Later when the socialistic ideology was discarded even in its own favorite grounds such as the USSR and China, it began losing its appeal. Meanwhile the Indian economy was facing serious difficulties on certain grounds. Hence after about forty years of experiments, the establishment realized that they would not be able to fulfill the objectives with policies based on a flawed economic idea. Circumstances compelled them to look for a change. At that time, history presented another opportunity for the country to formulate policies that would make use of all her potential and make people participate in the progress and share the benefits with joy.
But alas, the ruling segments once again believed that only the ideologies borrowed from the west would make the country better off. This time they chose the free market ideology as the panacea for the ills affecting the country. It was again adopted without any serious discussion or debate at the national level. The decision on such a vital subject concerning the future of one sixth of the humanity was decided by a few at the top, with the tacit acceptance of the elite and educated. Hence the nation was forced to follow another philosophy born and brought up elsewhere, based on their own narrow views and outlook about the society and the economy.
As a result, the country still has more than one fourth of the population going to bed without food three times a day. The agricultural sector, which is critical for us, has been facing severe crisis. It is a shame that no tangible steps are taken to revive the sector, even when farmers have been committing suicides. The easy entry of the multinational corporations has forced many of the traditional, small and medium scale industries to close down. Financial markets are increasingly controlled by the foreign institutions. The establishment does not have any clue to decide the future course of action, as the dependent mindset still dominates its thought process.
In a period of six decades, India has emerged as the fourth largest economy in the world, with the second highest growth rates. The global economic crisis that devastated most of the richer parts of the world, could not affect India much. Indian businesses have spread to different parts of the world. The corporate sector is in an expansion mood diversifying its activities in distant lands and buying foreign entities, wherever possible. The family based non-corporate sector has silently been contributing a dominant share to the growth of the economy. The Indian economic and business systems are increasingly being recognized the world over as worth studying for emulation. No other country in the world has seen such a turnaround in a period of just sixty years. The country which remained neglected during much of the second half of the twentieth century is now being looked upon as a model for the future.
What is the reason for such a progress in such a short period of time? How could a country that was decimated by the aliens with brute force make a comeback and emerge as one of the top two promising nations in the very first decade of the twenty first century? How is it possible for a country to move up continuously at a steady and fast pace, even when her policy makers remain confused to identify a suitable policy framework? The answer lies in the functioning Indian systems.
The economy is family driven, society dominated, highly entrepreneurial and self dependent. The family orientation of Indians makes people save as much money as possible so that the future would be secured. India’s rate of saving was 8.6 per cent of GDP during 1950-51, even when about half of her citizens were starving for food. Compare this with the negative and near zero saving rates of many of the richer countries today. The rates of saving have been continuously on the rise throughout the last six decades, contributing enormously to the growth of the economy. As a result capital formation took place at a faster rate without much difficulty, leading to investments in productive activities. It is only in this context that the Reserve Bank of India has recently noted that 95 per cent of the Indian economy is being financed by the domestic finance.
The family orientation, combined with the self dependent attitude and the entrepreneurial spirit of Indians, compels them to promote different ventures, however small they might be. As a result, new initiatives are continuously being taken at different levels, making India as one of the most entrepreneurial nations in the world. The types of enterprises that are functioning in the country are of different sizes and varieties. Economic Census 2005 estimates that there were 41.83 million establishments operating under the category of the unorganized sector, providing employment to more than 100 million persons. We have to remember that these are all the units promoted by people from the ordinary and under privileged sections of the society through their own efforts.
On the other end of the spectrum, there were more than 7, 86,000 companies during 2009, as per the details provided by the central Government. In between these two smaller and the bigger types of organizations, there are millions of small and medium units spread across the country. Earlier the Government of India estimated that there were 2042 clusters engaged in a wide variety of industrial and business activities. The contribution of these clusters in terms of entrepreneurship, employment, output, innovation and turnover is very significant to the economy. It is important to remember that these clusters were developed by the local entrepreneurs themselves, without the involvement of the state and state machineries. Many of these clusters such as Surat and Tirupur are synonymous with their products at the global level.
For more than a century before independence, India’s rate of growth was either around zero percent or negative. Starting from a very low base, the economy picked up quickly with an average growth rate of 3.5 per cent during the first three decades beginning from the 1950s. The rate steadily increased thereafter to 5.5 per cent during 1980-90, and 6 per cent in the next decade. It averaged more than 9 per cent during 2005-06 to 2007-08, before going down to 6.7 per cent in 2008-09 due to the global economic crisis. The economy started recovering quickly with the growth rate touching 7.4 per cent during 2009-10. There has been a continuous growth over the last six decades, in spite of the confusions and contradictions in the policy making circles.
We are in a paradoxical situation now. On the one hand, there are serious problems threatening the stability and future of the economy. The ruling establishment does not seem to understand the gravity of the situation and take immediate steps to address the issues. On the other hand, all the international bodies, research firms and think tanks unanimously agree that the Indian economy would continue its growth momentum in future to ultimately over take China and move forward. India is increasingly being looked upon by the rest of the world as a performing economy with a lot of potential for further progress.
What does this signify? It clearly shows that while India is emerging, it is the state that is failing. This is the lesson we learn after the close of the first decade of the twenty first century. India, with her abundant energy and native strengths, has been constantly struggling to move forward through the hard work and commitment of her citizens, whose roots remain firmly in the tradition and culture of this great nation. But the state, with its colonial mindset and borrowed thinking, continues to fail the country even after sixty years. Is it not time for the state to take stock of its role and rectify its mistakes?
(Swadeshi Patrika, Vol.16, No.2, New Delhi, February 2011)