Boundless optimism of Indian Economy

By Dr. D. R. Agarwal, Director, Swadeshi Research Institute; National Co-Convener, Swadeshi Jagaran Manch

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In Bhartiya Darshan or the Indian philosophy, development means reaching to the poor and weaker section of the society and connotes inclusiveness and not the exclusiveness. It speaks about a balanced development of materialistic wealth as well as the well-being of self and society as a whole . This is clearly manifested in the Integral Humanism of Pt. Dindayal Upadhyayjee and in the Third Way of Shraddheya Dattopant Thengadijee. Our ancient thinkers believed in the idea of “??????? ??:??????” which means spiritual and materialistic development together based on the principles of social justice, humanistic values , and protection of natural environment. Economic development should endeavour towards a balanced approach towards all the three segments of Agriculture, manufacturing and services sector. In manufacturing sector, priority should be given to MSMEs which contribute more for employment generation. In agriculture also a balanced and complementary approach should be taken for food, animal husbandry and fisheries. A large number of people derive their livelihood from agricultural sector and therefore there is a need for ensuring remunerative prices for food grains, horticulture and dairy products with proper marketing infrastructure and logistic support.

In this broader perspective, We should understand where we are today as a nation since our independence in 1947. Today in the Covid pandemic era, Indian Economy has shrank to US$ 2.7 trillion which represents less than 3% of the global economy of US$ 95 trillion. India’s population of 135 crores is a little more than one-sixth of the global population of 785 crores and therefore there is a need that it’s share in the global GDP should be at least equal to the proportion of its population and likewise for all the nations on the principles of inclusive growth. In absolute terms India’s gdp should therefore be at least US $ 15 trillion or in other words there should be more than five or six times growth from the present level. China’s population is about 18 percent of the global population and its share in global gdp is also about 15 percent which is in absolute terms US$16 trillion . United States population is nearly 33 crores which is less than 5 percent of the global population but its share in the global GDP is more than 20 percent and in absolute terms US$21 trillion. This comparison is based on market exchange rate of rupee which is Rs 75 against the US $ and therefore there is need to understand the impact of the exchange rate on the GDP calculation in terms of the international currency or the US$ and the income disparity around the world . In terms of purchasing power parity (ppp) India’s GDP is a little more than US$ 10 trillion and it is the third largest economy after China (US$ 27 Trillion)and USA (US$21 trillion). Thus India is already a $10 trillion economy. What is required is to restore the market exchange rate of rupee against US $ of Rs 75/- today to its purchasing power equivalent of Rs 15/-. It was Rs. 8/- per US$ in 1980, when Chinese Yuan way also 8 Yuan per US$. Rupee through ill design policies of devaluation has come down to 75/- and Yuan has remained strong at 6/ or 7/- and today by maintaining its purchasing power has become the strongest economy of the World. Let’s give a look to our economic history of the immediate 30 years of economic reform in the name of Liberalisation, Privatisation and globalisation, We have damaged our competitive strength in manufacturing sector and have remained a victim of unemployment and poverty even after 75 years of independence and our dependence on foreign capital, foreign goods, foreign technology has multiplied. Therefore there is a need to look back our past history of our economy a little bit.

