The international community is confident the country will grow remarkably, but growth in Indian money depends on Modi’s ability to keep protectionist foreigners under pressure to open up, draw investors here in sectors required and turn Indian ecosystems of education and business world class
Along with the statesman-like speech of Prime Minister Narendra Modi in Davos, where he spoke inter alia about globalisation-versus-protectionism, come several reports that are heartening for Indians. The International Monetary Fund has predicted a 7.4% growth of the country’s gross domestic product in the next year. This is close to the World Bank’s reading of the economy of this country. India further offers an impressive 29% annual return on investments in the financial technology sector, a City of London Corporation report said on Thursday. The report also said India would be the third largest economy in terms of purchase power parity in the next 10 years, trailing China and the United States; this implies not merely economic statistics that mean little to the man on the street; it refers to a phenomenal increase in the per capita income of Indians over the stated period of time. Optimists may also consider an analysis by a well-travelled businessman-columnist in 2015 that foresaw an upward trend in Indian economy even as China decelerated. In fact, the good news is not as distant as a decade away; this very year, India is going to be the fifth largest economy in the world. The caution with which Indian governments open up the market, but open it up for sure, rarely reversing the process of liberalisation, makes the world so confident of India’s potential. In hindsight, India appears fortunate to have benefited from the sound as well as flawed policies of the past. PV Narasimha Rao’s caution in the 1990s not to make the rupee fully convertible did not make foreign investors take all the money away in the wake of the security scam. The communist turn in Manmohan Singh government’s policies, dictated by Sonia Gandhi, led to massive corruption domestically due to a culture of discretion and entitlements the Indian National Congress regime nurtured, but it saved the country from the subprime mortgage crisis that had gripped the world in 2008-09. Likewise, Modi’s mix of indoctrination by the Rashtriya Swayamsevak Sangh and exposure to trained economists makes him build the economy brick by brick without throwing open the floodgates. This makes the international community repose faith in India’s stability, much as the world is misled more often than not about the RSS.
To address the misgivings the audience at the World Economic Forum might have had, Union Minister for Railways and Coal Piyush Goyal has rightly clarified that ‘Make in India’ cannot be damned as protectionism. True to its wont, the opposition has cocked a snook at Modi’s Davos talks, but the scepticism in sections of the media merits a studied response from the Union government for the seriousness of the critique. On the one hand, it is right to say that the world turning protectionist is an opportunity for India to showcase itself as a better investment destination. After all, it would mean that the consumers in protected territories would be hard pressed for choice of vendors and products but their Indian counterparts would have a ‘problem of plenty’. On the other, if foreigners do not allow Indian businessmen to set foot on their soil but we allow their industrialists to set shop here, it would translate to their companies earning a lot of rupees from us whereas our companies cannot earn enough dollars and pounds from them. While the businessman, his employees and his consumers alike benefit from a business, the returns for the first out of the three is the highest. For that matter, a programme like ‘Innovate in India’ would be as essential as ‘Make in India’ because the innovator — and not the licensed manufacturer — gets the largest share from the sale proceeds. Being an open market that sees little indigenous innovation would eventually affect the Indian businessman’s income and thus his ability to produce more goods, recruit more people and serve more customers.
Modi should, therefore, keep pressuring the United States, United Kingdom, France, Germany, Italy, ASEAN countries and even China to let our investors buy stakes in their countries. Foreign goods, at the same time, are essential here for situations of urgency — for example, procuring arms and ammunition when the Defence Research and Development Organisation proves a laggard for our security preparedness — areas where Indian science is not developed enough and where the local trader takes the customer for a ride because the buyer has no choice of a better shop. In the medium-to-long term, turning Indian science education and business training world class is an imperative, too.