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   Twenty One Years   

Omkar Goswami


I am fed up with Arvind Kejriwal; with the Robert Vadra—Haryana government—DLF shenanigans; and screaming television anchors. When India has to face myriad challenges, nautanki tamaasha has been the staple menu for weeks on end. May I, therefore, use this opportunity to reflect on the last 21 years? On 24 July 1991, when Manmohan Singh concluded his first Budget Speech with Victor Hugo’s words: “No power on earth can stop an idea whose time has come”, the economy was in tatters.

Inflation was at 13%. The combined fiscal deficit was almost 11% of GDP. Entrepreneurship was stultified by a pervasive environment of industrial licensing, public sector reservations, a dysfunctional anti-monopolies law, severe limitations on use of foreign exchange and over 900 products reserved for small scale industries. We had a peak tariff of 350%, an average import duty of 87%, and quantitative import restrictions. Poor lending and
income recognition, along with inadequate provisioning of bad debts led to a weakened banking system. A hugely over-valued fixed exchange rate had rapidly weakened our balance of payments.

Soon, non-resident Indians began to withdraw their dollar deposits and international banks stopped lending to India. Suddenly, our foreign currency reserves barely covered two weeks of imports.

The reforms of the Narasimha Rao government in its first two and half years let loose huge entrepreneurial energy that was straining at the leash. No doubt that our reforms are far from perfect. Some sectors have been more reformed than others; some not at all. Yet, none can doubt the enormous strides that we have made. Consider this. Between 1991-92 and 2011-12, India’s real GDP has grown at a trend rate of over 6.6% per year. What it means is that, barring China, no country in the world with a GDP greater than India has grown faster than us. We could have done better. Yet, we have almost trebled our real GDP in 21 years.

The single dominant factor that explains this growth is entrepreneurship across the length and breadth of India. Here are some facts regarding listed companies:

• Sales and other income of all companies listed on the Bombay Stock Exchange (BSE) increased 22 times from Rs.165,903 crore in 1991 to Rs.3,637,987 crore in 2011.
• Profits after tax increased 46 times — from Rs.7,948 crore in 1991 to Rs.363,882 crore in 2011.
• Thanks to consistent capital market reforms, the market capitalisation of listed companies on the BSE rose 101 times from Rs.675,880 crore in April 1991 to Rs.68,581,336 crore at end March 2011.

The story of entrepreneurship is wider. It is of an increasingly mass of successful but unknown entrepreneurs, involved in hundreds of activities across the land. People involved in car, tractor and motorcycle dealerships; selling mobiles, smartphones, data and SIM cards; white goods stores; property developers — large, medium and small; salons where saas and bahu go to experiment with hair colouring. You see entrepreneurs everywhere —devoid of caste, creed and business royalty.

In such a milieu, there are four worrying trends. The first relates to our population. We talk of ‘demographic dividend’ without acknowledging its challenges. By 2020, there will be 251 million children between zero to nine years. Will we be able to take care of their health, nutrition and early learning? Another 248 million will be from 10 to 19 years. What about their schooling and post-school training? And there will be 239 million between 20 and 29 years. Where will they get the skills to secure jobs in a rapidly digital world?

My second worry is about the spatial differences in development. I have written on this earlier — of the two India’s to the west and east of Kanpur. The poorest districts are in Jharkhand, Bihar, Chhattisgarh, Orissa, south-eastern Maharashtra and parts of lower Assam. Not surprisingly, there is a an almost perfect correlation between such districts and Maoist insurgency.

The third concern relates to the three resources that we need to utilise in a balanced manner to generate greater growth and employment. These are spectrum (aasman ke upar); natural mineral resources (zamin ke neechey); and land. Decisions regarding all three are stuck in such deep ruts that it will need serious vision as well as political capital and courage to decisively move forward.

The fourth worry is the gradual resurrection of aspects of the permit raj. Some of it coming through judicial interventions; others through audit observations; and yet others by executive action per se, based on a belief that civil servants don’t get punished for creating shackles; but can be incarcerated for crafting growth-oriented reforms.

These are serious concerns. Yet, looking back to 1991, India has it in her to continue growing. All we need is that our entrepreneurial energies be allowed to thrive. And our democracy.
Published: Business World, November 2012


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