Indian Economy has been undergoing a change from mixed economy (1950-1980) to opening up to supply side economy by Rajiv Gandhi in 1984 and liberating imports through external borrowings. Though the economy moved a bit from the shackles of low growth rate of 3.5 percent to around 5 percent but soon plunged into Balance of Payment (BOP) crisis in 1990 and the country had to mortgage its gold. The country had to change the path as the prolonged “licence permit quota raj” was coming in the way for systematic economic growth. Crony capitalism and Sate Capitalism has engulfed the entrepreneurship and innovative skill of the country. Our brain drain happened in a massive manner. A fully Centralized and controlled economy of China could understand the change in the wind but the Indian lion remained sleeping. China took the advantage when the wheels of growth in Japan started clogging due to Plaza Accord and Japan is yet to recover from the shock of recession which began with signing of Plaza Accord in 1989 which was an year of great change in the economic and political history. In this year Berlin War fell and two Germany celebrated the unification after collapse of Soviet Union. Tianamann Square massacre happened in 1989 and China repressed the voice of democracy. Deng Xiaojing continued the process of economic reforms and changed its gear from domestic reforms to external sector reforms and followed the path of globalisation relentlessly in the unipolar world where open market economy had become the sine qua none post collapse of communism with prestorica and glassnost had opened the way for laissez faire economy around the world. The Ten Commandments of Washington Consensus became the Mantras for globalisation and it made the task of structural adjustment program (SAP) of IMF as a lender of last resort. India took US$ 5 billion structural adjustment loan from IMF to take care of its BOP crisis. The base work for the economic reforms were completed by the then Finance Minister Mr Yashwant Sinha when Chandrasekhar was the Prime Minister. The new Government which was formed after the election post assassination of Rajiv Gandhi under the premiership of Shri Narsimharao, took the decision to implement the economic reform agenda as prescribed by IMF as part of SAP and Dr. Manmohan Singh as Finance Minister announced the New Economic Policy on 24 July 1991. It may be a matter of coincidence that just 50 years before on 24July 1941 that a Grand area plan was designed and the task to give it a formal shape was assigned by US President Roosewelt to his the then Treasury Secretary Henry Morgan Thau. The post Second World War financial Architecgture was the outcome of this Grand Area Plan in the name of Britton Wood Institutions to replace the economic colonialism by economic globalism. The unbridled forces of globalisation and the $ diplomacy has led towards concentration of wealth in few hands and the income disparity. The hypothesis of ‘one size fits all’ and a ‘Rising tide lifts all Boats’ have miserably failed to meet the goal of peace and prosperity. Unfortunately we find that more than 80 percent of the global wealth is concentrated with less than 20 percent of the global population and that too under the control of Multi National Corporations (MNCs) and as such the world is sharply divided with the problems of income inequality, poverty, unemployment global warning and climate changes. The recent Inter-Government Panel on climate change (IPCC) report has given severe warning signals about the impact of green house gases and the melting of glaciers causing increase sea level endangering the life our earth by 2040. There is a need to revisit the present financial architecture after 30 years of the so called economic reforms for creating an ATMNIRBHAR BHARAT on the Swadeshi Model of Self Reliance.

The World should give due regard to Sustainable Development through the principles of sustainable consumption as there is not only income disparity but also consumption disparity. The United Nations Conference on the Human Environment, at Stockholm from 5 to 16 June 1972, considered the need for a common outlook and for common principles to inspire and guide the peoples of the world in the preservation and enhancement of the human environment, and Proclaimed that “Man is both creature and moulder of his environment, which gives him physical sustenance and affords him the opportunity for intellectual, moral, social and spiritual growth. In the long and tortuous evolution of the human race on this planet a stage has been reached when, through the rapid acceleration of science and technology, man has acquired the power to transform his environment in countless ways and on an unprecedented scale. Both aspects of man's environment, the natural and the man-made, are essential to his well-being and to the enjoyment of basic human rights the right to life itself. “ It further said that “The protection and improvement of the human environment is a major issue which affects the well- being of peoples and economic development throughout the world; it is the urgent desire of the peoples of the whole world and the duty of all Governments.”

Thus on the one hand there are challenges of environment and sustainable growth and on the other hand there are challenges of disruptive innovation and artificial intelligence. The more we move towards technology, more the problem of joblessness and livelihood magnitude in the present era of digital economy. In other words, the economic development has to be job-oriented and to be aimed at providing adequate opportunities to the poor people living in the rural areas to participate in the process of growth. This will require the change in the consumption pattern giving priority to the local goods and agro-based products in order to ensure the viability of the small and medium enterprises. This will also require spending more money towards research and innovation so that the local products are qualitative and competitive. Once it is done in a phased manner, our dependence on imported goods will be reduced and as a consequence our domestic manufacturing will prosper. This will in turn reduce our trade deficit and our dependence on foreign capital and foreign technology. Gradually this will help strengthening Indian Rupees which will start appreciating against US Dollar as our exchange rate has devalued substantially from Rs. 8/- in 1980 to Rs. 75/- now. This will gradually move towards its purchasing power parity of Rs. 15/- or Rs. 20/-. This may take a few years but once the direction is reversed from the devaluation to revaluation, our GDP in terms of US $ will start multiplying. Today we divide our GDP of about Rs. 200/- trillion by Rs. 75/- to arrive at our GDP of US $ 2.7 trillion but once Rupee is appreciated to Rs. 15/- per US Dollar, our present GDP of $ 2.7 trillion will become US $ 13.5 trillion i.e; Rs. 200 trillion divided by Rs.15/- instead of Rs. 75/- or will multiply by 5 times. If we account for the annual growth @ 6% to the present GDP, it will be further doubled or will become US $ 27 trillion in 12 years or maximum by 15 years from now ie; 2035. Thus the power of intellectual property for improving the qualitativeness and the competitiveness of our Swadeshi products and consequential exchange rate multiplier, our present GDP of US $ 2.7 trillion will become 10 times more to US $ 27 trillion when we will be the third largest economy in the world after China and US.