Ajit Balakrishnan: Devising a New Sensex

PEOPLETECH

My sharebroker friend was breathless with excitement. "Have you seen the latest Goldman Sachs report?"

"Someone sent me a copy but I haven't got around to reading it," I said. "What does it say?"

"It's going to do great things for the Sensex," said my friend. "Maybe even take it past the 20,000 mark. It's going to be bonanza time for us in the stock market."

I spent all morning last Saturday wading through the reports and I found myself getting as breathless as my stockbroker friend.

But breathless for another reason altogether. India's future success as a world power is largely, perhaps even singularly, going to depend on maintaining our current high birth rate and ensuring that the children being born are healthy and well-educated. This high birth rate, says the report, will keep India's population growing far into the future while the European and Japanese population growth turns negative and the Chinese age. The US will have suffered a similar fate but may make do because of Latin American immigration.

I can only marvel at this sudden turn of events. For decades, India used to be beaten by international economists using the stick of "the population explosion". Indian families were breeding too fast. The "teeming millions" were taxing national resources. Soon there would be no place to sit or stand. In a sudden twist of logic, the "teeming millions" are now projected to go out and buy cars and washing machines and man BPO outfits and add robustly to the economy in many different ways. What made me breathless was the way a perception that India has a gigantic problem has suddenly been turned into a perception that India faces a gigantic opportunity.

Such population theorising, based in some specific local phenomena, has a long history. Thomas Malthus, observing the exploding population of a newly prosperous late 18th century Britain, theorised that only starvation and disease keep population growth in check. Increasing the incomes of people or improving agricultural productivity would be fruitless, as this would be completely absorbed by a further increase in population.

Though Malthus created quite a stir, economists got busy worrying about other things and the "population problem" was sidelined till it reappeared centre stage in 1968 with Paul Ehrlich's The Population Bomb. Ehrlich, observing the exploding American population of the 1950s and 60s, predicted that hundreds of millions of people in the US were going to starve to death, leaving only 20 million people alive by 1999. In panic, the scientifically inclined pushed for technological solutions like the birth control pill and the "loop". The morally inclined preached abstinence and some even advocated homosexuality as a solution.

Our policymakers, ever attuned to the latest international policy fad, and encouraged by the Ford Foundation, picked up the theme and slogans like Do ya teen bus and Hum do, Hamare do, and symbols like the red triangle became a familiar part of the Indian landscape. All this culminated in Sanjay Gandhi's forced sterilisation initiatives of the Emergency era, epitomising the Indian elite's desire for quick-fix solutions to national problems.

Fortunately, population-explosion theorists were stopped in their tracks when it was discovered in the 1980s that population growth rates, instead of relentlessly galloping, flatten off after societies reach a certain level of economic development. At this point, women marry later, and children are no longer needed as a source of cheap family labour and family sizes come down. Thus, in many European countries the birth rates have fallen so much that populations have started declining. Similar slowdowns can be observed in those Indian states in the South that have progressed socio-economically and, nationally, among all Indian families which have progressed past the subsistence level.

The latest twist in the population tale is that it is important for an economy to have a high proportion of working age people as compared to retired people. This is supposed to ensure that the savings of these working age people cover the costs of pensions and healthcare for the older, retired folk. In addition, these young consumers can stimulate economic growth by buying cars and microwave ovens and iPods and taking loans to buy houses.

The only catch is that there is absolutely no certainty that demographic trends will continue the way economists are projecting them to. In India, for example, a recent UNESCO study points out that though our economy is growing at an 8% plus rate, in Gujarat, one of our economically better-off states, the percentage of underweight children had risen to 47% from 45% seven years ago. In UP, India's most populous state, the percentage of anaemic children under three has risen to 85% from 74%.

One way to make sure our super-power ambitions are going in the right direction is to devise a simple Sensex-like number that provide a daily index of education and nutrition levels of Indian children below 10 years of age. Because, if eventual stock prices are determined by how the economy will perform a decade hence, is this not going to be the true indicator of our future prosperity? I could then wholeheartedly join my sharebroker friends in their breathless excitement each time this index went up.

Comments welcome at ajitb@rediffmail.com